Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen; I’m an International Tax Attorney, founder and owner of Sherayzen Law Office, Ltd.
Today, I would like to discuss with you one of the most fundamental concepts of US International Tax Law: US Tax Residency. Specifically, US Tax Residency for Individuals, in the context of the US Income Tax only.
When a Client comes into my office, one of the first things I want to find out about him is whether he’s considered a US Tax Resident or a US Person. For our purposes, these concepts are interchangeable.
Why is that important? If he’s a US Tax Resident, then a whole avalanche of US Tax Reporting Requirements apply to him: the Worldwide Income Requirement, the FBAR, Form 8938, 8621, 5471 etc. etc. On the other hand, if he is not a US Tax Resident, then none of these requirements would apply to him.
How do we figure out if a Client is a US Tax Resident? There are three categories of US Tax Residents. The first are US Citizens; a US Citizen is always a US Tax Resident. This is dramatically different from almost all other countries in the world except Eritrea.
In the majority of other jurisdictions, if a citizen resides outside of their country, then he’s a resident of that country, not a resident of the home country. The United States is different; if a US Citizen resides in another country, he is still a Tax Resident of the United States. He can reside on the moon; he can reside on Mars; he is still a US Tax Resident.
The second category of US Tax Residents consists of US Permanent Residents. A US Permanent Resident is always a US Tax Resident. At this point it’s important to clear up a confusion that exists regarding the concepts of US Tax Residency versus US Permanent Residency. A US Permanent Resident, as I said, is always a US Tax Resident; but a US Tax Resident can be a person who is not a US Permanent Resident and not a US Citizen. It is important to distinguish between these two concepts and not to confuse them.
Let’s turn to the final category of US Tax Residents: Foreign Persons who satisfied the requirements of the Substantial Presence Test. Under the Substantial Presence Test, a Foreign Person is considered to be a US Tax Resident if he is physically present in the United States for at least 183 days in the past three years. The calculation of the 183 days is a little bit peculiar; you take all of the days that you spend in the current year and plus 1/3 of the days you spent in the prior year, plus 1/6 of the days that you spent in the year before that.
Let’s use an example to illustrate how the Substantial Presence Test works. Let’s say Pierre, a citizen of France is sent by his company to work in the United States for one hundred twenty days in each of the years: 2014, 2015 and 2016 on an L1 Visa. We are trying to figure out whether Pierre is a US Tax Resident in the year 2016. For these purposes, we will take 1/6 of the days he spent in the United States in the year 2014 which is 120 divided by 6 = 20 plus 1/3 of the days he spent in the United States in the year 2015 which is 120 divided by 3 = 40. Forty plus twenty = 60 plus all of the days he spent in the United States in the year 2016 which is 120 days; So 120 plus 60 = 180 which is below the 183 day threshold. This means that Pierre was not a US Tax Resident in the year 2016.
I hope that this short presentation has helped you clear up this important concept of US Tax Residency. Thank you for watching, until the next time.
http://sherayzenlaw.com/wp-content/uploads/2018/01/sherlawltd_logo.png00adminhttp://sherayzenlaw.com/wp-content/uploads/2018/01/sherlawltd_logo.pngadmin2020-05-06 17:54:102024-08-23 17:52:38US Tax Residency | International Tax Lawyer
Now that we’ve talked about the Income Reporting Requirements, let’s talk about the Information returns. Again, I’m going to limit myself to the most common Information Returns, simply because otherwise we will be talking about it for quite awhile, longer than the time allotted.
The most dangerous and the most important Information return that exists is FBAR. How many people here have heard of FBAR? (A few raised hands in the audience)
Why is it so important? If you look at your handout on the right-hand side, where the listed of penalties are referenced, it becomes very clear why compliance with this form is a Centerpiece of US Tax Compliance; US Tax Enforcement efforts are focused on this form. Very few people know that FBAR is actually not a tax form in of itself and comes form Title 31, Bank Secrecy Act that was passed in 1970.
The Internal Revenue Code, Title 26 partially explains why the penalties are so high with respect to the FBAR. Originally it was not meant to fight Tax Evasion but to fight Money Laundering and Financial Crimes so, the penalties there naturally are associated with Criminal Activities.
