taxation law services

Estimated Tax Payments are due on June 15, 2011

Estimated tax payments for the second quarter (April 1 –  May 31) of 2011 are due on June 15, 2011. The estimated tax payments should be made using Form 1040-ES. Note, if the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be considered on time if it is made on the next business day.

Underpayment and Overpayment Interest Rates for the Third Quarter of 2011

On May 16, 2011, the Internal Revenue Service announced that interest rates for the calendar quarter beginning July 1, 2011, will remain the same as in the previous quarter. The rates will be:

  • four (4) percent for overpayments (three (3) percent in the case of a corporation);
  • four (4) percent for underpayments;
  • six (6) percent for large corporate underpayments; and
  • one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

Section 6621 of the Internal Revenue Code establishes the rates for interest on tax overpayments and tax underpayments. These rates determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Rev. Rul. 2011-12. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. Pursuant to I.R.C. section 6621(c), the rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. See section 301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.

The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.

Interest factors for daily compound interest for annual rates of 1.5 percent, 3 percent, 4 percent and 6 percent are published in Tables 8, 11, 13, and 17 of Rev. Proc. 95-17, 1995-1 C.B. 556, 562, 567, and 571. Interest factors for daily compound interest for an annual rate of 0.5 percent are published in Appendix A of Revenue Ruling 2010-31, 2010-52 IRB 898, 899. 3.

Contact Sherayzen Law Office

If you have any questions with respect to IRS interest rates and any other tax-related concerns, you should contact our experienced tax firm to discuss your case.

FBAR: Exclusion of Personal and Homeowner’s Lines of Credit

Often, I receive specific questions from my clients with respect to whether certain types of accounts should be reported on the Report on Foreign Bank and Financial Accounts (“FBAR”). Recently, one of my clients wanted to know whether he needs to report his personal and homeowner’s lines of credits on the FBAR.

A little disclaimer before I deal with the main subject of this essay. In this legal note, I do not discuss the situations where you loaned the money to someone else. This essay focus strictly on the money loaned to you.

Generally, whether the money loaned to you should be reported on the FBAR is a highly fact-dependent situation. Most such loans are not reported on the FBAR, because these loans are not considered assets. However, if a loan can be considered as an asset because of the way it is structured or because it is a part of a larger financial arrangement, the loan needs to be reported on the FBAR. You should discuss this situation with an international tax attorney who specializes in FBARs.

The situation with respect to personal and homeowner’s lines of credit, however, is much clearer. The IRS does not regard these lines of credit as assets and does not require you to disclose them on the FBAR. While this is a general rule, you should call us to discuss your specific situation in order to make sure that nothing in your situation makes these lines of credit reportable.

Contact Sherayzen Law Office to Get FBAR Help

If you have any questions with respect to FBAR or voluntary disclosure, Sherayzen Law Office can help. Our international tax firm has guided our clients throughout the United States through voluntary disclosure and FBAR reporting, making sure that the rights of our clients are protected and they pay only fair taxes and penalties.

Official Treasury Currency Conversion Rates of December 31, 2010

Every quarter the U.S. Department of Treasury publishes its official currency conversion rates (they are called “Treasury’s Financial Management Service rates). While there are many uses for these rates, the current (March 2011 revision) FBAR instructions require their use, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:

In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.

Here is the table of the official Treasury currency conversion rates:

