Archive for category: International tax attorney & lawyer Video

Hi and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd. and today we are continuing our series of blogs from the Czech Republic. Right now, I’m on the way to Prague from Karlovy Vary and I wanted to make this blog about the Worldwide Income Reporting, particularly about the myths which surround the worldwide reporting requirement.

The general rule is that if you are a US Tax Resident that you must disclose your worldwide income on your US Tax Returns; but there are a number of myths on the internet especially which say that there are certain exceptions to this requirement. So, lets go over these worldwide income reporting myths.

The most frequent and the most dangerous myth is the ‘local taxation’ myth. Under the ‘local taxation’ myth, a taxpayer believes that he doesn’t have to report his income, his foreign income because it is subject to local taxation. So, for example if you have a foreign account in the Czech Republic and there’s tax withholding on all the income produced by the account then you don’t have to report the income. And sometimes some people even believe that you don’t even have to report the account itself. This is a completely false assumption; there is no basis for it whatsoever. Even if income is subject to local taxation, it still needs to be reported on your US Tax Return.

The second myth which is also very common is that you only pay taxes in the jurisdiction where you earned the income; the so called ‘territorial taxation’ myth. This myth is very popular for a very good reason. A lot of countries actually would not tax income that is earned in another jurisdiction. Unfortunately, the United States is not one of them. Under US Tax Law irrespective of where the income is earned, it’s taxed in the United States as long as you are a US Tax Resident. The fact that it’s earned in another jurisdiction has no influence on the tax law whatsoever.

And then finally, there is an interesting belief that is held by some people is that there is some sort of ‘de minimis’ exception to the worldwide reporting requirement. And that is also not correct. There is no de minimis exception to the worldwide income reporting requirement. Even if you earn one dollar of foreign income, you still need to report it. Even if you earn ten dollars, one hundred dollars, it doesn’t matter; you still have to report it. Now I believe the reason why this myth exists is because of the $10,000 interest in the foreign account requirement for FBAR purposes. So FBAR as you may know is an information return that US Persons must file in the United States. It’s not part of the internal revenue code but it is administered by the IRS. And in order to be subject to FBAR filing requirement, you have to have at least $10,000 in your foreign accounts. Technically speaking, the highest aggregate value should be in excess of $10,000, but that amount $10,000 kind of sticks in people’s minds and they think this is the amount of income that you have to have in order for foreign income to be reportable on your US Tax Return. That is also not true: $10,000 is something that is relevant to FBAR only and has nothing to do with actual income, it has to do with balances.

So, these are the three most common worldwide income exception myths. If you follow any one of them, you are most likely not in compliance with US Tax Laws and if this is the case, I suggest that you contact me as soon as possible. You can call me at (952) 500-8159 or you can email me at [email protected]. Thank you for watching and until the next time.

“Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen; I’m an international tax attorney and owner of Sherayzen Law Office, Ltd.

Today, I would like to discuss with you an interesting and very important concept in US Tax Law:  Statute of Limitations. The Statute of Limitations basically means that there is a certain period of time when the IRS can go back and open up a certain tax form or an entire tax return for examination. The general Statute of Limitation under US Tax Law for a normal 1040 is three years; however, there are a number of important exceptions. One of the exceptions for example is when you do not disclose more than 25% of your income on your US Tax Returns. In this case, the Statute of Limitations extends to six years.

Now if you also fail to file an international information return with your US Tax Return, then you may be facing a situation where the Statute of Limitations never starts to run. In other words, the IRS can go back in time and open up that form forever, potentially forever. I have had in my personal practice situations where during an audit and IRS would go back 18, 20 years to open up a tax return for examination and imposition of penalties.

US Tax Law is filled with concepts like this, complex concepts, and it’s important to understand them before you make your decision on how to proceed with respect to the reporting of your foreign assets and foreign income.

If you would like to know more about US Tax Law or you would like to have a consultation, with respect to a specific international tax issue, you should contact me directly at: (952) 500-8159 or email me at: [email protected].

Thank you for watching until the next time.