What happened after 2001 is that the function of enforcing the FBARs was turned over to the IRS and ever since that time, the FBAR turned into a Tax Enforcement mechanism and a very effective one, due to the penalties associated with it.
http://sherayzenlaw.com/wp-content/uploads/2018/01/sherlawltd_logo.png00adminhttp://sherayzenlaw.com/wp-content/uploads/2018/01/sherlawltd_logo.pngadmin2020-05-06 17:01:272024-08-23 18:54:54Why Are FBAR Penalties So High? | International Tax Attorney
At this point I will switch over to English (laughter) because any discussion of International Tax Law requires precision, which my French, unfortunately cannot convey at this point.
Before we delve into the subject matter of today’s discussion, I would like to give you some background information so that you have an idea about who I am and what it is I do.
My name is Eugene Sherayzen and I’ve been an International Tax Attorney for about eleven years now; I started practicing Law right after I finished Law School and got my Attorney License in 2005. All these years, I’ve been devoted to building my own Law Firm, Sherayzen Law Office, Ltd. which specializes in International Tax Compliance, in particular Offshore Voluntary Disclosures; this is by far the largest area of my practice in International Tax Law but I also do International Tax Planning and Annual US Tax Compliance.
The nature of my practice is such that I have a very wide-range of Clients, from school teachers, to owners of Multimillion dollar businesses, to families of Chiefs of African tribes, to Foreign Businesses that invest in the United States, to US Businesses who wish to expand overseas etc., etc.
These Clients come from various Countries. I’ve had Clients from every Continent in which there is a permanent human settlement except Greenland (but that is a subject of discussion, of dispute as I understand, no one really knows whether it’s an Island or a Continent as this matter isn’t settled just yet).
I did attempt to count how many Countries I’ve dealt with over these years and I have come up with a number which is over sixty, and this is not counting the Consultations from obscure Countries; of Consultations from ships, sometimes people call me while they’re still at sea.
http://sherayzenlaw.com/wp-content/uploads/2018/01/sherlawltd_logo.png00adminhttp://sherayzenlaw.com/wp-content/uploads/2018/01/sherlawltd_logo.pngadmin2020-05-06 16:41:222024-01-04 22:07:16International Tax Law Firm
| 
US Tax Residency | International Tax Lawyer
/in International tax attorney & lawyer Video /by adminHello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen; I’m an International Tax Attorney, founder and owner of Sherayzen Law Office, Ltd.
Today, I would like to discuss with you one of the most fundamental concepts of US International Tax Law: US Tax Residency. Specifically, US Tax Residency for Individuals, in the context of the US Income Tax only.
When a Client comes into my office, one of the first things I want to find out about him is whether he’s considered a US Tax Resident or a US Person. For our purposes, these concepts are interchangeable.
Why is that important? If he’s a US Tax Resident, then a whole avalanche of US Tax Reporting Requirements apply to him: the Worldwide Income Requirement, the FBAR, Form 8938, 8621, 5471 etc. etc. On the other hand, if he is not a US Tax Resident, then none of these requirements would apply to him.
How do we figure out if a Client is a US Tax Resident? There are three categories of US Tax Residents. The first are US Citizens; a US Citizen is always a US Tax Resident. This is dramatically different from almost all other countries in the world except Eritrea.
In the majority of other jurisdictions, if a citizen resides outside of their country, then he’s a resident of that country, not a resident of the home country. The United States is different; if a US Citizen resides in another country, he is still a Tax Resident of the United States. He can reside on the moon; he can reside on Mars; he is still a US Tax Resident.
The second category of US Tax Residents consists of US Permanent Residents. A US Permanent Resident is always a US Tax Resident. At this point it’s important to clear up a confusion that exists regarding the concepts of US Tax Residency versus US Permanent Residency. A US Permanent Resident, as I said, is always a US Tax Resident; but a US Tax Resident can be a person who is not a US Permanent Resident and not a US Citizen. It is important to distinguish between these two concepts and not to confuse them.
