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September 22, 2014 / 27 Elul, 5774
At a Glance

Posts Tagged ‘FBAR’

Are You Rich Enough to Make Aliyah?

Thursday, April 18th, 2013

How many times have you heard people say, “I could never make aliya. It’s too difficult financially”?

Well, now there is one less excuse.

There are the standard financial pluses of living in Israel: the Israeli unemployment rate is lower than in America, day school tuitions are cheaper, and you don’t need to use personal vacation days for the chaggim.

While there are many benefits to living in Israel, there are some financial challenges, particularly around tax-filing time. While Americans living in Israel have an obligation to file with the IRS, Israel and America have a tax treaty between them, according to which if you pay taxes in Israel and also owe them in America (since America taxes her citizens on worldwide income), you can take a tax credit on your American taxes for what you paid to Israel.

In addition to filing U.S. taxes, American olim must file FBAR forms and they also may be responsible for filing under new FATCA requirements.

Confused? You’re not alone. But if you used this confusion as an excuse not to make aliya, your excuse no longer holds water. A new book can help you.

The IRS recently implemented FATCA, and Uncle Sam wants you to file your American taxes (in addition to your Israeli taxes) and FBAR form, but before you start to get too worried, there are solutions. For starters, get a copy of my recent book, The Expatriate’s Guide to Handling Money and Taxes? As a financial adviser with more than two decades of experience helping Americans abroad handle their American brokerage accounts and deal with the problems that arise from living in dual currencies, I wrote the book with the help of various leading international tax lawyers and accountants.

Just as you would extensively research communities, ulpans, schools, and jobs before moving to Israel, learn what your tax obligations to the Old Country will be when you are offshore. This should make your transition easier, as you won’t have nightmares about the IRS demanding a share of your new salary.

Why It’s Tough to Be an American

Thursday, April 4th, 2013

The American economy isn’t what it once was, and while some Americans are looking to move abroad to better their financial situation, Americans living abroad face specific financial challenges due to the fact that they are American citizens (which I discuss in depth in my new book, The Expatriate’s Guide to Handling Money and Taxes). While holding an American passport once was considered a great advantage, today it has broad ramifications for your finances. Any well-intentioned American parents or grandparents who are thinking of getting American citizenship for their Israeli-born children or grandchildren might want to think again when it comes to taking up this inherited privilege.

Why?

Below are six good reasons why financially, life has become more difficult for American citizens living overseas, regardless of how long they’ve been abroad, whether they’ve ever worked or lived in the States, or even whether they speak English:

(1) FBAR and FATCA. These terms refer to tax reporting requirements that U.S. citizens abroad must file if their assets reach certain minimum levels. Non-compliance can result in steep fines. These requirements have had a very serious effect on how foreign banks and investments view U.S. account holders, since FATCA requires foreign banks to report American accounts and assets to the American government.

The problems that follow are a direct consequence of FBAR and FATCA:

(2) Limits on buying mutual funds through an American brokerage account. You may think it’s O.K. if FATCA makes it difficult to open a foreign investment account, since after all, you can use your American brokerage account and continue with your familiar investments. But, beware: many American mutual funds are rejecting orders to buy if the address on the account is not a U.S. address. And I’ve been approached by clients of other brokerage houses whose mutual fund trades have retroactively been cancelled because of the foreign address issue. Not every brokerage firm in America is comfortable dealing with accounts of Americans living overseas.

There are also challenges in buying mutual funds through an overseas brokerage account. If your foreign investment house sells you a foreign mutual fund, not only will it report your assets to America (or else it risks facing steep taxes), but you may need to report the foreign mutual fund as a PFIC (Passive Foreign Investment Company).

(3) The current situation has made it very hard to transfer assets, as countries don’t automatically recognize notaries from other countries. This means if you live overseas and inherit an American brokerage account, you may need to fly into America to physically have your signature witnessed by an American company that can offer a “medallion guarantee.”

(4) It’s very difficult to get life insurance from a U.S. insurance company because they won’t recognize an address outside the United States.

