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When you see a headline or come across a snippet involving federal agencies like the Internal Revenue Service (IRS) and U.S. Citizenship and Immigration Services (USCIS), don’t assume that terms are interchangeable and don’t be fooled into thinking that the same kinds of treatment apply across the board. A policy alert issued this week by the USCIS addressed requirements for residence, making clear that there is a distinction between residence and physical presence (link downloads as a PDF). But for tax purposes, residence and physical presence can mean something very different.

When it comes to tax, I’m often asked, “Where do I pay taxes?” Sometimes it comes from a person from another country who is present in the United States (U.S.) on a work or student visa. Sometimes it’s directed from a U.S. citizen living and working in a foreign country. Other times, it’s from a long-term resident in the U.S. who returns to a home country for stretches at a time. But my answer is almost always the same: It depends. And that’s not just because I’m a lawyer. It’s because the rules for tax law (which are constantly changing) don’t always line up nicely with the rules for immigration law (which are also constantly changing). 

A lot of the confusion for international taxpayers focuses on the idea of residence. Residency feels like it should be an easy thing – it’s where you live, right? But what if where you live changes? Or if where you live isn’t where you intend to remain? Or if where you live isn’t the country where you were born? On the tax side, things can get tricky. It’s complicated even more because the definitions used by the Internal Revenue Service (IRS) to describe residency aren’t necessarily the same as those used by the USCIS.

Our tax system generally starts with the premise that all U.S. citizens are taxed on their worldwide income unless otherwise excluded. That’s a pretty big net.

For tax purposes, those who are not U.S. citizens are considered aliens. Aliens are further divided into non-resident aliens and resident aliens. By default, non-U.S. citizens inside the country are considered non-resident aliens unless they meet one of two tests: the green card test or the substantial presence test. 

The green card test is precisely what it sounds like: You are a resident for U.S. federal tax purposes if you are a Lawful Permanent Resident of the U.S. at any time during the calendar year. The most obvious evidence is an alien registration card, Form I-551, which we also call a green card.

The substantial presence test is more complicated – and there’s math. To meet this test, you must be physically present in the U.S. on at least 31 days during the current year, and 183 days during the three-year period that includes the current year and the two years immediately before that, counting:

  • All the days you were present in the current year, and
  • 1/3 of the days you were present in the first year before the current year, and
  • 1/6 of the days you were present in the second year before the current year.

(Ok, it’s not just simple math: there are fractions involved.)

For tax purposes, you’re present in the U.S. for any day that you’re physically present in the country for any period of time. And typically, the longer you are here, the more likely you are a resident for tax purposes. There are some exceptions. Those exceptions include commuting days to Canada or Mexico, days you are in transit or in the country as a crew member of a foreign vessel, days that you can’t leave because of a medical condition that developed while you were in the U.S., and days that you are an exempt individual. Exempt individuals typically include folks here on certain kinds of visas (mainly government, student and teacher visas) and professional athletes here to compete in a charitable sports event.

Even if you pass the substantial presence test, you can still be treated as a non-resident alien if you have a closer connection to a foreign country in which you have a tax home than to the U.S. Some exceptions apply, but the IRS typically looks at where you and your family live, where you keep your stuff, where you conduct your business, and where you drive and vote when determining how close your connection is to a foreign country. It’s very facts and circumstances dependent.

(For more information, check out IRS Pub 519, which downloads as PDF.)

You probably assume that folks are clamoring to be considered residents, right? Not always. For U.S. tax purposes, residents are treated – and taxed – like U.S. citizens. On the plus side, that means that they’re entitled to the same tax credits and deductions as U.S. citizens. But that also typically means that they must report their worldwide income and disclose their foreign assets; perhaps not so surprisingly, that doesn’t have universal appeal.

Non-residents, on the other hand, typically only have to report and pay tax on their U.S.-sourced income. But they also do not get the benefit of most tax breaks afforded to U.S. citizens.

For tax reasons, physical presence in the country is typically (but not always, remember there are exceptions) linked to residency. The longer you stay here, the more likely it is that you are a resident. But for immigration purposes, that is not necessarily the case. In their policy alert, the USCIS purported to make clear that there is a distinction between residence and physical presence. Citing the Immigration and Nationality Act (INA), the USCIS explained: The term residence should not be confused with physical presence, which refers to the actual time a person is in the United States, regardless of whether he or she has a residence in the United States.

