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  1. a couple add – ons with regards to my research into “streamlined program“. The $1,500 tax owed p.a. and filing 3 year tax and 6 year FBAR is not firm.
    I have heard that the IRS has moved many overseas expats currently into the SP without giving notice and have done 5/6 years under the Streamlined a number of times. I have been told by IRS agents that they have no problem with this approach, and it will not lead to additional penalties, audit, or other enforcement. Their view is that since you’re meeting the program’s requirements, there’s no evil in an additional 2/3 years. The streamlined approach has no guaranties against penalties being levied. The IRS has said that individuals who are considered “low risk” will not have penalties levied. It has provided some guidelines for what constitutes low risk, but that’s all that exists to date. So the bottom line is : it depends – no FBAR penalties in any case but with regards to FTP,FTF,FTD civil tax penalties it is discretionary depending how your examiner sees your case as simple or more complicated.

  2. Thanks for the correction Michael. Brain fart by me on the 3.8%. 🙂

    This comment is posted from the Rose Bowl where the Bruins just scored again.

  3. I’m a big proponent of very seriously considering noncorporate structures, so as to avoid the double tax and loss of LTCG rates that accompanies corporate structures. But the estate tax is definitely an issue, and one needs to have a well thought out plan for addressing estate taxes before embarking on a noncorporate structure. Also, one small nit, NRAs are not subject to the 3.8%.

  4. @bubblebustin,

    Yoikes. A big question. But as a practical matter look at the financial bogey they tell you in the streamlined procedure — $1500/yr in tax. Penalties on top of that are going to be a few hundred dollars per year, at worst.

    Yes I know that for some people even $400 per year or so will matter. But still. File, pay at $50 per month, and move on with life.

  5. sorry Phil but can I ask you a question which is a bit off-topic : during a dinner party conversation yesterday I was discovering that a certain expat couple unfortunately has not filed their 1040 returns because they thought paying taxes in the country where they lived and worked would have been enough. Through our conversation I told them that they should qualify for the streamlined procedure and saying that in the Streamlined Program there are no FBAR and no tax penalties . So you will have any FTF (Failure to File) and FTP (Failure to Pay) penalties you paid returned to you. Those are the Section 6662 and Section 6651 penalties you had to pay because you did not file and pay when the return was originally due. Unfortunately, interest that was paid on any taxes due after the original filing due date is never returned. Was I correct in saying that FTF, FTP, FTD tax penalties do not apply within the streamlined procedure/program ?
    I am still looking for a reference to that within the IRM`s.

  6. @bubblebustin – My point is that if the US isn’t an attractive place to invest, the above doesn’t matter to foreign investors.

    If a foreign investor sees the US as a riskier place to invest because of FATCA, they may very well goes elsewhere in the world.

    Homelanders see FATCA as a non-issue, but I can assure you foreigners and Americans living abroad see it totally different.

  7. I will do another post explaining choices for owning U. S. real estate if you are a nonresident. But here is a quick summary.

    The two taxes are the income tax (what capital gains tax rate will you pay if you sell the real estate at a profit?) and the estate tax (what is the tax if you die while owning the real estate?).

    Using a foreign corporation to own U. S. real estate will defeat the estate tax. You can die knowing that the U. S. estate tax will not be imposed. But capital gains of corporations are taxed at a high rate (34% is typical).

    Conversely, if you own the property in your own name, you will pay capital gain tax at a lower rate (20% plus 3.8% EDIT: brain fart by Phil; thanks Michael Miller) but if you die the estate tax is imposed.

    The way to get the best of both worlds is an irrevocable trust. But this is expensive and cumbersome. It isn’t cost effective for small properties.

  8. ….using corporations to own U.S. real estate is not terribly tax-efficient….. Sorry Phil I forgot to ask : what would be the most efficient way for a NR to own US real estate.

  9. sorry but I am not sure what this readers comment has to do with “Rental Income and Branch Profits Tax“ besides stirring up some controversy and the stereotype hate and fear mongering between the “rich“ and so called “working class“ folks.
    IMO FATCA-DATCA-GATCA are reality and here to stay and everybody needs to accept that and comply.
    But lets talk about Rental Income and Branch Profits.. interesting post Phil and I was not aware that the combined corporate income tax plus branch profits tax can be above 50%. This is why one should look for those deductions like expenses for repairs and property taxes but what I do not understand is that you excluded mortgage debt and assumed a cash deal. Keep in mind that banks are lending a lot more freely in the Bahamas 🙂

  10. At the end of the day the USA is like one big Prospectus, you can invest in the US, risk FATCA, complicated tax rules and after all that you may, repeat may end up with a profit.

    No thanks sell up and find a better Prospectus elsewhere.

    FATCA is a bit like telling people the dangers of HIV or Smoking, people take a period of time to digest the news and then make a risk assessment. It’s evolution not revolution.

    The rich can avoid FATCA just by jettisoning US citizenship at the extreme with us working folks keeping this issue as work in progress.

    The US is writing a bad Prospectus.

    My prediction –

    As the world economy recovers tax evasion will become lesser of an issue as government revenues recover.

    Civil Liberties groups in different countries will have to take on board FATCA as a discrimination issue with some countries’ court ruling against IGAs thereby slowing its progress.

    Upcoming Swiss Referendum campaign interesting

    FATCA is mirroring the shift in global political / economic power, If the US fails to implement this across the world or at least the G20, the shift in economic power has been confirmed. The US’ role in the world has been diminished. However people who follow this blog and others one will find this no surprise except the Homelanders.

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Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.