(5) Say goodbye to your U.S. credit and debit cards. Some of them don’t work away from the United States, while many companies will refuse to mail your statements overseas. And if you have an existing account, now that your address has moved abroad, you won’t receive a new card when it becomes necessary.

(6) Don’t think you can solve your problems by opening a bank account in the United States. Without a U.S. address, forget about it. And if you receive a dollar check, it’s not a simple matter of depositing it in your bank account abroad, as the banks charge a fortune for conversions into local currency, and it’s not unusual to take up to three weeks for foreign checks (yes, outside the U.S. dollar checks are considered ‘foreign’) to clear.

So what are the solutions to these thorny problems?

You’ll find them in my new e-book, The Expatriate’s Guide to Handling Money and Taxes, which I wrote in order to help the many bewildered expats that I meet in my capacity as a financial adviser. As a reader of The Jewish Press, use the coupon code JPRESS to get the book at half price.

Do You Need to File an FBAR Form with the IRS?

Tuesday, March 5th, 2013

Americans earning income in the USA have to file taxes on or before April 15th, but what about Americans earning and living abroad? With the implementation of the Patriot Act as well as other laws, expatriate Americans face a whole slew of new reporting regulations. These laws make it necessary for Americans abroad to file reports…even if they don’t owe any taxes.

Unfortunately, many U.S. citizens living overseas are unaware of their reporting obligations towards to America. If they just fill in a basic tax form, they may think they’re done.

But they’re not. (There’s a lot more to do. At the bottom of this article, find out how to get a discount on The Expatriate’s Guide to Handling Money and Taxes.)

If you have more than $10,000 in assets overseas (on any single day of the year…if you transfer funds to buy real estate, or if you have a foreign bank account, or if you have a foreign pension fund, etc.) Uncle Sam wants to know about it. While the intentions behind filing the FBAR form were to make it more difficult to launder money and increase tax revenue, the real result has been to make life a nightmare for Americans living abroad.

Even honest folks who are unaware of their filing obligations are committing a criminal offense if they don’t file this report correctly by June 30of every year for the preceding tax year.

I discussed the issue of U.S. expats’ tax obligations with international tax specialist Ron Zalben, of Don Shrensky & Co, Jerusalem, to find out what U.S. olim need to know.

“Why are FBAR (Foreign Bank and Financial Accounts) and FATCA (Foreign Account Tax Compliance Act) forms causing so much trouble?” I asked.

Ron explained, “Since so many U.S. citizens living abroad have never filed a U.S. tax return (for legitimate or other reasons), it’s scary for them to now begin a relationship with the IRS.  They’re scared because of the uncertainty of dealing with the IRS – something they never have dealt with previously. This uncertainty causes panic and fear.  Starting shortly with FATCA, foreign banks will start sharing information of U.S. citizens’ bank accounts with the IRS.”

I asked Ron for specific tips on how to file the FBAR and he gave me these three ideas:

1. Don’t panic.

2. Seek professional advice.

3. Organize the details of your income and foreign accounts for each tax year.

Indeed, although the idea of filling in a very long, complex tax form might seem rather daunting, approaching it in a systematic manner is helpful. Make sure to include all bank and savings accounts in your name, as well as any accounts you have authority over or a financial interest in (business accounts, non-profit organization treasurers, children’s accounts, etc.)

To further awareness of American expatriates’ reporting requirements both Ron and I contributed chapters to a new book, called The Expatriate’s Guide to Handling Money and Taxes. The idea behind the book is to spread the awareness of new tax legislation that has already had a profound effect on expats everywhere.

If you want to make sure that you fulfill your legal obligation to the U.S. government properly, download this book and be sure to implement the easy-to-follow checklist of things to do. For Jewish Press readers, get half off the regular price of the book by using the discount code JPRESS. Go to www.ExpatGuideToMoney.com and order now. The discount will expire on tax day, April 15th.

Printed from: http://www.jewishpress.com/blogs/goldstein-on-gelt/do-you-need-to-file-a-fbar-form-with-the-irs/2013/03/05/

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