On March 25, 2014, the Internal Revenue Service issued Notice 2014-21, describing how existing tax principles apply to transactions using virtual currency, in the form of questions and answers. The ruling is not surprising, but is informative in many respects. This article addresses the tax implications of this Notice, and not the advantages and disadvantages…
DetailsGenerally, 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.
DetailsMarch 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…
DetailsOn March 10th, 2014, we had an opportunity to hold a follow up telephone discussion with the IRS about the Steamlined Filing Compliance Procedures for Non-Resident, Non-Filer US Taxpayers (SCP) introduced in June 2012. Readers of this blog will recall that we voiced several concerns about the SCP in a letter addressed to David Horton…
DetailsUS persons who have ownership interests in foreign corporations, or who are directors or officers of foreign corporations, are subject to special reporting rules. The first article of this series provided the general reporting requirements under Form 5471; the second article of this series about the reporting requirements of “Category 2 Filers”, which are the…
DetailsUS International Tax Counsel, Danielle Rolfes, confirmed on 28 February 2014 during remarks to the Federal Bar Association Section of Taxation meeting in Washington that the 1 July 2014 effective date for implementation of the Foreign Account Tax Compliance Act (FATCA) will not be extended. She also said that FATCA is not going to be…
DetailsOne of the most widely-utilized tools by high net worth individuals to avoid U.S. estate and gift taxes, namely, “zeroed out GRATs,” remains available. This is due to the failure of Congress to adopt pending proposals to shut it down. “GRAT” stands for “grantor retained annuity trust.” GRATs have a long history of use to…
DetailsThe US taxes its citizens and residents based on their worldwide income. A US citizen living abroad can elect to exclude a certain amount of foreign earned income on his or her US income tax return, if certain requirements are met. For 2013, the maximum foreign earned income exclusion (“FEIE”) amount is $97,600 per taxpayer (amount indexed for inflation each year). The FEIE is available only to exclude income from wages or self-employment income earned for services performed outside the US. The FEIE is claimed on IRS Form 2555.
DetailsOn January 10, 2014, the US and Italy entered into a bilateral agreement for the implementation of FATCA The Italian agreement is based on the Model 1A treaty and requires Italian financial institutions to report their US account holders to the Italian government, which in turn will report those accounts to the US government. Similarly,…
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