Taxpat's US Tax Blog

Introducing CLVN's US Tax Blog

As of December 2009, David Colvin no longer works at Taxpat.  He has launched a new blog, CLVN's US Tax Blog.  The Taxpat team will be maintaining the Taxpat blog.

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Reminder: Q4 2009 Estimated Tax Payments Due January 15, 2010

Just a short reminder that the final 2009 Estimated Tax Payment is due January 15, 2010.  To avoid (further) penalties for underpayment of estimated tax, in general, by January 15, 2010 you should have paid (in combination with 2009 US taxes withheld and all other 2009 Estimated Tax Payments) the lower of:

1)  90% of your (eventual) 2009 tax liability, or
2)  100% of your 2008 tax liability (110% if your 2008 Adjusted Gross Income exceeded $150,000)

Note:  You do not need to make estimated tax payments if your final 2009 tax liability does not exceed $1,000.

You can find the form and instructions at: http://www.irs.gov/pub/irs-pdf/f1040es.pdf

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998. His niche focus is serving individuals with complex cross-border tax and financial issues. He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998. His niche focus is serving individuals with complex cross-border tax and financial issues. He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.

2009 Foreign Earned Income and Housing Exclusion Amounts

For taxable year 2009, the maximum foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $91,400, figured on a daily basis, times the number of days during the year that you meet the bona fide residence test or the physical presence test.

The foreign housing exclusion is calculated by deducting the "base amount" from your qualified foreign housing expenses (subject to the limits discussed below).  The base amount is 16% of the maximum foreign earned income exclusion amount ($14,624 for 2009), figured on a daily basis, times the number of days during the year that you meet the bona fide residence test or the physical presence test.  There is a limitation on the maximum amount of qualified housing expenses.  This limit for most cities is 30% of the foreign earned income exclusion ($27,420 for 2009).  However, there are numerous exceptions (cities with higher limits).  These exceptions can found starting on Page 5 of the 2009 Form 2555 instructions.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998. His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues. He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998. His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues. He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.

UPDATED: Street Address for mailing FBAR Reports (Form TD F 90-22.1)

The address previously given (on the June 15 posting) seems to work but we have confirmed that there is a more current address which should be used. 

Here is the response from an enquiry to the IRS:

The Date of Receipt determines timliness.  If you want to use express mail to guarantee delivery, please use FED EX, UPS or DHL, any other service must be delivered during normal business hours.  Address to:

        IRS Enterprise Computing Center   

    Attn: FBAR  Mail Room   4^th Flr.

        985 Michigan Avenue

        Detroit, MI  48226

    Contact Phone #  (313) 234-1062

The Contact Phone # cannot be used by a filer to determine if their report was received.  

All tracking must be done through your delivery service.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998.  His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues.  He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon. 

Street Address for Mailing 2008 Foreign Bank and Financial Account Report (Form TD F 90-22.1)

UPDATED JUNE 26, 2009:  For those of you who have not yet filed your 2008 Form T DF 90-22.1, be aware that the due date of June 30 is the date that the form must be received by the Department of Treasury, not the date it must be mailed (as is the case with tax returns). 

If you are living overseas and have not yet mailed your 2008 forms, it is likely that they may not make it to Detroit by June 30 using regular mail.  Using Dutch registered mail (aangetekend) is not a good option at this point - from my experience is it not unusual for this to take 3 weeks or more, and you get no proof of receipt, only of mailing.  Therefore the only "safe" method of making sure it gets there on time is courier.  If you send by courier, you will need the street address and phone number, which are as follows:

IRS Enterprise Computing Center  

Attn: FBAR  Mail Room   4^th Flr.

985 Michigan Avenue

Detroit, MI  48226

Contact Phone #  (313) 234-1062

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998.  His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues.  He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.

 

Reminder: US Expat Tax Returns and 2009 Q2 Estimated Tax Payments Due June 15

If you were living outside of the US on April 15, 2009, you get an automatic two-month extension of time to file your 2008 US federal taxes (to June 15, 2009).  If you take advantage of the automatic extension you need to attach a statement to your 2008 tax return explaining that you have done this.  The automatic extension does not extend the time to pay your tax - interest is charged as of April 15.

If you cannot file your 2008 tax return by June 15, you need to request an extension using Form 4868 (or sometimes Form 2350 if it is your first year living abroad).

