American Citizens Abroad
Town Hall Meeting
May 6, 2015
Stuart Hearn
Enrolled Agent
Agenda
• Some helpful tips (hopefully) and common
mistakes made in preparing U.S.
individual taxes.
• A few 2015 updates.
Some helpful tips (hopefully) …
• Form 8938 Statement of Specified Foreign
Financial Accounts (the IRS’s FBAR
copycat…with a few additions!)
– Required if living outside U.S. and value of Specified
Foreign Assets:
> $200k Y/E balance or > $300k max – S, HoH, & MFS
> $400k Y/E balance or > $600k max –MFJ
– Required if living in U.S. and value of Specified
Foreign Assets:
> $50k Y/E balance or > $75k max – S, HoH, & MFS
> $100k Y/E balance or > $150k max –MFJ
Some helpful tips (hopefully) …
• Form 8938…what are Specified Foreign Assets?
– Everything you report on your FBARs:
•
•
•
•
Maximum balances of all non-U.S. bank accounts
2nd Pillar Year-end balance (if indeed best est. of max)
3rd Pillar Year-end balance (if indeed best est. of max)
Cash surrender value of non-U.S. life insurance policies
– All that precious metal you have in a safe deposit box or
hidden under your bed (does not include personal
jewellery);
– Any investments in loans, securities, or other non-U.S.
assets not held in bank or brokerage accounts & not
reported on Forms 3520, 3520-A, 5471, 8621, 8865, or 8891
(yes, it is a numbers game!)
Some helpful tips (hopefully) …
• Reporting Retirement Distributions:
– Social Security (Swiss and U.S.);
• Taxable amount depends on filing status and other income
• Foreign tax credit available against Swiss social security on U.S. tax return
• 2/3 of 85% of U.S. social security taxable on Swiss tax return (per treaty)
– 2nd and 3rd Pillar;
• Lump sum distributions not reported on Swiss taxes – amounts taxed separately at
beneficial rates
• Lump sum distributions reportable on U.S. taxes and taxable as ordinary income
• Tracking of contributions necessary to determine U.S. non-taxable basis
• Monthly payments partially taxable (based on non-taxable basis) on U.S. tax return
• Monthly payments taxable on Swiss tax return (some deductions are available)
– IRA & 401(k)
• Reported on form 1099-R and reportable on U.S. taxes. Foreign tax credits may be available
based on treaty
• Traditional IRAs can be considered tax deferred for your Swiss taxes. This is not the case
for Roth or Educational IRAs.
Some helpful tips (hopefully) …
• Filing Deadlines, Penalties, & Interest:
– US taxes
• Due date is 3 months and 15 days after the close of fiscal year. Interest is due if
any tax due past this date
• Automatic 2-month for U.S. persons living abroad. Also an extension of time to
pay
• Other extensions requested using forms 4868/2350. Late payment penalties
(0.5% per month of any unpaid tax, up to maximum of 25%) will apply
• Late filing penalty 5% per month up to maximum of 25%
• Other accuracy-related penalties can apply
– FBAR (FinCEN 114)
• Due date is June 30 following the end of the year being reported – no extensions
• $10,000 penalty for non-filing may be imposed.
• Willful failure to report an account can result in $100,000 penalty or 50% of the
value of the account at the time of the violation.
Common mistakes made in preparing
U.S individual taxes
• Gross income from employment:
– Gross income before the deduction of pension
(LPP) and social tax (AVS) must be declared
as wages on your U.S. taxes.
– In addition, the amount your employer
contributes to your pension fund should also
be included in income!
Common mistakes made in preparing
U.S individual taxes
• Foreign Tax Credits
– Credit can only be taken on taxes paid on
income to a foreign jurisdiction. Wealth taxes
cannot be credited (but may be deducted on
schedule A).
– Credit can be claimed on either the paid or
accrued basis (even as a cash-basis taxpayer).
– A foreign tax credit cannot be taken for any
income excluded under the foreign earned
income exclusion.
Common mistakes made in preparing
U.S individual taxes
• Filing Status
– If you are married you can no longer file U.S. taxes
using the filing status ‘Single’. This is the case even if
your spouse is not a U.S. person and as of tax year
2013 for same-sex spouses.
– If married you can file ‘Married Filing Separately’
(MFS), ‘Married Filing Jointly’ (MFJ) or ‘Head of
Household‘ (HoH) if your spouse is not a U.S. person
and you have a U.S. dependent allowing you to
qualify as HoH.
– Tax savings possible if you choose to file jointly,
which is possible (by making an election under IRC
Sec. 6013) even if your spouse is not a U.S. person.
Common mistakes made in preparing
U.S individual taxes
• Tax calculation
– Tax tables are always used, but in some cases must be
used in conjunction with other worksheets.
– ‘Foreign Earned Income Tax Worksheet’ must be
used if you are claiming the Foreign Earned Income
Exclusion.
– If you have qualifying dividends or long term capital
gains to report, the ‘Qualified Dividends and Capital
Gain Tax Worksheet’ will need to be completed.
– If both situations apply, both worksheets need to be
completed - see form 1040 instructions for
worksheets.
A few 2015 updates
• 2015 Foreign Earned Income Exclusion
– $100,800 (first time to hit six figures!!!!)
• 2015 Foreign Housing Exclusion
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–
–
–
Geneva: $95,200 - $16,128 = $79,072 (maximum deduction)
Bern: $66,200 - $16,128 = $50,072 (maximum deduction)
Zurich: $39,219 - $16,128 = $23,091 (maximum deduction)
All other Swiss cities: $32,900 - $16,128 = $16,772 (maximum
deduction)
• Annual Exclusion for Gifts
– Remains $14,000/person
– $147,000 to non-U.S. spouse
A few 2015 updates
• Net Investment Income Tax (NIIT) of 3.8%
– no change from 2014
– Kicks in MAGI > $250,000 MJF
– Kicks in MAGI > $200,000 S & HoH
– Kicks in MAGI > $125,000 MFS
Questions?
TaxPro Sàrl
Avenue de-Luserna 40
1203 Geneva
www.tax-pro.ch
Tel. +41.22.304.1690
shearn@tax-pro.ch