For millions of U.S. account holders of foreign accounts, they are coming to the realization that the United States has made the enforcement of unreported foreign accounts, assets, and income a top priority.
Moreover, acronyms such as FBAR and FATCA might causing you unnecessary fear and stress.
The fear and stress is coupled by the online scare mongering – courtesy of attorneys, CPAs and Accountants who spend their time trying to scare unsuspecting individuals into paying extremely large amounts of money for protection they do not need, by incorrectly telling them that they will go to jail unless they follow the tax representative’s advice.
But I already Paid Tax Overseas
This is a very important aspect the offshore disclosure. If you already paid tax overseas, then you generally receive a foreign tax credit against any taxes that may be due in the United States on the same earnings.Nevertheless, the mere fact that you paid tax overseas does not exclude you from having to report that information on your U.S. tax return – and then claiming foreign tax credit and-as opposed to not reporting the money at all.
Here is an Example: Angela is originally from Portugal and has numerous foreign accounts in various Portuguese Banks. Under Portuguese law, the banks withhold a certain amount of tax money each time earnings are generated on the accounts, and that money is deposited directly with the Portuguese tax authorities.
Just because the foreign bank already deposited the money into that Portuguese tax (and thus, foreign taxes have already been paid) does not mean that Angela is exempt from report. Rather, Angela is required to report the earnings on her U.S. tax return as well, and claim a foreign tax credit for the taxes she already paid. With Portugal, a majority of taxes are withheld at 28%, so more likely than not Angela would not have any tax liability in the United States.
But What if you were Refunded the Foreign Tax Paid
It is not uncommon for individuals with foreign accounts who do not reside in the foreign country to receive a foreign refund for taxes they already paid.
Here is a typical example: Donald is originally from India and has foreign accounts in India that generate annual interest income. Some of the accounts are resident accounts – even though Donald now lives in the United States. Even though the bank withholds certain monies – which are then deposited for taxes – when is all said and done at the end of the year, it turns out Donald earns less than the minimum threshold required to have to file a tax return in India. As such, the Indian government refunds Donald the taxes that were withheld.
Donald Cannot Claim a Full Foreign Tax Credit
Since Donald received a refund of the money that was paid overseas he cannot claim a foreign tax credit for those earnings (although he may have an additional credit “carry-over” from prior years or other tax credits from payments in other countries that had not been refunded).
Why? Because of Donald received a refund of the foreign taxes paid, then technically he did not pay any foreign tax on those earnings. As such, when Donald submits to offshore disclosure he may have to pay U.S. tax on those foreign earnings.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel
Generally, experienced attorneys in this field will have all the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.