Country Currency Foreign Currency to $1.00
Afghanistan Afghani 44.5000
Albania Lek 106.3600
Algeria Dinar 73.1500
Angola Kwanza 90.0000
Antigua-Barbuda East Caribbean Dollar 2.7000
Argentina Peso 3.9800
Armenia Dram 360.0000
Australia Dollar 1.0400
Austria Euro 0.7700
Azerbaijan Manat 0.8200
Bahamas Dollar 1.0000
Bahrain Dinar 0.3800
Bangladesh Taka 69.0000
Barbados Dollar 2.0200
Belarus Ruble 3010.0000
Belgium Euro 0.7700
Belize Dollar 2.0000
Benin CFA Franc 503.3000
Bermuda Dollar 1.0000
Bolivia Boliviano 6.9600
Bosnia-Hercegovina Marka 1.5000
Botwana Pula 6.7500
Brazil Real 1.7200
Brunei Dollar 1.3200
Bulgaria Lev 1.5000
Burkina Faso CFA Franc 503.3000
Burma Kyat 450.0000
Burundi Franc 1243.0000
Cambodia (Khmer) Riel 4239.0000
Cameroon CFA Franc 503.3000
Canada Dollar 1.0200
Cape Verde Escudo 81.6700
Cayman Islands Dollar 0.8200
Central African Republic CFA Franc 503.3000
Chad CFA Franc 503.3000
Chile Peso 486.7000
China Renminbi 6.6700
Colombia Peso 1920.0000
Comoros Franc 361.3500
Congo CFA Franc 503.3000
Costa Rica Colon 501.9500
Cote D’Ivoire CFA Franc 503.3000
Croatia Kuna 5.5900
Cuba Peso 0.9300
Cyprus Euro 0.7700
Czech Republic Koruna 18.6400
Democratic Republic of Congo Congolese Franc 900.0000
Denmark Krone 5.7200
Djibouti Franc 177.0000
Dominican Republic Peso 37.0500
East Timor Dili 1.0000
Ecuador Dolares 1.0000
Egypt Pound 5.7900
El Salvador Dolares 1.0000
Equatorial Guinea CFA Franc 503.3000
Eritrea Nakfa 15.0000
Estonia Kroon 12.0000
Ethiopia Birr 16.4900
Euro Zone EURO 0.7700
Fiji Dollar 1.8200
Finland Euro 0.7700
France Euro 0.7700
Gabon CFA Franc 503.3000
Gambia Dalasi 28.0000
Georgia Lari 1.7600
Germany FRG Euro 0.7700
Ghana Cedi 1.4500
Greece Euro 0.7700
Grenada East Carribean Dollar 2.7000
Guatemala Quentzel 8.0000
Guinea Franc 6078.0000
Guinea Bissau CFA Franc 503.3000
Guyana Dollar 201.0000
Haiti Gourde 38.5000
Honduras Lempira 18.9000
Hong Kong Dollar 7.7700
Hungary Forint 217.1200
Iceland Krona 117.0700
India Rupee 45.7000
Indonesia Rupiah 8900.0000
Iran Rial 8229.0000
Iraq Dinar 1166.5000
Ireland Euro 0.7700
Israel Shekel 3.6800
Italy Euro 0.7700
Jamaica Dollar 85.8000
Japan Yen 83.8300
Jordan Dinar 0.7100
Kazakhstan Tenge 147.5000
Kenya Shilling 80.9000
Korea Won 1160.1500
Kuwait Dinar 0.2800
Kyrgyzstan Som 46.8000
Laos Kip 8031.0000
Latvia Lats 0.5400
Lebanon Pound 1500.0000
Lesotho South African Rand 7.0700
Liberia Dollar 49.0000
Libya Dinar 1.2500
Lithuania Litas 2.6500
Luxembourg Euro 0.7700
Macao Mop 8.0000
Macedonia FYROM Denar 45.8000
Madagascar Aria 2010.6100
Malawi Kwacha 151.0000
Malaysia Ringgit 3.1700
Mali CFA Franc 503.3000
Malta Euro 0.7700
Marshall Islands Dollar 1.0000
Martinique Euro 0.7700
Mauritania Ouguiya 290.0000
Mauritius Rupee 30.3000
Mexico New Peso 12.5000
Micronesia Dollar 1.0000
Moldova Leu 12.1700
Mongolia Tugrik 1262.4500
Montenegro Euro 0.7700
Morocco Dirham 8.5000
Mozambique Metical 35.7100
Namibia Dollar 7.0700
Nepal Rupee 72.9500
Netherlands Euro 0.7700
Netherlands Antilles Guilder 1.7800
New Zealand Dollar 1.3400
Nicaragua Cordoba 21.7900
Niger CFA Franc 503.3000
Nigeria Naira 150.6000
Norway Krone 6.2000
Oman Rial 0.3900
Pakistan Rupee 85.7000
Palau Dollar 1.0000
Panama Balboa 1.0000
Papua New Guinea Kina 2.4800
Paraguay Guarani 4700.0000
Peru Inti 0.0000
Peru Nuevo Sol 2.8300
Philippines Peso 44.1000
Poland Zloty 3.1100
Portugal Euro 0.7700
Qatar Riyal 3.6400
Romania Leu 3.2900
Russia Ruble 31.4000
Rwanda Franc 592.0200
Sao Tome & Principe Dobras 18526.1191
Saudi Arabia Riyal 3.7500
Senegal CFA Franc 503.3000
Serbia Dinar 0.7700
Seychelles Rupee 12.1000
Sierra Leone Leone 4146.0000
Singapore Dollar 1.3200
Slovak Euro 0.7700
Slovenia Euro 0.7700
Solomon Islands Dollar 7.4000
South Africa Rand 7.0700
Spain Euro 0.7700
Sri Lanka Rupee 111.3500
St Lucia East Carribean Dollar 2.7000
Sudan Pound 2.3700
Suriname Guilder 2.8000
Swaziland Lilangeni 7.0700
Sweden Krona 7.0400
Switzerland Franc 1.0000
Syria Pound 46.4500
Taiwan Dollar 30.5000
Tajikistan Somoni 4.4000
Tanzania Shilling 1483.0000
Thailand Baht 30.1800
Togo CFA Franc 503.3000
Tonga Pa’anga 1.7700
Trinidad & Tobago Dollar 6.3200
Tunisia Dinar 1.4500
Turkey Lira 1.5100
Turkmenistan Manat 2.8400
Uganda Shilling 2313.0000
Ukraine Hryvnia 7.8900
United Arab Emirates Dirham 3.6700
United Kingdom Pound Sterling 0.6400
Uruguay New Peso 19.9000
Uzbekistan Som 1645.0000
Vanuatu Vatu 92.5900
Venezuela New Bolivar 2.6000
Vietnam Dong 19500.0000
Western Samoa Tala 2.2300
Yemen Rial 214.0000
Yugoslavia Dinar 0.7700
Zambia Kwacha 4925.0000
Zimbabwe Dollar 1.0000