The policy alert was an effort to clarify the status of children who are not yet citizens and are adopted or born to U.S. service members or certain government employees overseas. The controversial statement made clear that those children would not automatically become citizens because they do not meet the residency requirements under existing immigration law. USCIS policy had previously provided that children of U.S. government employees and members of the U.S. armed forces who were employed or stationed outside of the country should be considered to be both “residing in the United States” and “residing outside of the United States” for immigration purposes. However, the USCIS has rescinded the prior policy permitting children of U.S. government employees and U.S. armed forces members stationed outside of the country to be considered “residing in” the U.S. With that, it may be necessary for affected parents to apply for citizenship on behalf of their children. 

(Again, you can find the update, which downloads as a PDF here. You can find the complete USCIS manual here.)

A key takeaway from the update is the importance of understanding that terms don’t always mean what you might think they mean, and even interpretations that you might think are settled can change over time. It also underlines that different agencies may use similar terms and yield different results. For example, for tax purposes, U.S. tax residents are largely treated like U.S. citizens. But that’s not the case for immigration purposes: lawful permanent residents may not vote in elections, and if they remain outside of the U.S. for extended periods, they may be considered to have abandoned their permanent residence. That presumption is hard to refute for immigration purposes; it’s a lot easier to prove a U.S. connection for tax purposes even if you leave the country.

It’s also complicated when the two worlds – immigration and tax – collide. Under U.S. law, immigrants can be deported if they are convicted of a crime of moral turpitude or an aggravated felony. Aggravated felonies include certain financial crimes such as those involving fraud or deceit. When it comes to tax, something as relatively minor as the failure to file a tax return is typically considered a misdemeanor – but if the violation is found to be willful, it can be treated as a felony.

For those who are not permanent residents, that could result in removal proceedings. As Jonathan Grode, an immigration attorney for Green & Spiegel, LLC, explains, “With nonimmigrant status, a crime that renders the person inadmissible – one involving a crime of moral turpitude and a sentence that carries a maximum of greater than a year – then under INA 212 the foreign national is removable from the United States.” But deportation can also extend to permanent residents – remember Joe Giudice?

As the world grows smaller, it’s clear that tax and immigration will continue to overlap and change. That doesn’t mean that the terms that apply to one apply to the others, or that the respective agencies share common guidelines. When you see words that could have dual meanings, use caution and make sure that you’re applying them in the right context. If you have questions, it’s always a good idea to check with a professional for guidance.

Earlier this month, the Internal Revenue Service (IRS) issued a reminder to taxpayers with significant tax debts that their passports could be at risk. Now, IRS Commissioner Charles Rettig has granted a reprieve for some taxpayers.

A memo (TAS-13-0819-0014) from Acting National Taxpayer Advocate Bridget Roberts has advised that there is “a temporary change” related to the revocation of passports for taxpayers working with the Taxpayer Advocate Service. According to the memo, effective July 25, 2019, all open TAS cases with a certified taxpayer will be decertified; new TAS taxpayer cases will also be systemically decertified. 

The authority to revoke passports dates back to December 4, 2015, when the Fixing America’s Surface Transportation Act, or “FAST Act,” became law. Under the FAST Act, the State Department will yank passports from taxpayers after notification from the IRS that there’s a seriously delinquent tax debt. A “seriously delinquent” tax debt is defined as “an unpaid, legally enforceable federal tax liability” greater than $50,000, including interest and penalties. The limit is adjusted each year for inflation and cost of living: for 2019, it’s $52,000. 

Taxpayers with serious debts could be excluded under some circumstances, including those accounts which are being paid on time as part of an installment agreement or under an Offer In Compromise.

(You can read more about the passport revocation program here.)

Former National Taxpayer Advocate Nina Olson has expressed serious concerns about the program, including the exclusion of taxpayers with open TAS cases. Taxpayers with TAS cases are those with tax problems that taxpayers were typically unable to resolve through normal IRS channels.

The TAS also helps address large-scale, systemic issues that affect groups of taxpayers. That’s why, in 2018, even before the passport revocation program was implemented in full, Olson issued almost 800 Taxpayer Assistance Orders (TAOs) ordering the IRS not to certify taxpayers that the TAS identified as eligible for passport certification and who had an open TAS case. Those taxpayers were not certified, and the reprieve did not extend to those with new TAS cases. Olson continued to advocate for taxpayers who were seeking assistance from TAS, but there was no formal policy in place to provide them with relief.

(You can read more about the TAS and the Taxpayer Bill of Rights here.)

