Are you ‘current’ with the IRS?

If you’re a US citizen or if you’re a non-US citizen with a green card, it’s likely that you’re required by US law to file a tax return with the IRS. This is true even if your income for the year 2005 was less than $80,000 (or the equivalent in foreign currencies). All US citizens and ‘resident’ aliens are required by law to file a return with the IRS, regardless of where we live, who’s paying us or what currency we get paid in. The only exception is when our gross worldwide income (e.g., before taxes) from all sources (both wages and capital) is less than an amount related to our filing status – see below↓.

The 2005 worldwide income filing requirements are:

Single (< 65 yrs of age)

$   8,200

 In SEK for 2005* = 61,254:-

Head of household (<65)

$ 10,500

                                 78,435:-

Married filing jointly (both < 65)

$ 16,400

                               122,508:-

Married filing separately (all ages)

$   3,200

                                 23,904:-

Note 1: A dependent child w/ unearned income (dividends or interest) over $800 in 2005 is required to file a return.

Note 2: The ‘married filing jointly’ status means the combined income from both spouses is included.

*2005’s average exchange rates for conversions to $1.00USD are

7.47SEK, or 6.44NOK, or 5.995DKK, or $1=1.24€.   Source: U.S. Fed. Reserve

 

However, even if your worldwide income is under the applicable filing threshold listed above, it’s still a good idea to file and stay current with the IRS. One reason is that when you live and work abroad, the IRS has no income information from your foreign employers or banks and a tax return is the best way to keep the IRS informed, and therefore un-inquiring. Plus, it is often good to have copies of recent tax returns when interacting with the US government, student financial aid agencies and various financial institutions. Lastly, it’s a good idea to be current with the IRS if you inherit property or money from a relative in the US. In other words, it’s better to timely file your IRS tax return than to let it slide another year. So this year, why not…

Leave the filing to Phil!

 

Fees – all rates in SEK and include VAT (moms)

 

General Tax Planning and Legal Advice                                                                  1,250:- per hr

 

Special Price for New Clients: The 3 most recent

missing years for the price of two (2), includes

only the forms in the ‘standard’ return                                                                    2,000:- for 3 returns.

 

‘Standard’ IRS Overseas Filers Return                                                                  1,000:- per year

the “Standard” return includes:

                                            One Form 1040, one Form 2555,

                                            a Schedule B, and 2 Statements – re. exchange

rate used and the right to the overseas extension.

 

‘EZ’ IRS Overseas Filers Return (no Schedules required)                                         750:- per year

                     

All additional IRS Forms not included in the ‘standard’

return, as well as state and local tax returns in the U.S.                                       1,250:- per hr

 

AS of 2005 filing season I can do e-file! This is a much better way to complete the annual paper-chase with the IRS - without the paper. The problems with filing electronically from abroad have been overcome and it's now a very effective way to take care of your IRS filing requirements (and state if needed). But not all US citizens living abroad may use the e-file system. For example, if your spouse is a NRA with no SS#, then you'll have to file a paper return. Contact me to see if you qualify for the e-file program.

 

WARNING - the FBAR is not new but enforcement is better!!!

What is an FBAR? Read on...

 

Report of Foreign Bank and Financial Accounts

 

Do You Have a Foreign Financial Account?

If you own a foreign bank account, brokerage account, mutual fund, unit trust, or other financial account (including private pension savings in a foreign institution), then you may be required to report the account yearly to the Internal Revenue Service. Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (FBAR), if

  1. The person has financial interest in, signature authority or other authority over one or more accounts in a foreign country, and
  2. The value of the account exceeds $10,000 at any time during the calendar year.

A United States person is not prohibited from owning foreign accounts. The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions.  The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law.  Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad. 

 

Definition of Terms
A “United States person” is:

·         A citizen or resident of the United States,

·         A domestic partnership,

·         A domestic corporation, or

·         A domestic estate or trust

A foreign country includes all geographical areas outside the United States, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, and the territories and possessions of the United States (including Guam, American Samoa, and the United States Virgin Islands).

 

Reporting and Filing Information

A person who holds a foreign account may have a reporting obligation even though the account produces no taxable income.  Checking the appropriate block on Form 1040 Schedule B, and filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, satisfies the account holder’s reporting obligation.

 

A foreign account holder must mail the Form TD F 90-22.1 on or before June 30 of the following year to:

U.S. Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621.

 

The FBAR is not to be filed with the filer’s Federal income tax return.
The granting, by IRS, of an extension to file Federal income tax returns does not extend the due date for filing an FBAR.  There is no extension available for filing the FBAR.

 

Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.

 

FBAR Assistance

Help in completing Form TD F 90-22.1 is available at 1-800-800-2877, option 2.  The form is available online at IRS.gov and MSB or by telephone at 1-800-829-3676.  Questions regarding the FBAR can be sent to FBARquestions@irs.gov.