International Tax Compliance is mandatory for all U.S. Taxpayers. Unfortunately, many individuals who arrive in the United States on an H-1B visa are not aware that they will soon also be required to file US tax returns — just as if they were a U.S. Citizen or Legal Permanent Resident.
Non-Residents with U.S. Sourced Income
Even if a person is not subject to U.S. tax beyond the fact that they earned U.S. source income, under most circumstances they still must file a 1040NR (Non-Resident) tax return to report the U.S. source income. If they are not otherwise subject to US tax, then they are not taxed on their worldwide Income, or required to pay U.S. Tax on Foreign Income.
Substantial Presence Test means Worldwide Taxation
As a non-US citizen and non-US green card holder, you are generally only required to pay tax on your “US Effectively Connected Income” (money you earn that is sourced in the United States). However, if you qualify for the Substantial Presence Test, then the IRS will tax you on your WORLDWIDE income.
IRS Substantial Presence Test generally means that you were present in the United States for at least 30 days in the current year and a minimum total of 183 days over 3 years, using the following equation:
- 1 day = 1 day in the current year
- 1 day = 1/3 day in the prior year
- 1 day = 1/6 day two years prior
Example A: If you were here 100 days in 2016, 30 days in 2015, and 120 days in 2014, the calculation is as follows:
- 2016 = 100 days
- 2015 = 30 days/3= 10 days
- 2014 = 120 days/6 = 20 days
- Total = 130 days, so you would not qualify under the substantial presence test and NOT be subject to U.S. Income tax on your worldwide income (and you will only pay tax on money earned while working in the US).
Example B: If you were here 180 days in 2016, 180 days in 2015, and 180 days in 2014, the calculation is as follows:
- 2016 = 180 days
- 2015 = 180 days/3= 60 days
- 2014 = 180 days/6 = 30 days
- Total = 270 days, so you would qualify under the substantial presence test and will be subject to U.S. Income tax on your worldwide income, unless another exception applies.
An FBAR is a “Report of Foreign Bank and Financial Accounts” form. It is a form that is filed online directly with the Department of Treasury when a person, trust or business owner (or signatory) has more than $10,000 in an “annual aggregate total” of foreign and overseas accounts.
When do I File an FBAR?
If you, your family, your business, your foreign trust, and/or PFIC (Passive Foreign Investment Company) have more than $10,000 (in annual aggregate total at any time – not per account) overseas in foreign accounts and either have ownership or signatory authority over the account, it is important that you have an understanding of what you must do to maintain FBAR (Report of Foreign Bank and Financial Accounts) compliance. There are very strict FBAR filing guidelines and requirements in accordance with general IRS tax law, Department of Treasury (DOT) filing initiatives, and FATCA (Foreign Account Tax Compliance Act).
What Accounts are Reported on an FBAR?
Filing FBARs and ensuring compliance with IRS International Tax Laws, Rules, and Regulations is extremely important for anyone, or any business that maintains:
- Foreign Bank Accounts
- Foreign Savings Accounts
- Foreign Investment Accounts
- Foreign Securities Accounts
- Foreign Mutual Funds
- Foreign Trusts
- Foreign Retirement Plans
- Foreign Business and/or Corporate Accounts
- Foreign Insurance Policies (including some Life Insurance)
- Foreign Accounts held in a CFC (Controlled Foreign Corporation); or
- Foreign Accounts held in a PFIC (Passive Foreign Investment Company)
In accordance with FATCA (Foreign Account Tax Compliance Act) there are several reporting requirements, which are required by US taxpayers who have foreign accounts, foreign assets, and foreign income. The requirements also include foreign investments and the receipt of gifts from an overseas individual(s), trust or business.
The failure to be FATCA Compliant may result in significant fines and penalties. Moreover, depending on the amount of unreported taxes, it could lead to other issues such as Levies, Seizures, and a “Hold” placed on your passport.
Getting into Compliance
Whether or not you live in the United States or in a foreign country, you may be eligible to enter Offshore Disclosure to try and get into compliance before you are audited or examined by the IRS (and subject to much higher fines and penalties), including possible passport or visa revocation.
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 FBAR Counsel?
Generally, experienced attorneys in this field will have 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.