Without a formal procedure, the TAS will be tasked with the continuous administrative burden of chasing the IRS for relief for affected taxpayers on a case by case basis. With a temporary stay, the TAS can focus on helping taxpayers with their underlying tax issues rather than following up on passport revocation. How that might change long term is uncertain. According to the TAS memo, official IRS guidance will follow once IRS Commissioner Rettig makes a final decision about the process.

The Internal Revenue Service (IRS) is reminding taxpayers with an expiring Individual Taxpayer Identification Number (ITIN) to submit renewal applications. Failing to renew an ITIN by the end of the year may cause refund and processing delays in 2020.

An ITIN is assigned to a taxpayer who is not eligible to obtain a Social Security Number (SSN). Typically, only United States citizens and those non-citizens who are authorized to work in the U.S. by the Department of Homeland Security receive SSNs.

SSNs and ITINs are intended to be used only for tax and benefits purposes, but since banks, schools and insurance companies use them as identification numbers, more folks want them for non-tax purposes: Only a quarter of ITINs assigned since the program began in 1996 have been used to file tax returns. Concerns about ITIN misuse spurned changes, including a law that now allows ITINs to expire. Nearly 2 million ITINs are set to expire at the end of 2019.  

(In contrast, SSNs never expire but the number of SSN cards that you can request is limited. For more, click here.)

ITINs that have not been used on a federal tax return at least once in the last three years are not valid for use on a tax return unless renewed by the taxpayer. Expirations also occur on a rotating cycle: ITINs with middle digits 83, 84, 85, 86 or 87 (like 9NN-83-NNNN) that have not already been renewed will also expire at the end of the year. ITINs with middle digits of 70 through 82 have already expired; if your ITIN has expired, you can still renew at any time.

Affected taxpayers who expect to file a tax return in 2020 should submit a renewal application as soon as possible to avoid delays. If you have an expired ITIN, your federal income tax return will be processed, but exemptions and certain tax credits will be disallowed. 

“We urge taxpayers with expiring ITINs to take action and renew the number as soon as possible. Renewing before the end of the year will avoid unnecessary delays related to their refunds,” said IRS Commissioner Chuck Rettig.

The IRS will begin sending CP48 Notice in early summer to affected taxpayers. The notice will explain the steps to take to renew your ITIN. 

When you renew your ITIN, you can choose to renew your family members’ ITINs at the same time, even if those ITINs are not yet set to expire. For this purpose, family members include your spouse and any dependents residing in the United States that you will claim on your tax return. 

(Remember that there is no personal exemption amount for tax years 2018 through 2025. That means that spouses or dependents outside the United States who would have been claimed for this benefit—and no other benefit—do not need to renew their ITINs this year.)

If your ITIN is not set to expire, or if it has already expired and you do not have a filing requirement, you do not need to take any action. Similarly, if your status has changed and you are eligible for an SSN, you should not apply for or renew an ITIN.

You can renew your ITIN by completing a federal form W-7 (downloads as a PDF) together with the required documentation. You can mail the form to the address on the instructions, work with Certifying Acceptance Agents (CAAs) authorized by the IRS, or call and make an appointment at a designated IRS Taxpayer Assistance Center.

If you need more information, the IRS has several fact sheets available to help, including Pub 5259: https://www.irs.gov/pub/irs-pdf/p5259.pdf

Commissioner Rettig notes, “To help with this process, the IRS is sharing this material in multiple languages.” In addition to English and Spanish, you can find Pub 5259 in ChineseKoreanHaitian CreoleRussian, and Vietnamese.

Technology has changed the world. It’s crazy to me that these days, I could sit on an airplane and send an email to my brother under the ocean (he’s a submariner). Or that I can, with the click of a mouse, have almost anything delivered to my house from trees to laundry detergent to a car. Or that I can, as I did last week, have virtual face-to-face meetings with clients in South Africa and Spain inside of an hour. These advancements have made our lives easier, but that’s not always the case. Sometimes, technology can be used in ways that exploit, rob, and paralyze good people. And those threats are exactly what the Joint Chiefs of Global Tax Enforcement (J5) are working together to end.

The J5 organized last year to combat crime on a global level by sharing resources. The J5 consists of criminal intelligence communities from Australia, Canada, the Netherlands, the United Kingdom and the United States who are committed to collaboration in the fight against international and transnational tax crime and money laundering. Membership of the J5 includes the heads of tax crime and senior officials in tax agencies, including Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), the Fiscale Inlichtingen-en Opsporingsdienst (FIOD), HM Revenue & Customs (HMRC) and Internal Revenue Service Criminal Investigation (IRS-CI). You can read more about the J5 here.

