IRS Releases List of Foreign Financial Institutions that have received Global Intermediary Identification Numbers

In late May, the IRS published the first list of the Foreign Financial Institutions (“FFI”) that have applied for and received Global Intermediary Identification Numbers (“GIIN’s”). The list is searchable at the IRS website. According to the IRS, the list will be periodically updated. Recipients of W-8BEN-E’s are now able to independently verify whether an FFI that…

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How does the Net Investment Income Tax Affect US Citizens Living Abroad?

The Net Investment Income Tax (NIIT) went into effect January 1, 2013, affecting tax years beginning on or after January 1, 2013.  The NIIT applies to US persons with modified adjusted gross income above the following thresholds: $125,000 for filing status married filing separately; $200,000 for filing status single or head of household; and $250,000…

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IRS Decision to “Ease” FATCA Enforcement does not Apply to Individuals – Only to Entities

You may have seen a post like the one below and concluded that the IRS had eased FATCA enforcement for everyone.  That is NOT true.  During the American Bar Association Section of Taxation meeting in Washington, DC from May 8th through 10th, senior officials of the IRS explained that the announcement made public on Friday, May…

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Taxation of Compensation Clawbacks

Compensation clawbacks, where employers recoup compensation, e.g., incentive bonuses, to rectify violations of rules or policies, have received much press since the Great Recession of 2008, and a number of well-publicized financial scandals, such as the J.P. Morgan “London Whale” incident. The Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) (“Dodd-Frank”) dramatically increased the incidents of clawbacks, and, thus, the importance of their federal income tax treatment

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Final Version of W8-BEN-E Released: New FATCA Compliance Requirements for non-US Entities

On March 28, 2014, the IRS released the final version of the W-8BEN-E. The W-8BEN-E is an important step in enforcing FATCA, and replaces the W-8BEN for non-US entities receiving payments from US payors. The purpose of the W-8BEN-E for non-US entities to certify their FATCA status. However, it is still the responsibility of the US payor to request the…

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Foreign Tax Credit

Generally, receiving a tax credit is more beneficial to a taxpayer than a deduction from income taxes. A tax credit provides a dollar for dollar reduction in current income tax liability. If a taxpayer excludes amounts from his or her earned income under the foreign earned income exclusion, then the taxpayer cannot receive a foreign tax credit or deduction for taxes on the income that were excluded under the foreign earned income exclusion. It will be important for the taxpayer to determine whether he or she is in a better position receiving the foreign earned income exclusion or receiving the foreign tax credit applicable to the foreign earned income.

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FATCA Developments in March 2014

March has started well in the Treasury Department’s ongoing efforts to implement FATCA. The Treasury Department inked two more FATCA intergovernmental agreements (IGA’s) on March 5, 2014. Importantly, Chile has signed an IGA, the first country in South America. The Finnish IGA agreement is based on the Model 1A treaty and requires Finnish financial institutions…

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