All green card holders as well as US citizens need to be made aware of new tax rules and enforcement procedures. A taxpayers information evening was held by a number of groups and tax experts and many US taxpayers living in Switzerland became aware in 2009 that the US tax authority has brought out new rules.
In Geneva on 2 September, 200 American expatriates, holders of green cards and citizens gathered at Webster University to see what the new implications were with the tax situation. Many people think that all along they have been compliant so it will come as a surprise to them that some of them may not be.
For many taxpayers abroad, the status quo has changed, and tax experts believe that things are going to become even tougher with the IRS. The IRS has ever more sophisticated technology tools and these help them to track down those who don’t comply.
Some things that have changed –
Compliance – you have filed taxes for the past 6 years, you have filed all FBAR forms listing your financial assets and between you and your foreign bank all taxes due have been paid.
For many years the IRS has has an informal approach to accepting tax returns late and also allowing negotiations for settlements with the IRS. This is coming to an end.
The government of the country where you live can allow your foreign bank to give certain information to the IRS. With Switzerland, the details of a new treaty will soon be published.
Everyone has to file income tax liability. Even a child with more than $3,500 in assets must file. If you are married to a non-US citizen and your gross income is more than your exemption amount by $3 500 you are obligated to file.
It was in 2009 that the government made it that everyone had to file FBAR forms if during the year the amount was more than $10,000. During any given quarter, the form requires you to provide the numbers for all financial- and bank accounts, listing the highest balance.
Also note the following –
You must fill in form W7 if you want to benefit from the foreign spouse exemption to reduce tax liability in the US but you also need to go to the US embassy to have your spouse registered.
For those planning to retire outside US borders, the banks in Switzerland have advised their US clients to put their money in non-US registered mutual funds. This can avoid capital gains taxes. In the United States, you are liable for capital gains taxes if you have property outside the country.
Not declaring a foreign trust can see you getting penalties of 30-35%.
Correction 21 September – You have to file FBAR forms if you are a US citizen with a foreign company as you may be benefiting from corporate accounts.
Rules apply to green card holders, dual nationals and US citizens.
There is an online filing program for young people known as Turbo Tax and some people recommend this as it is cheaper than hiring an accountant.