The J5 marked its one-year anniversary this year in Washington, DC. The meeting coincided with a global cyber training event hosted by the United States at the World Bank. The timing emphasizes the group’s focus on shared areas of concern and cross-national tax crime threats, including cybercrime and cryptocurrency.

As part of their efforts, the J5 are involved in more than 50 investigations involving sophisticated international enablers of tax evasion, including a global financial institution and its intermediaries who facilitate taxpayers to hide their income and assets around the world. The agencies are also working together on other criminal cases such as those involving money laundering and the smuggling of illicit commodities. 

How effective are they? The group claims there have been more data exchanges between J5 partner agencies in the past year than the previous ten years combined. While working within existing treaties and laws, that shared information means that the members can open new cases more quickly, develop existing cases more rapidly, and find efficiencies to reduce the time it takes to work cases. 

Hans van der Vlist, General Director FIOD, praised the group’s cooperation, saying that it is “becoming more effective and operational.” He noted that just two weeks ago, they were able to remove an important online mixer for cryptocurrencies and are now analyzing the mixer’s information. Online mixers are companies that pool cryptocurrency funds together and create a series of new transactions – allegedly to hide the source of the funds. In that way, it’s like an ultra-sophisticated version of money laundering.

Given its track record, it’s no surprise that the Internal Revenue Service – Criminal Investigation (IRS-CI) is an active partner in these joint efforts to combat global crime. “I’m extremely proud of the work we have accomplished in just one year since the formation of the J5,” said Don Fort, Chief of IRS-CI. “Each country came to the group with expectations and challenges that needed to be overcome so we could each realize our goal. We have found innovative ways to tackle these problems, remove barriers, and develop processes that make the sum of all of our parts a much more efficient and successful organization. It is not a good time to be a tax criminal on the run—your days are numbered.”

The J5 are also focused on information sharing. One of the platforms that the J5 uses is Financial Criminal Investigation (FCInet), a decentralized virtual computer network that enables agencies to compare, analyze, and exchange data anonymously. The platform provides real-time information and allows agencies from different jurisdictions to work together while respecting each other’s local autonomy. With FCInet, Financial Criminal Investigation Services (FCISs) like IRS-CI can connect information without the need to surrender data or control to a central database and without jeopardizing rights to privacy. You can find out more here.

As part of the anniversary event, members underwent cyber training hosted by IRS-CI, a leader in cyber-crimes and the investigative work worldwide, in conjunction with the World Bank. Attendees received training on virtual currency, blockchain, and the dark web. Members also learned more about cryptocurrency tracing and open source intelligence. 

The J5 continues to collaborate internationally to reduce threats to tax administrations that might be posed by cryptocurrencies and cybercrime and to make the most of data and technology. For more information about the J5, you can check out the IRS-CI’s J5 webpage here.  

You may think you know what a taxpayer with foreign assets looks like. It’s easy to paint a picture of the super-rich jetting off to the Caymans, but that’s more Hollywood-driven than real life. Taxpayers with control over foreign assets come in all shapes and sizes. It’s the executive who works in the U.S. on a non-immigrant visa. It’s the mom who opened a bank account for her daughter during a school year abroad. It’s the woman who worked for a few years in Europe and built a little nest egg to which she hoped to retire. It’s the son who opened a bank account in his mom’s home country to take care of her while she was ill. And it’s even the woman whose husband waited in the car while she visited our office because, as she told us, he didn’t know about her Swiss account.

No matter the circumstances, U.S. citizens and resident aliens, including those with dual citizenship, may have to report certain foreign assets.

Who has to file?

Depending on the nature of your assets, you may have to file one or more forms. The most common tax form to file for foreign assets is the annual Report of Foreign Bank and Financial Accounts (more commonly, FBAR). Each “US person” with an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in any foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $10,000. In other words, if the total of your interests in all of the foreign accounts in which you have an interest reaches $10,000 or more at any point in the calendar year, you may need to file an FBAR. That applies even if you’ve been faithfully reporting the income on your federal income tax return and even if you’ve never, ever repatriated a single dollar to the U.S. It also applies even if the account produces no taxable income. Some exceptions apply.

How do I file?

The Financial Crimes Enforcement Network (FinCEN) form 114, or individual FBAR, is only available through the BSA E-Filing System website.