1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM – former Yugoslav Republic of Macedonia.

Non-Resident Alien Spouse and Joint U.S. Tax Return

This article will cover the options that are available for married couples where one spouse is a non-resident alien and the other is a U.S. citizen. A nonresident alien is an alien who has not passed the green card test or the “substantial presence test” under IRS rules. For the purposes of this article, a “married couple” will refer solely to this specific situation.

Election to File Joint Return

Although a non-resident alien who does not have U.S. source income is generally not required to file a U.S. tax return, in some instances it may be beneficial for a non-resident alien married to a U.S. citizen to do so. If the married couple meets certain criteria, they may elect to file a joint return.

The criteria is as follows: A married couple may elect to treat the non-resident alien as a U.S. resident, if the couple is married at the end of the taxable year. This also includes instances in which one of the spouses is a non-resident alien at the beginning of the year, but becomes a resident alien at the end of the year, and the other spouse is a non-resident alien at the end of the year.

Reason for Electing to File a Joint Return

There are numerous reasons why a non-resident alien in a married couple may elect to file a joint return. For instance, the non-resident alien may have U.S. source income, in which case U.S. taxes will likely be owed in any event. Thus, filing a joint return may result in less taxes paid, depending on tax brackets, type of income and applicable deductions.

It may also make sense in certain circumstances for a non-resident alien who does not have U.S. source income to file a joint return. Additionally, a non-resident alien filing a joint return may be allowed to claim possible credits on foreign income taxes paid, such as the Foreign Tax Credit.

Note however, in certain circumstances, the non-resident alien spouse of the married couple filing the joint return may still be treated as a non-resident alien (such as for the tax purposes of IRC Chapter 3 Withholding, Social Security, or Medicare).

Applicable Rules

Married couples must file a joint return in the year they first elect to treat the non-resident alien as a resident alien for tax purposes. Both spouses will be considered to be residents for tax purposes for all years that the election is in effect. While a joint income return must be filed for the year the election is made, a joint or separate return may be filed in later years.

By electing to file the joint return, both spouses must report all worldwide income on the return. In general, neither spouse will be able to claim tax treaty benefits as a resident of a foreign country in the years in which the election is made, although this will depend upon the specifics of each treaty.

Making The Election

Married couples may make the election by attaching a statement, signed by both spouses, to the joint return for the first tax year that the election is made. (See specific IRS requirements for more details). Married couples may also make the election by filing a amended Form 1040X joint tax return (however, any tax returns filed after the tax year of the amended return must also be amended).

Ending or Suspending the Election

Once the election is made, it will apply to all subsequent tax years, unless it is ended or suspended. An election may be ended by various means, such as the death of either spouse, legal separation, revocation by either spouse, or inadequate records (See Publication 519, U.S. Tax Guide for Aliens, for more details). Once the election is ended, neither spouse may make the election in subsequent tax years.

An election is suspended if neither spouse is a US citizen or resident alien at any time during a later tax year. Married couples may resume the election however if the required criteria are eventually met again in subsequent tax years.

Contact Sherayzen Law Office

This article is intended to give you a brief summary of these issues. If you have further questions regarding these matters as it pertains to your own tax circumstances, Sherayzen Law Office offers professional advice in all of your tax and international tax needs. Call now at (952) 500-8159 to discuss your tax situation with an experienced international tax attorney.