Let’s turn to the final category of US Tax Residents: Foreign Persons who satisfied the requirements of the Substantial Presence Test. Under the Substantial Presence Test, a Foreign Person is considered to be a US Tax Resident if he is physically present in the United States for at least 183 days in the past three years. The calculation of the 183 days is a little bit peculiar; you take all of the days that you spend in the current year and plus 1/3 of the days you spent in the prior year, plus 1/6 of the days that you spent in the year before that.
Let’s use an example to illustrate how the Substantial Presence Test works. Let’s say Pierre, a citizen of France is sent by his company to work in the United States for one hundred twenty days in each of the years: 2014, 2015 and 2016 on an L1 Visa. We are trying to figure out whether Pierre is a US Tax Resident in the year 2016. For these purposes, we will take 1/6 of the days he spent in the United States in the year 2014 which is 120 divided by 6 = 20 plus 1/3 of the days he spent in the United States in the year 2015 which is 120 divided by 3 = 40. Forty plus twenty = 60 plus all of the days he spent in the United States in the year 2016 which is 120 days; So 120 plus 60 = 180 which is below the 183 day threshold. This means that Pierre was not a US Tax Resident in the year 2016.
I hope that this short presentation has helped you clear up this important concept of US Tax Residency. Thank you for watching, until the next time.
Why Are FBAR Penalties So High? | International Tax Attorney
/in International tax attorney & lawyer Video /by adminNow that we’ve talked about the Income Reporting Requirements, let’s talk about the Information returns. Again, I’m going to limit myself to the most common Information Returns, simply because otherwise we will be talking about it for quite awhile, longer than the time allotted.
The most dangerous and the most important Information return that exists is FBAR. How many people here have heard of FBAR? (A few raised hands in the audience)
FBAR is the report of Foreign Bank and Financial Accounts. It’s official name is FinCEN Form 114; it used to have a very lovely name, ‘TD F 90-22.1’. The FinCEN Form 114 replaced TD F 90-22.1 about three years ago; but I still remember it and I can say without hesitation, how impressive this form was to me.
Why is it so important? If you look at your handout on the right-hand side, where the listed of penalties are referenced, it becomes very clear why compliance with this form is a Centerpiece of US Tax Compliance; US Tax Enforcement efforts are focused on this form. Very few people know that FBAR is actually not a tax form in of itself and comes form Title 31, Bank Secrecy Act that was passed in 1970.
The Internal Revenue Code, Title 26 partially explains why the penalties are so high with respect to the FBAR. Originally it was not meant to fight Tax Evasion but to fight Money Laundering and Financial Crimes so, the penalties there naturally are associated with Criminal Activities.
What happened after 2001 is that the function of enforcing the FBARs was turned over to the IRS and ever since that time, the FBAR turned into a Tax Enforcement mechanism and a very effective one, due to the penalties associated with it.
International Tax Law Firm
/in International tax attorney & lawyer Video /by adminAt this point I will switch over to English (laughter) because any discussion of International Tax Law requires precision, which my French, unfortunately cannot convey at this point.
Before we delve into the subject matter of today’s discussion, I would like to give you some background information so that you have an idea about who I am and what it is I do.
My name is Eugene Sherayzen and I’ve been an International Tax Attorney for about eleven years now; I started practicing Law right after I finished Law School and got my Attorney License in 2005. All these years, I’ve been devoted to building my own Law Firm, Sherayzen Law Office, Ltd. which specializes in International Tax Compliance, in particular Offshore Voluntary Disclosures; this is by far the largest area of my practice in International Tax Law but I also do International Tax Planning and Annual US Tax Compliance.
The nature of my practice is such that I have a very wide-range of Clients, from school teachers, to owners of Multimillion dollar businesses, to families of Chiefs of African tribes, to Foreign Businesses that invest in the United States, to US Businesses who wish to expand overseas etc., etc.
These Clients come from various Countries. I’ve had Clients from every Continent in which there is a permanent human settlement except Greenland (but that is a subject of discussion, of dispute as I understand, no one really knows whether it’s an Island or a Continent as this matter isn’t settled just yet).
I did attempt to count how many Countries I’ve dealt with over these years and I have come up with a number which is over sixty, and this is not counting the Consultations from obscure Countries; of Consultations from ships, sometimes people call me while they’re still at sea.