What is the deadline to file?

The deadline for filing the FBAR is the same as for a federal income tax return. This means that the 2018 FBAR must be filed electronically with FinCEN by April 15, 2019. 

Can I file my FBAR with an extension?

Yes. In 2016, FinCEN announced that it would automatically grant all taxpayers filing an FBAR a six-month extension to October 15.

What happens if I should file an FBAR but choose not to file?

Failure to comply with FATCA or file an FBAR can result in civil penalties, criminal penalties or both.

Wait… You said there might be other filing requirements?

Yes. You probably already know that the U.S. taxes its citizens and resident aliens on their worldwide income. That means you have to report all income from all sources unless excluded. When you file your tax return, pay special attention to Schedule B, Part III, which asks about foreign accounts:

Other forms that might be required include form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts and form 8938, Statement of Specified Foreign Financial Assets. If you’re not sure whether you need to file additional forms and you inherit or hold foreign assets, check with your tax professional.

If I owe, can I pay in Euro? Or Real?

Nope. Income and expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. And, any tax payments must be made in U.S. dollars.

What do I do if I’m not current with my foreign asset reporting?

The Offshore Voluntary Disclosure Program (OVDP) ended on September 28, 2018. However, the Streamlined Filing Compliance Procedures (SFCP) remains in place for taxpayers who might not have been aware of their filing obligations.

Delinquent FBAR procedures are available to taxpayers who do not need to use either the OVDP or the SFCP to file late or amended tax returns to report and pay additional tax, but who have not filed timely FBARs; taxpayers under a civil examination or a criminal investigation by the IRS, or who have been contacted by the IRS about the delinquent FBARs are not eligible for the program. Delinquent international information return procedures are available to taxpayers who have not filed one or more required international information returns (such as form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) and have reasonable cause for not doing so; as before, taxpayers under a civil examination or a criminal investigation by the IRS, or who have been contacted by the IRS about late or missing returns are not eligible for the program.

Is owning foreign assets a crime?

Simply having assets offshore isn’t a crime, but failing to report them may be.

Where can I go for more information?

The IRS has an International Taxpayers page on its website. You can also check out IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (downloads as a PDF).

If you don’t think what you post on social media matters, think again. France has announced that it will begin searching social media accounts next year in an effort to crackdown on tax fraud.

Gerald Darmanin, France’s Minister of Action and Public Accounts, made the announcement as part of an interview he gave to the news show, Capital. The episode will be broadcast Sunday night on France’s national TV channel M6. An excerpt of the show (in French, d’accord) is available here.

According to Darmanin, the government plans to analyze data available on social media sites to determine whether certain taxpayers are living beyond their means. The government “will be able to see that if you have numerous pictures of yourself with a luxury car while you don’t have the means to own one, then maybe your cousin or your girlfriend has lent it to you… or maybe not,” says Darmanin. And yes, that’s all without a subpoena – remember, they’re looking at publicly available data.

Sound bizarre? It’s already happening in other countries, including the United States, albeit not in such an organized and public fashion. The government has long many tools, including social media, to investigate potential tax fraud. In one of the most infamous cases, Rashia Wilson of Tampa, Florida, famously bragged on Facebook while surrounded by piles of money:

I’m Rashia, the queen of IRS tax fraud. … I’m a millionaire for the record. So if you think that indicting me will be easy, it won’t. I promise you. I won’t do no time, dumb b———.

In fact, Rashia regularly bragged online about her crimes. At court, Assistant U.S. Attorney Mandy Riedel actually read excerpts of Wilson’s Facebook page out loud in court as evidence. Wilson was sentenced to 21 years in prison and ordered to pay restitution (for more on the story, click here).

Analyzing taxpayers’ social media is just one of a number of ideas the French government is using to tackle tax fraud. The country is also creating a new “tax police force.” It’s all part of a new law passed just a few weeks ago that allows the French tax authorities more options in the fight against tax evasion.

The Internal Revenue Service (IRS) has issued a reminder to taxpayers with an expiring Individual Taxpayer Identification Number (ITIN) to submit their renewal applications. Failing to renew an ITIN by the end of the year will cause refund and processing delays in 2019.

An Individual Taxpayer Identification Number (ITIN) is assigned to a taxpayer who is not eligible to obtain a Social Security Number (SSN). SSNs are generally assigned to United States citizens and those noncitizens who are authorized to work in the U.S. by the Department of Homeland Security. SSNs and ITINs are intended to be used only for tax and benefits purposes, but since banks, schools and insurance companies use them as identification numbers, more folks want them for nontax purposes: Only a quarter of ITINs assigned since the program began in 1996 have been used to file tax returns.

