Expat Tax USA

THIRD AND FOURTH QUARTERS 2010

1.  If you have a valid extension, pay oustanding amounts on your 2009 tax liability by Oct 15th to avoid interest charges of 4%.   Our office will not process December extension filing requests.  We will be closed in December.  If you don't have an extension and you have fallen behind it is never too late to become compliant again to preserve your ability to elect to exclude foreign earned income.

2.  Pay your Q3 EST for 2010 by Sept 15th and your Q4 by Jan 18th 2011.  Use www.eftps.gov for added convenience.

3. Continue to save your statements for all your financial accounts.  Collect your details for your FBAR (click here for more details) reporting.  As a reminder, this form should by mailed from Singapore no later than June 15th as it must arrive in Detriot on or both June 30th or it will be untimely and you may be subject to punitive penalties.  Your Dec or Jan statements will have your interest, but you need to go back and review your statements to find the high balances.  If you are a PR of Singapore, you also will need to report your interest and the high balance on your CPF accounts.  See below for more information on this form.  Ignored for decades, the IRS seems quite serious about it now.   Do a Google search for information dated 2008 and later.  An informative article can be found in the June-July 2008 edition of the Journal of Tax Practice & Procedure. You can also find good information in a publication put together by OffShore Press. (Google it).   Please note that the form was further modified in October 2008, so for the most up to date information you'll have to refine your search even further. (Then you'll need to refer to the IRS website to get the revised definition of US Person.) 

4.  File your taxes by October 15th.  Secure an appointment early and make gathering your documentation a priority in order to meet your deadlines and avoid paying penalties and interest.

5.  Make IRA contributions before April 15, 2011 (if you are eligible--you or your spouse must have income that isn't all excluded under section 911-Form 2555-Foreign Income and Housing Exclusions).  Flush income in 2010 rather than 2011 if you have a choice.  Tax rates are likely to increase in 2011.

There is a general misconception about the Foreign Earned Income and Housing Exclusions.  You must file your 1040 and report the income to exclude it.  If the IRS notices you first you can lose the ability to exclude.

US Taxes are due in four quarters as you earn the money.  Don't make the mistake of not making estimated payments.  For income earned Jan-March 2010, the payment is due April 15th, 2010.

Singapore has very low tax rates.  If you earn over the exclusion you will likely still have a US tax obligation even with foreign tax credits.  Other countries in the region have higher taxes so you expect to owe little US tax if you are working in Australia or China, for example.  (Hong Kong & Macau have low rates.)

These are gross generalizations of course.

Offshore Settlement Offer:  This program is over, but voluntary disclosure (turning yourself in) is always an option.  If you have never filed a return, or have substantial unreporting on previously filed returns or have undisclosed foreign accounts (bank or investments) we will provide a referral to a tax attorney.

Hiring the Right Person 

The United States tax code, specifically its treatment of foreign-earned income, is complex and confounding to the untrained tax preparer.  You need a tax preparer conversant with the current tax code and trends that specifically effect , American citizens living abroad, permanent residents of the U.S.,  U.S. military stationed abroad, and others with U.S.-connected income.   

You could be overpaying or underpaying your taxes if you aren't careful.  If you are a first-time overseas filer, this is especially true as there are many special time tests and first year elections that will effect your future tax filings. 

Don't let your accountant from home guess his way through your taxes.  Hire a preparer with expertise in these types of returns.  If you aren't sure, ask your previous tax preparer  if they have experience with forms 2555 and 1116.  If they say no, you should not pay them to prepare your taxes.  It just makes the most sense to have an expat tax preparer prepare your expat taxes.  If you typically self-file, ask yourself if you are willing to devote the time to learn. 

Let s take the guess work out of your tax returns. 

A quick word about penalties:

The failure to file penalty is the harshest and you risk criminal action and denial of the ability to take the exclusions.

File even if you can't pay.

The failure to pay penalty isn't as bad but you should be aware that if you owe more than $50,000 the IRS can and likley will seize your assets in the U.S.

The interest rates that the IRS charges you for unpaid balances varies each quarter.  It has been set at 4% for the past 3 quarters.  If you amend a return and are due a refund, the IRS will pay this interest on your refund.  If you owe them, the interest also accrues on the penalties.

Hightlights of Our Services:

• Tax Returns and Notice Response 
• Estimated tax payments (1040-ES)
• Assistance with all types of Extensions (We are not handling December extension requests.) 
• 1040/1040NR and all associated forms  (except business forms such as 5471)
• Most State Filings (For State Forms follow the link)
• Tax issues for LPRs (green card holders) and NRAs
• Expatriation Returns 
• Consultation on US tax implications and reporting requirements when establishing a small business in Singapore  (In association with Kim Johnson, CPA (California) KRJ Business Solutions, based in Texas.) 
• Assistance with FBAR filings

Downloads:  Please contact us via Email before submitting these forms.  We are near capacity and will only be accepting a few new clients for the remainder of the current and next filing season.

2009 Checklist for New Clients

2009 Checklist for Returning Clients 

2010 Engagement Letter

Tax Guide for the Singapore Expatriate

Fast Facts Singapore Tax

Page 2 Fast Facts

Indonesian Tax Information

As the taxpayer you are responsible for the contents of your filed return.  Before you sign your return you should be able to review it with your tax preparer.  If they are unwilling to do so, you should take your work elsewhere.  Pay attention to the details.  For example, Schedule B has a yes/no block asking if you have foreign bank accounts.  Be sure you have answered this question appropriately. It is your responsibility even if your returns are prepared by a third party.

There are new preparer penalities and disclosures required by the IRS.  For this reason, you may be asked to provide more substantiation of your information and to sign more documents at the beginning of your engagement.  Please be sure to keep accurate records for seven years in the event you are called upon to furnish the source documents.  This includes all your bank statements from your foreign banks.

Important Links:

The Internation Revenue Service's website provides valuable information to all taxpayers.  Of particular interest to international filers is the International Tax Gap Series at www.irs.gov.

Military Filers should review the IRS website for important information, including information on free filing assistance.