June 15 is also the due date for the second quarter 2009 Estimated Tax Payment, which can be done online at www.officialpayments.com, or by mail using Form 1040-ES.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998.  His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues.  He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.

How To Confirm Receipt Of Your Foreign Bank Account Report

I had written earlier that there is a phone number to call to confirm receipt of Form TD F 90-22.1.  However, this does not seem to work.  We asked the IRS how to get verification of receipt and got the following response:

"You may request verification of filing by writing IRS at IRS Detroit Computing Center, BSA Compliance Department, P.O. Box 32063, Detroit, MI 48232. The FEE is $5.00 to conduct a search an additional $.15 if you need a copy. Make checks payable to Internal Revenue Service. Please spell it out do not use the acronym. Your letter must include the calendar year you are requesting and your Social Security number."

You can contact the IRS with questions related to Form TD F 90-22.1 at FBARQUESTIONS@irs.gov.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998.  His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues.  He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.

Foreign Bank Reports Must Be "Received" By June 30

Just a reminder that the Foreign Bank Report (TD F 90-22.1) must be received by the Department of Treasury no later than June 30, as opposed to tax returns, which need to be "postmarked" by the due date.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998.  His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues.  He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.

Seven Important Points About Penalties

The following is a nice summary of the Failure-to-File and Failure-to-Pay Penalties that the IRS imposes.  Note that for US expats, neither of these penalties apply until after June 15, as long as you attach a statement to your tax return explaining that you were residing abroad on April 15.

IRS Tax Tip 2009-51 (http://www.irs.gov/newsroom/article/0,,id=205326,00.html)

Taxpayers who do not file their return and pay their tax by the due date may have to pay a penalty. Here are seven things you should know about failure-to-file and failure-to-pay penalties.

1. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.
   
2. The penalty for filing late is usually 5 percent of the unpaid taxes for each month of part of a month that a return is late. This penalty will not exceed 25 percent of the taxpayer’s unpaid taxes.
   
3. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
   
4. You will not have to pay a failure-to-file penalty if you can show that you failed to file on time because of reasonable cause and not because of willful neglect.
   
5. You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid.
   
6. If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty.
   
7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998.  His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues.  He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.

Fines for (NL Residents with) Secret Bank Accounts to Triple

Scary news for those taxpayers still not reporting their worldwide assets in Box 3. If you are ready to come clean and want to take advantage of the amnesty program, there is a specific form to complete, called a "Vrijwillige Verbetering", which can be downloaded from the Belastingdienst web site at http://download.belastingdienst.nl/belastingdienst/docs/vrijwillige_verbetering_buitenlands_vermogen_ib151z3plfol.pdf.
Unfortunately the form seems to be available only in Dutch.  Note that tax paid in Box 3 is a "creditable" tax for US tax purposes, so playing it by the book usually doesn't give too bad of a result for US citizens, aside from avoiding penalties down the road.

Per DutchNews.nl (www.dutchnews.nl), Monday 06 April 2009:

The fine for people found to have secret bank accounts abroad is to be tripled to 300% of the non-declared savings, tax minister Jan Kees de Jager told tv show Buitenhof on Sunday.

At the moment, people found with secret savings face having all of the money confiscated by the tax authorities. If MPs back de Jager's proposals, they will also have to pay the same amount twice over in fines.

Since 2002, the government has operated an amnesty for people with secret accounts. If they admit to having money stashed abroad they have to pay an extra tax surcharge but no fine and will not face criminal prosecution.

So far this year 317 people have come forward, admitting to secret savings totalling some €70m.

Drug dealers

The Telegraaf reports on Monday that a considerable percentage of the people declaring their foreign savings are soft drugs traders who made their money in the 1990s.

'If they declare their money to the tax before an investigation is begun, they do not have to say where their capital came from,' one lawyer told the paper.

Since it emerged that Switzerland, Liechtenstein, Luxemburg and Andorra are reforming their bank secrecy laws, the number of people declaring their foreign accounts has gone up by 20 a day, the paper says.

Tax havens are coming under increasing pressure on their banking secrecy laws and world leaders agreed at last week's G20 summit in London to take tougher action against them.

David Colvin is a CPA and CFP® based in Amsterdam, Netherlands since 1998.  His niche focus is serving high-net-wealth individuals with cross-border tax and financial issues.  He is also an advisor to Maxim Global Wealth Advisors, based in Amsterdam and Portland, Oregon.