Concerns about misuse spurned changes, including a law that now allows ITINs to expire. ITINs that have not been used on a federal tax return at least once in the last three years are not valid for use on a tax return unless renewed by the taxpayer. Expirations occur on a rotating cycle. That’s why the IRS mailed more than 1.3 million letters to taxpayers who have ITINs with middle digits 73, 74, 75, 76, 77, 81 or 82 this year. Those folks may need to renew.

If you are a taxpayer with an ITIN with middle digits 71, 72, 78, 79 and 80 that has already expired, you will also need to renew your ITIN if you will have a filing requirement in 2019. When you renew your ITIN, you can choose to renew your family members’ ITINs at the same time, even if those ITINs are not yet set to expire. For this purpose, family members include your spouse and any dependents residing in the United States that you will claim on your tax return.

(Remember that there is no personal exemption amount for tax years 2018 through 2025. That means that spouses or dependents outside the United States who would have been claimed for this benefit—and no other benefit—do not need to renew their ITINs this year.)

If your ITIN is not set to expire, or if it has already expired and you do not have a filing requirement, you do not need to take any action.
Similarly, if your status has changed and you are eligible for an SSN, you should not apply for or renew an ITIN.

If you have an expired ITIN, your federal income tax return will be processed, but exemptions and certain tax credits will be disallowed.
You renew your ITIN by completing a federal form W-7 together with the required documentation. You can mail the form to the address on the instructions, work with Certifying Acceptance Agents (CAAs) authorized by the IRS, or call and make an appointment at a designated IRS Taxpayer Assistance Center.

If you need more information, the IRS has several fact sheets available to help, including Pub 5259.

In addition to English and Spanish, you can find Pub 5259 in ChineseKoreanHaitian CreoleRussian, and Vietnamese.

You can find other ITIN-related IRS publications here

The clock continues to tick down for taxpayers hoping to take advantage of the Offshore Voluntary Disclosure Program (OVDP). The Internal Revenue Service (IRS) will close the program on September 28: that gives taxpayers just a few more weeks to apply.

The IRS launched the OVDP in 2009 to encourage compliance with foreign asset reporting. Structured as a tax amnesty program, it allowed U.S. taxpayers to come forward and avoid criminal prosecution for not reporting foreign accounts. That program drew to a close on October 15, 2009. About 15,000 taxpayers took advantage of the program.

Additional filing requirements were written into the Foreign Account Tax Compliance Act, more commonly called FATCA. Failure to comply with FATCA or file an FBAR can result in civil penalties, criminal penalties or both. In response to FATCA, in 2011, the IRS announced a new amnesty program to take the place of the 2009 program. But since amnesty is such an ugly word, the IRS called it “a special voluntary disclosure initiative.” The official title was the 2011 Offshore Voluntary Disclosure Initiative (OVDI).

That year, the number of taxpayer disclosures peaked, when about 18,000 taxpayers came forward. By early 2012, the IRS claimed it had collected $4.4 billion under both programs.

In 2014, the IRS modified the program yet again. At the time of the relaunch, the IRS made it clear that there would be no set deadline for taxpayers to apply for the program. However, the IRS website warned: “[T]he terms of this program could change at any time. For example, the IRS may increase penalties or limit eligibility in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any time.”

That time finally came. In March of 2018, the IRS announced the program would end on September 28, 2018. The IRS claims that since the launch of the program, taxpayers with undisclosed offshore accounts have paid a total of $11.1 billion in back taxes, interest, and penalties. Acting IRS Commissioner David Kautter said about the decision, “Taxpayers have had several years to come into compliance with U.S. tax laws under this program. All along, we have been clear that we would close the program at the appropriate time, and we have reached that point. Those who still wish to come forward have time to do so.”

Remember: Simply having assets offshore isn’t a crime, but failing to report them may be. (For more on legitimate reasons to go offshore, click here.)
So who needs to worry? Under current law, U.S. taxpayers must report certain offshore assets. Each “US person” with an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in any foreign country must file a Report of Foreign Bank and Financial Accounts (more commonly, FBAR) if the aggregate value of such accounts at any point in a calendar year exceeds $10,000. In other words, if the total of your interests in all of the foreign accounts in which you have an interest reaches $10,000 or more at any point in the calendar year, you may need to file an FBAR. That applies even if you’ve been faithfully reporting the income on your federal income tax return and even if you’ve never, ever repatriated a single dollar to the U.S. It also applies even if the account produces no taxable income. Some exceptions apply (click here for more).

