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February 16, 2018 - Phil Hodgen

Section 199A Works for Nonresident Aliens

Section 199A Deductions

Reader B.B. from Miami Beach asked a such a simple1 question:

Are NRAs with pass-through U.S. entities eligible for the [IRC Section 199A] deduction?

What follows is my incomplete answer. A complete answer would require me to fully understand Section 199A. And I would rather die in a fire than become intimate with Section 199A.

Foreshadowing the Denouement

Short answer: I think so.

Let’s be precise. I am talking about a nonresident alien who has effectively connected income. With that clarification, I think a Section 199A deduction is allowed because:

  • Section 199A doesn’t say a nonresident alien is forbidden from taking the deduction; and
  • A nonresident alien with effectively connected income will have the right type of income–the kind of income that generates a Section 199A deduction.
... continue reading
Friday Edition
February 13, 2018 - Phil Hodgen

Strategic Reasons to become a US Tax Resident Again

Sometimes people who expatriate become U.S. taxpayers again. This might happen because life intervenes (family or job reasons make a return to the United States necessary or desirable). Or, becoming a U.S. taxpayer again might be good for tax reasons.

Let’s look at this piece of the expatriate’s life after expatriation.

Introduction

Two Types of Tax Residents

There are two types of “residents” for U.S. tax purposes:

  • Income tax. A nonresident noncitizen of the United States might become a resident of the United States for income tax purposes only. The result? Pay U.S. income tax on worldwide income, and file all of the tax paperwork that the United States demands of its residents and citizens.
... continue reading
Expatriation
February 8, 2018 - Haoshen Zhong

The GILTI Software Developer

Introducing the cross border business newsletter

In response to the tax law changes enacted December of 2017, we converted our PFICs Only newsletter to cover more topics that arise when a business crosses the US border–when a US person owns part of a foreign business or when a foreign person starts a business in the US. This is the first blog post under the new subject.

The GILTI consultant

If you were paying attention to the tax law rewrite last year, you may have heard the term “global intangible low-taxed income” (GILTI). It is supposed to establish a minimum tax on foreign source income for multinational corporations.... continue reading

Americans Living Abroad
February 2, 2018 - Phil Hodgen

GILTI: In Which Foreign Corporation Income is Made Taxable

Poker players are always looking for tells — inadvertent signals by their opponents. The Tax Cuts and Jobs Act has a tell. Our Federal government has told us what they think of us.

They think we are incipient felons.

If you had any doubt about our how our Federal Overlords view us, new Internal Revenue Code Section 951A should clarify things for you. This new law introduces a new acronym: GILTI.

Not Quite Territorial Taxation

The new tax laws are great if your name is Apple or Google.

But for American entrepreneurs living abroad and running regular businesses, (tax) life is worse in 2018 than it was in 2017.... continue reading

Friday Edition
January 30, 2018 - Phil Hodgen

The Consequences of Filing Form 8854 Late

Form 8854, I like to say, is how you log out of the U.S. tax system when you give up U.S. citizenship or permanent resident status. Let’s look at the procedural aspects of this mandatory paperwork:

  • Why you must file Form 8854;
  • When you must file Form 8854; and
  • What happens if you don’t file Form 8854 on time?
Why Form 8854 Exists

Overview

Congress imposed the data collecting requirements for expatriates. The IRS took these instructions from Congress and, wielded its its general authority under 6011 to design forms and collect data. Form 8854 is the result. The IRS also took its authority under 6071 and set the filing deadlines that we work with.... continue reading

Expatriation