As indicated in my last post, the Australian Treasury is seeking submissions on priorities for updating Australia’s tax treaty network. Fix the Tax Treaty! has made a submission. This post explains what you can do to help.
Continue reading “Treasury Submission”Tag: US Tax
Foreign Enrolled Agents on the rise
FATCA – the full employment act for the tax compliance industry…
Bloomberg Tax is reporting a nearly 50% increase in the number of Enrolled Agents with foreign addresses. The article is troubling on many levels, starting with the title: “U.S. Tax-Dodging Crackdown Overseas Brings Foreign-Adviser Surge.” Apparently, the editorial team at Bloomberg has different ideas, because today they published “Stop Treating American Expats Like Tax Cheats.”
FATCA is truly the full-employment act for the tax compliance profession. Below the fold, I’ll examine the following issues raised by the increase in US tax compliance professionals outside of the US:
- Has the IRS really “gone global”?
- What support does the IRS provide international taxpayers?
- Who can prepare tax returns?
- What is an Enrolled Agent?
- What to look for in a tax preparer
New IRS Relief Procedures
On Friday 6 September, the IRS announced new “Relief Procedures for Certain Former Citizens.” These procedures mirror the current Streamlined Offshore Filing Procedures with some differences that might be attractive to some who have renounced or wish to renounce their US citizenship. Taken in conjunction with other recent IRS announcements, this new procedure is a “carrot” to encourage compliance before the IRS applies the “stick” of recently announced compliance campaigns. However, this begs the question of why the IRS would want to encourage compliance among non-citizens whose US tax liability would be dwarfed by the combination of the cost to the IRS of processing their returns and the cost to the individual of having the returns prepared.
Continue reading “New IRS Relief Procedures”Tax Fairness for Americans Abroad Act
HR 7358, introduced on 20 December 2018, represents a watershed moment for American citizens residing OUTSIDE of the US. You can read a bit about the bill over at Citizenship Solutions – where a draft has also been posted. The official bill should be posted on congress.gov in a day or two.
This is a HUGE step forward! While the naysayers are already active on Facebook and Twitter complaining that this bill will never pass because there’s not enough time left in the current Congress, they fail to realise that any step forward is a victory. Enormous effort has gone into getting sufficient support in Congress to get this far. We need to acknowledge the significant time and effort that has been expended by people like Solomon Yue, Suzanne Herman, John Richardson, and Keith Redmond; and by organisations such as American Citizens Abroad, Republicans Overseas and Democrats Abroad. They have been working consistently over a period of years to get this far. Someone in Congress now recognises the problem – this is the first step in ultimately achieving a solution.
Continue reading “Tax Fairness for Americans Abroad Act”Residence Based Taxation Proposal
For the past few weeks there has been increasing speculation about the contents of a rumoured Residence Based Taxation proposal from Congressman George Holding’s office. Democrats Abroad reported that they had seen the proposal. Then Republicans Overseas were also on board. And, over on the American Expatriates Facebook Group, Keith Redmond reported on a meeting held at the offices of Americans for Tax Reform to discuss the proposal. It has been great to see such broad-based support for this much-needed reform. Continue reading “Residence Based Taxation Proposal”
More on the Transition Tax…
In January, John Richardson and I recorded a conversation about the “Transition” tax that was part of US tax reform. John’s post introducing the videos is here: U.S. Tax Reform and the “nonresident” corporation owner: Does the Sec. 965 transition tax apply?
The transition tax is the provision in the tax reform bill that concerned us so much when it was introduced that we posted a Call to Action! In short, when applied to an Australian-resident US taxpayer, the transition tax asserts the right of the US to reach inside an Australian corporation and tax previously earned active business income just because a majority of the company is owned by “US Shareholders”. This is a major departure from prior law, and calendar-year taxpayers were given not much more than a week from the date the law was signed to the end of the tax year in which this new tax would be applied – certainly not enough time to understand the new law, let alone plan to avoid the inherent double taxation. Furthermore, in all of the hearings on the bill, not one Representative or Senator mentioned anything about the applicability of this provision to corporations owned by tax-residents of other countries, for whom the idea of “repatriating” profits to the U.S. is not only absurd, but also a drain on the economy of the country they call home.
