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June 29, 2017 - Haoshen Zhong

Is My Investment in a Foreign Corporation?

This is a question we get through email and client work fairly often.

I made an investment into a foreign investment vehicle. Maybe it is a partnership rather than a PFIC?

This post is something of a sequel to this post, describing why a unit trust is likely a PFIC, despite being organized as a trust under local law. This post’s focus is on distinguishing between partnerships and corporations.

What are PFICs?

Passive foreign investment company (PFIC) is a specific classification under US tax law. When a US person owns shares in a PFIC, the US person is subject to extremely punitive tax and reporting rules.... continue reading

PFIC and CFCs
June 23, 2017 - Phil Hodgen

How to Not Pay U.S. Social Security Tax While Working Abroad

Americans who move abroad to work face a particularly difficult job in preparing tax returns. Let’s cheerfully ignore income tax problems today, and instead look at Social Security taxes.

Technically, I am talking about FICA1 taxes: the taxes you pay to fund your old-age pension, survivor’s pension, disability insurance, and Medicare benefits. But for simplicity’s sake–and to match the way normal people talk about these taxes–I will refer to these taxes as “Social Security” taxes.

Let’s look at the semi-established digital nomad. You are a U.S. citizen who owns an operating U.S. business, formed as a corporation. You plan to move abroad and travel for a few years.... continue reading

Friday Edition
June 20, 2017 - Phil Hodgen

Taxation of MSAs and HSAs after Expatriation

This is another piece of the rewrite project for The Exit Tax Book.


Specified Tax-Deferred Accounts After Expatriation: Generally

Distributions from specified tax-deferred accounts after expatriation are unremarkable: an expatriate (covered or not) is treated like any nonresident alien, and taxed accordingly. The only difference will be for covered expatriates: since they are taxed when they expatriate, they are not taxed a second time when they receive distributions of money that was previously taxed.

This chapter discusses distributions from every type of specified tax-deferred account except IRAs:

  • Health Savings Accounts (HSAs);
  • Archer Medical Savings Accounts (MSAs);
  • Section 529 education savings plans; and
  • Coverdell education savings plan.
... continue reading
Expatriation
June 15, 2017 - Haoshen Zhong

Is My Retail Super Fund a PFIC?

Is my pension fund a PFIC?

This is a question we get frequently through email:

I have a pension fund. Is that a PFIC?

Unfortunately, there is no easy answer to this question, because every country has a different pension system, and they can be classified wildly differently depending on how the country’s pension works.

For this post, I will pick on the retail Australian super fund again, because I happen to see a lot of them. This post merely illustrates one process I use to determine if there is a PFIC problem.

What is a super fund?

It is a retirement savings schemes.... continue reading

PFIC and CFCs
June 9, 2017 - Phil Hodgen

Income Tax Return Filing Deadlines for Americans Abroad

Answers In a Hurry

Here are the answers in a hurry:

When You Must File Your Income Tax Return

  • April 15. If your “tax home” or “abode” is in the United States, your filing deadline is April 15. This is the default rule.​
  • June 15. If your “tax home” or “abode” is outside the United States, your deadline for filing your income tax return is June 15. This is automatic and you do not need to do anything to get it.
  • October 15. Anyone can file Form 4868 to make extend the filing deadline to October 15. File before April 15 or June 15 (whichever applies to you).
... continue reading
Americans Living Abroad Friday Edition