Worldwide Income Reporting while living outside the US | International Tax Lawyer

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

We are continuing a series of blogs from Santa Monica, California. Today, I’m standing on the beach in front of the Pacific ocean and I’d like to talk to you about a topic I raised last time. Where I said if you decide to move outside of the United States, you continue to be a tax resident of the United States and you have to report your worldwide income on your US tax returns.

Today, I’d like to answer a few questions that often arise in the context of that statement. First of all: Does the worldwide income requirement mean that all of your income have to be disclosed or only elective income or passive income? The answer to that question is ALL income has to be disclosed; all foreign and domestic. It doesn’t matter if it’s subject to local taxation. It doesn’t matter whether it’s non-taxable in the local country. Here, you have to operate as a US tax resident by US tax rules, so all of your worldwide income is reportable on your US tax returns.

Does that mean that you won’t be able to take advantage of the fact that you are taxed locally? Does it mean that you will be suject to double taxation? Not necessarily. The United States has plenty of tax treaties around the world with many countries, the vast majority of countries and you should be able to take a foreign tax credit to minimize your US tax liability, though it may not be dollar for dollar, there may be complications which is an issue to be discussed in the context of specific facts but you’re likely not to be subject to full double taxation. There should be a way for you to plan out your tax affairs and a way to minimize your US tax exposure. We’ll continue exploring this subject of US international tax reporting requirements in the following blogs.

Thank you for watching, until the next time.

Ending State Tax Residency – Moving outside of the US | International Tax Lawyer Santa Monica

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Good morning and welcome to Sherayzen Law Office video blog! My name is Eugene Sherayzen; I am an international tax attorney and owner of Sherayzen Law Office, Ltd.

Today, I am continuing a series of blogs from Santa Monica, California. In previous blogs, I raised the issue of US citizens moving to live outside of the United States and I’ve addressed the first problem of local tax compliance. Today, I’d like to talk to you about the second problem; that is the ending of state tax residency. Let me be clear about what I mean here; what I mean is ending local state tax residency, obviously not federal tax residency. Regarding federal tax residency, you will have as long as you are a US citizen.

For example, the state of California has its own state tax residency rules and while they consider you a tax resident, they will tax you on your worldwide income. This is similar situation with respect to states like Minnesota, New York, New Jersey – basically all of the states that have income tax and even those who don’t also have their own state tax residency rules.

Why is that important? Why do you need to end your state tax residency or at least consider doing so before you leave the United States? For a very simple reason: If you don’t, then the state will continue to tax you on your worldwide income even though, technically, you live outside of the United States.

I can give you an example from my Minnesota practice. A client of mine left for the Middle East and thought he ended his Minnesota tax residency; he lived there for four years and then all of a sudden, the state of Minnesota contacted him and argued that he should be paying Minnesota taxes on his worldwide income for all of these four years. The local accountants, unfortunately didn’t do a good job; in the interview, they misguided him and he came to me and we took care of this problem. The problem is that there is always a cost in neglecting these types of issues. You need to make sure that you do everything that is required to end your state residency before you leave the United States. For example, if you are required to give notice to your local county, then absolutely do so. If you are required to put your house up for sale, then absolutely do so. If you are required to move your banking outside of the state, then do so. State tax residency rules can be very complex, so it’s important that you explore this issue ahead of time and then take care of it before you leave.

Thank you for watching, until the next time.

Foreign Account Disclosed on Form 8938 But Not FinCEN Form 114 | FBAR Lawyer Beverly Hills

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Hello 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.

Today, I’d like to talk to you about a situation where an account was disclosed on Form 8938 but it was not disclosed on FBAR or as it’s known by it’s official name, FinCEN Form 114.

Does your disclosure on Form 8938 replace the FBAR nondisclosure? That’s a question I often hear from taxpayers who come and talk to me. The answer is no; unfortunately, just because you disclosed an account on Form 8938, that does not in any way eliminate your obligation to report the same account on Form 114 or FBAR.

Will it help your case, that is, will it help your non-willfulness case? Yes, it will but you still have to file your FBARs; you still have to disclose on FBARs all of the foreign accounts that you are required to disclose; otherwise, you are on the hook for the penalties. They may be non-willful penalties, but it will depend on the particular facts and circumstances of your case.

If you would like to know more about your FBAR compliance, you can contact me at (952) 500-8159 or you can email me at [email protected].

Thank you for watching, until the next time.