Call to Action!
We are all disappointed that the Tax Cuts and Jobs Act (HR 1) currently before Congress does not contain relief for non-resident citizens. But it could even make things worse! The current legislative versions of the bill (both House and Senate) are poorly drafted and could be interpreted to harm individual shareholders of “controlled foreign corporations,” including small businesses owned by non-US resident Americans (even though this is clearly not the intent of Congress).
It is time to contact our Australian elected representatives to make them aware of the potential extraterritorial reach of this harmful provision. The Steering Committee of Fix the Tax Treaty! has sent an open letter to Prime Minister Malcolm Turnbull, Treasurer Scott Morrison, and Foreign Minister Julie Bishop outlining why Australia should be interested in this issue and what Australia can do to mitigate the potential harm.
Investment Constraints 5: Final Thoughts
In this series we’ve discussed how Australian investments impact a US tax return. To finish up, this post will discuss the pros and cons of investing directly in the US as well as a quick discussion of the types of records you should be keeping to assist with US tax preparation.
This is the final installment in our series of posts discussing the ways US tax laws constrain the investment choices of US taxpayers living in Australia. This post covers investing in the US and what records should be kept. These are the areas we have covered in all five posts in this series:
- Superannuation
- Homeownership
- Real Estate
- Australian Managed Funds
- Australian Shares
- Business Ownership Structures
- Investing in the US
- Record keeping
This series (and everything on this website) is general information only. I am not a lawyer, tax professional, or financial planner, just someone who has learned about US tax and wants to pass on general knowledge. Many areas of tax law are interdependent, so changes in one area may have unintended consequences in another. You should consult a professional who can consider your own personal circumstances before taking any action. Continue reading “Investment Constraints 5: Final Thoughts”
Investment Constraints 4: Structures
An entrepreneur starting a new business has a choice to make – how should she structure the business legally. In Australia, there are actually four alternatives to choose from: sole proprietorship, partnership, company or trust. The reasons for choosing a company or trust often include limiting legal liability, protecting personal assets, or ease of sharing or transferring ownership. And, in the wake of recent caps on superannuation contributions, more financial planners are recommending family trusts to hold savings that cannot be put into the superannuation system. What are these structures? How do they work in a purely Australian context? And what problems or challenges might arise when a US taxpayer tries to do exactly what her Australian neighbour would find optimal?
This is the fourth instalment in our series of posts discussing the ways US tax laws constrain the investment choices of US taxpayers living in Australia. These are the areas we will be covering:
- Superannuation
- Homeownership
- Real Estate
- Australian Managed Funds
- Australian Shares
- Business Ownership Structures
- Investing in the US
- Record keeping
This series (and everything on this website) is general information only. I am not a lawyer, tax professional, or financial planner, just someone who has learned about US tax and wants to pass on general knowledge. Many areas of tax law are interdependent, so changes in one area may have unintended consequences in another. You should consult a professional who can consider your own personal circumstances before taking any action. Continue reading “Investment Constraints 4: Structures”
Investment Constraints 3: Equity
60% of Australians own equity based investments (listed or non-listed) outside of institutional superannuation accounts, and 37% of Australians own listed shares (2017 ASX Australian Investor Study). There are two main ways to invest in equity – purchase shares directly on the share market or purchase a slice of a portfolio managed by a professional portfolio manager. For Australian investors who are claimed by the US, the US tax implications of these two choices are quite different.
This is the third instalment in our series of posts discussing the ways US tax laws constrain the investment choices of US taxpayers living in Australia. These are the areas we will be covering:
- Superannuation
- Homeownership
- Real Estate
- Australian Managed Funds
- Australian Shares
- Business Ownership Structures
- Investing in the US
- Record keeping
This series (and everything on this website) is general information only. I am not a lawyer, tax professional, or financial planner, just someone who has learned about US tax and wants to pass on general knowledge. Many areas of tax law are interdependent, so changes in one area may have unintended consequences in another. You should consult a professional who can consider your own personal circumstances before taking any action. Continue reading “Investment Constraints 3: Equity”