February 27, 2018 - Phil Hodgen

Tax Liabilities and Your Form 8854 Balance Sheet

Net Worth Test and Covered Expatriate Status

We help many, many people with their expatriation, and the number 2 problem we fix is net worth. Bad tax things happen if a person is a covered expatriate.

A person is a covered expatriate if he or she has a net worth of $2,000,000 or more.1 An expatriate reports all assets and liabilities on Form 8854.

The planning question is simple: “How can I reduce my net worth so I can report a value below $2,000,000 on the Form 8854 balance sheet?”2 If you are able to reduce your net worth below $2,000,000, you may be able to avoid covered expatriate status.... continue reading

February 22, 2018 - Haoshen Zhong

High Tax Exception to GILTI

Limited high tax exception from GILTI

In our last post, we described the basics of how GILTI works in the context of a software company. Many questions we received through email related to a “high tax exception” to GILTI. Today’s post discusses what the high tax exception is and why this high tax exception appears to not exempt shareholders of corporations in high tax countries from GILTI.


Let us work with a set of assumptions to see how limited the high tax exception is:

A US citizen lives in the UK and owns a fairly successful retail business. It is run through a UK limited company.

... continue reading
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.


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
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 Minimultinationals