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January 19, 2010 - Phil Hodgen

IRS interim guidance for dealing with foreign tax officials

This post is about “outbound” disclosure of information. When will the IRS report back to your home country about your financial activities in the United States?

One of the long term trends in tax administration will be that there will be increased government-to-government information sharing. That country over there (wherever that is) will feel increasingly emboldened to share with the U.S. government, and the information shared will be about you. And vice versa. This will be done under the guise of the Bogeyman du Jour (drug cartels, terrorists, etc.) but it will be done.

The IRS updated the Internal Revenue Manual in late December 2009 with a Memorandum titled “Interim Guidance on Interactions with Foreign Tax Officials.” Let’s look at what it says about government-to-government information sharing.... continue reading

Foreign Business Activities in the USA
December 15, 2009 - Phil Hodgen

Expatriation business is good, thanks in part to dumb tax policy

Today’s Wall Street Journal (link to the article is here, Rupert Murdoch, and be damned) there is non-tax verification of what I am seeing here.

What we’re seeing

We take people all the way through the process until they have no more U.S. passport and are completely–and legally–logged out of the U.S. tax system forever. Same thing for people with green cards. We take them all the way through the process. (Side note: at the California Society of CPA’s International Tax Conference last week in Costa Mesa a speaker asked a room of 100 people who had direct experience with Section 877A, the IRS rules for people who give up their citizenship or permanent resident status.... continue reading

Foreign Business Activities in the USA
December 14, 2009 - Phil Hodgen

HSBC/Geneva has client data stolen by former employee

We’ve heard this song before. Disgruntled bank employee grabs secret information about customers, spills the beans to the tax authorities in another country.

A couple of years ago it was Liechtenstein and the LGT Bank. Now it is HSBC in Geneva. This time it is French taxpayers who are feeling the heat.

The nut grafs:

A former employee of the bank stole client data between late 2006 and early 2007, the bank confirmed yesterday.

However, it insisted that only ten of the bank’s wealthiest customers had been affected by the theft, which was discovered during a period of police surveillance in 2008.

... continue reading
Foreign Business Activities in the USA US Real Estate Investments Voluntary Disclosure
October 12, 2009 - Phil Hodgen

Foreign earned income doesn’t cover interest and dividends

I just received an email from someone based on the www.foreignbankaccountamnesty.com site. It raised a question that comes up often, so I figured I would answer it online.

Question: Are dividends or interest payments received by US citizens living overseas received from foreign financial institutions also included in above definition and application of foreign earned interest, or is only income earned from work/employment meant by the term “foreign earned income”?

As part of the ongoing offshore bank account so-called amnesty, I came across many expatriate Americans who assumed that the foreign earned income exclusion covers any foreign-source income — including bank interest.... continue reading

Foreign Business Activities in the USA US Real Estate Investments Voluntary Disclosure
October 8, 2009 - Phil Hodgen

Impressive complexity in tax returns

I just got off the phone an accountant in an unnamed Asian city who has prepared an impressive and immaculate amended 2008 income tax return for one of her clients (who is also my client).

It is an impressive job because the preparer did a thorough job without shortcuts. This, I know from personal experience, causes brain damage.

The foreign earned income exclusion, PFIC rules, foreign tax credit, AMT, etc. rules make a normal person’s tax returns quite frankly almost impossible to do correctly. The system is designed to cause failure by taxpayers.

I defy any non-tax person — even if you have a Ph.D in Astrophysics — to do correctly what B.... continue reading

Foreign Business Activities in the USA Nonresidents with US Activities Voluntary Disclosure