Taxpayers who have not complied still have a few options to play catch-up. According to the IRS, despite the closure of ODVP, the Streamlined Filing Compliance Procedures (SFCP) will remain in place for taxpayers who might not have been aware of their filing obligations. So far, under that program, about 65,000 additional taxpayers have come into compliance.
Additionally, delinquent FBAR procedures and the delinquent international information return procedures will remain available for eligible taxpayers after September 28, 2018. The delinquent FBAR procedures are available to taxpayers who do not need to use either the OVDP or the SFCP to file late or amended tax returns to report and pay additional tax, but who have not filed timely FBARs; taxpayers under a civil examination or a criminal investigation by the IRS, or who have been contacted by the IRS about the delinquent FBARs are not eligible for the program. The delinquent international information return procedures are available to taxpayers who have not filed one or more required international information returns (such as a form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) and have reasonable cause for not doing so; as before, taxpayers under a civil examination or a criminal investigation by the IRS, or who have been contacted by the IRS about late or missing returns are not eligible for the program.

If those options aren’t sufficient, you may wish to consider the OVDP. To get in under the wire for the OVDP, complete offshore voluntary disclosures must be received or postmarked by September 28, 2018. Partial, incomplete, or placeholder submissions will not be sufficient.

As for those folks who haven’t yet come forward – and aren’t planning to do so? They’re not off the hook. The IRS says that it will continue to hold taxpayers with undisclosed offshore accounts accountable after the program closes.

The Internal Revenue Service has announced that combat-zone contract workers may now qualify for the foreign earned income exclusion.
Typically, if you are a U.S. citizen or a U.S. resident alien, you’re taxed on your worldwide income. However, certain taxpayers can exclude some or all foreign wages from tax under the foreign earned income exclusion. The exclusion is hefty: In 2018, the exclusion can be worth as much as $103,900.
To claim the foreign earned income exclusion, you must have foreign earned income and your tax home must be in a foreign country. Your tax home is where you conduct business or are performing work as an employee and may be different from your family home: It’s not necessarily the same as your residence.

In other words, you must demonstrate that you have established residence in a foreign country for an uninterrupted period that includes an entire tax year; for most taxpayers, that means January 1—December 31. You can leave the foreign country for temporary trips back to the United States or elsewhere for vacation or business, but you must intend to return. In extreme circumstances, you can get a waiver if you don’t stay for the entire year.

You aren’t considered to have a tax home in a foreign country for any period in which your abode is in the United States. “Abode” is a complicated word but is generally defined as “one’s home, habitation, residence, domicile, or place of dwelling.” It is not the same as your principal place of business or your tax home (see IRS Pub 54 for more details).

Under prior law, taxpayers who lived and worked in designated combat zones failed to qualify for the foreign earned income exclusion because they had an abode in the United States. As part of the Bipartisan Budget Act of 2018, contractors or employees of contractors providing support to U.S. Armed Forces in designated combat zones are eligible to claim the foreign earned income exclusion even if their “abode” is in the United States. The foreign earned income exclusion is not available to federal employees or members of the military. However, service members in combat zones may qualify for the combat pay exclusion (more on the combat pay exclusion and other tax breaks for the military here).

The new law applies to tax years beginning in 2018.

The foreign earned income exclusion is not automatic. To claim the exclusion, eligible taxpayers must file a U.S. income tax return together with a federal form 2555, Foreign Earned Income (downloads as a PDF). And no double-dipping: If you opt for the exclusion, you may not claim any other exclusion, deduction or credit related to the excluded income.

For more information about claiming the exclusion, check with your tax professional.

The 2018 FIFA World Cup will come to an end on Sunday when Croatia faces France in the final. The soccer tournament, held in Russia, saw 32 national teams compete on a world stage (31 qualifying teams and the host team) over a month’s time.

Each team brought a squad of 23 players to the tournament. While some of the players were already household names all over the world (think Neymar, Messi, and Ronaldo), others were not as well known outside of their home countries until now, like goalkeepers Danijel Subašić (Croatia) and Igor Akinfeev (Russia).

The well-known faces tend to sport healthy salaries and big endorsements. Messi and Ronaldo landed at #2 and #3, respectively, on Forbes’ highest-paid athlete list, bringing in more than $100 million each. Lesser known players can bring home substantially smaller salaries, depending on where they play and where they live.

Over the past few years, the amount of money that some players pay in taxes – or didn’t pay in taxes – has made the news. (You can read about World Cup soccer players who have been caught up in tax scandals here.)
But exactly how big a bite does the taxman take from players? Depending on the country, top tax rates can range from 13% to over 50%. Here’s a glimpse at the top tax rates for each of the countries in the Round of 16:

A quick peek at the tax rates by country as a bar graph is as follows:

Or here, by number:

  • France (45%)
  • Argentina (35%)
  • Uruguay (36%)
  • Portugal (48%)
  • Russia (13%)
  • Spain (45%)
  • Croatia (36%)
  • Denmark (55.8%)
  • Brazil (27.5%)
  • Mexico (35%)
  • Belgium (53.7%)
  • Japan (55.95%)
  • Sweden (61.85%)
  • Switzerland (40%)
  • Colombia (33%)
  • England (45%)
  • ** U.S. rate for comparison (37%)

(Data was sourced from the Organisation for Economic Co-operation and Development (OECD), individual country revenue sites, and Trading Economics. There may be slight differences between sources – so keep reading.)

There are a few things to note. One, these figures reflect the top tax rates which may reflect the rates paid by soccer stars, but may not, depending on factors like residency (not all players live and work in their home country) and type of income (image rights might be taxed differently than salary, for example).

Top tax rates represent the amount that you will pay on the next dollar of income, but not necessarily the rate that you’ve paid on all income, depending on the tax system. The U.S. income tax system is progressive which means that the rate of tax increases as income increases (more on that here). If you’re single, you pay the same 10% on the first $9,525 as every other single person. Then, you pay 15% on the next $27,000 and 25% on the next $50,000 – the same as every other single person. You only pay the top rate (37%) on income over $500,000. So while the top tax rate is 37% in the U.S., the blended, progressive rate is smaller.

But not all countries have a progressive system: Russia, for example, has a flat tax (even though the country considered a change to progressive taxes as recently as 2014). That means that the same rate applies to all income from the bottom to the top.

Not all income is the same; some may be tax-favored. Capital gains, for example, may be taxed at lower rates even when they are generated by high-income taxpayers. Some countries allow lower tax rates for royalties or image rights, while others, like Russia, may boost rates for certain kinds of unearned income. Still, other income may be sheltered, subject to special tax treaty rules or eligible for an exception (remember the “Beckham law” in Spain?).

In some countries, excise and social taxes are combined to produce the top rate. Following the OECD’s lead, the figures in the charts above generally don’t include those “extra” or all-in taxes, though sometimes they are difficult to segregate. It’s easier to peel away in a country like the U.S. where the top tax rate (37%) reflects an income tax rate which is separate from other taxes like Social Security and Medicare or the Net Income Investment Tax.

Top national tax rates typically don’t include state and local taxes. In the U.S., those can vary, but often add up to less than 10%; some exceptions exist like those 13.3% rates for high-wage earners in California. However, in some countries, state and local taxes can make up a significant chunk of taxes payable: In Sweden, for example, rates can top 30%.

Finally, keep in mind that these tax rates don’t include other taxes like real estate, sales, and property taxes. Those can drive your tax burden up – or down – depending on where you live and work. Property taxes, for example, tend to be twice as high in the U.S. as in other OECD with respect to tax collections, while our sales taxes are often less than the VAT (value-added tax) in many countries.

So where does the U.S. fall in the grand scheme of things? (And no, that’s not throwing shade at our men’s team.) The average tax rate for OECD member countries is around 40%. Sweden has the highest tax rate in the OECD, followed by Denmark and Japan (all of which made an appearance in the Round of 16) with rates over 50%. You can see how the U.S. measures up to other OECD countries, including the OECD average, as a share of gross domestic product (GDP) here. (Spoiler alert: Only Chile, Ireland, Korea, and Mexico ranked lower than the U.S. as a percentage of GDP.)

Differences in tax rates can reflect a host of issues, sort of like how your interpretation of a soccer penalty can be influenced by the angle and the player. That’s why an exact tax rate for one country can vary from source to source, just like a referee’s call, even when the answer seems clear and obvious. Taking all of that into consideration, the tax rates listed here should be enough to give you an idea of the top tax rates in your favorite World Cup countries. Enjoy the final!

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