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Navigating the US Tax Jungle: A Survival Guide for Singapore Expats

posted Mar 30, 2015, 7:26 AM by Kaitlin Krozel

This article was published in the March 2015 edition of the Singapore American Newspaper and can also be viewed on page 5 here.

Navigating the U.S. Tax Jungle: A Survival Guide for Singapore Expats

As an expat, trying to file your U.S. tax return can feel like navigating through the jungles of Borneo; but instead of tigers and orangutans, the jungle of the U.S. tax code has over 70,000 pages of confusing laws that are changed and added to every year. The following 5 rules are a survival guide for U.S. expats living in Singapore. Whether you are new to expat life or a seasoned veteran, this guide will help you navigate your way.

Survival Rule #1: Know your deadlines

Expats overseas on April 15th are granted an automatic extension until June 15th to file their U.S. Federal tax return. That’s right – you have an additional two months to file! If you need additional time you can obtain an extension until October 15th by filing Form 4868. If you moved to Singapore in 2014 you may want to consult with a tax professional as different extension procedures may need to be followed.

While you may request an extension to FILE your tax return, there is no extension to PAY your taxes. No matter what your filing date is, 2014 U.S. income taxes owed are due by April 15th, 2015. Taxes paid after April 15th will be subject to interest (currently 3% per year). After June 15th, a late payment penalty will also apply.

Survival Bonus: The penalty for filing late is greater than the penalty for paying late, so always file your tax return on time even if you can’t make full payment.

Don’t forget about Singapore taxes! Your 2014 Singapore tax return is due April 15th 2015. You will receive your 2014 income tax bill by September 2015.

Survival Rule #2: Understand the special tax rules for expats

As an expat you may be able to claim the Foreign Earned Income Exclusion which reduces your taxable income. The 2014 exclusion was $99,200; for 2015 it is $100,800. If married and both spouses work, EACH spouse is able to claim the exclusion. In addition, if you are living in a rented house/apartment you may also be entitled to the Housing Exclusion which further reduces your taxable income by allowing for a deduction of rental expenses.

If your foreign earned income is above both of the exclusions, you can also claim a foreign tax credit for a portion of the taxes owed to Singapore. While the exclusions reduce your taxable income, the foreign tax credit directly reduces the amount tax owed.

Survival Rule #3: Don’t forget the FBAR

FinCEN Form 114, more commonly known as the FBAR, is filed separately from your federal tax return. The FBAR is required if you had over $10,000 USD in aggregate among all of your non-US financial accounts at any point during 2014. Don’t worry, this form only reports information and does not trigger any taxes. The 2014 FBAR is due by June 30th, 2015 and should be filed online with the Department of Treasury.

In addition to the FBAR, you may also need to file the similar Form 8938 ‘Statement of Foreign Financial Assets’ with your tax return if your non-U.S. assets exceed certain IRS thresholds.

Survival Rule #4: Caution! Other expat issues

The section below is not an all-inclusive list of other expat issues, but highlights some important ones.

Ownership in a non-US business: The expat community is full of entrepreneurs, so if you become an owner, director, or partner in a non-US business there may be additional reporting requirements.

Non-U.S. Rental Property: If you own rental property outside the United States, it is still reportable on Schedule E of your U.S. federal tax return.

Central Provident Fund (CPF): If you are a Singapore Permanent Resident (PR), you will have a CPF account (a social security/retirement savings plan). Make sure to report both your employee and employer contributions on your U.S. tax return. Also make sure to report the CPF on your FBAR (and Form 8938 if required to file).

Affordable Care Act (ACA): The ACA (a.k.a Obamacare) became effective in 2014 and requires all U.S. persons to purchase minimum essential health coverage. There is an exemption available if you were living outside the U.S. and Form 8965 will need to be filed with your tax return to claim this exemption.

Survival Rule #5: Beware of Scams

Look out for fake emails and calls claiming to be from the IRS no matter how official they may look or sound. The IRS will never send you an email or randomly call about a refund or bill out of the blue. These scammers are looking to steal your personal information.

Whether you prepare your own taxes or work with a professional, it is now your mission to navigate the jungle of your own U.S. tax return!

I've Never Filed an FBAR. Should I File 2013 By June 30th?

posted Jun 28, 2014, 12:08 AM by Kaitlin Krozel

It's 11pm and I just got off the phone with a worried US citizen living in Asia. He had read my last post about the changes the IRS made to its offshore programs just last week and he wants to go through the Streamlined Procedures. Obviously his submission will not be completed in the next few days...so the question is...should he file is 2013 FBAR by the June 30th deadline or wait to file it along with his Streamlined submission? I thought about it a bit and told him he should go ahead and file his 2013 FBAR following the instructions on the IRS website for Streamlined Filings: 

"On the cover page of the electronic form, select “Other” as the reason for filing late.  An explanation box will appear.  In the explanation box, enter “Streamlined Filing Compliance Procedures.” 
I don’t necessary think that all of the FBAR’s have to be filed at the same time for Streamlined. So this way he is still filing 2013 on time and making a submission before the July 1 FATCA implementation date (he was pretty concerned about the July 1 date). Then I will work with him to complete his returns and prior year FBAR's. For this particular client, I believe this was the correct approach and wanted to share. He files 2013 on time and gets the peace of mind he needs about the July 1 FATCA date. By no means should you take this as tax advice related to your specific situation, as it may or may not be how you should proceed. If you are just learning about the IRS offshore programs now...make sure you visit the IRS website and understand there are various programs/options. There is no 'one size fits all' when it comes to the IRS offshore programs, so make sure to read about the various options and feel free to contact me if you need help...just not so late at night :)

IRS Makes Big Changes to Offshore Tax-Compliance Programs

posted Jun 19, 2014, 12:33 PM by Kaitlin Krozel

Just yesterday, the IRS announced changes to its offshore tax compliance programs that apply to U.S. persons with unreported foreign income and unreported foreign accounts

First, some background info: All foreign income earned by U.S. persons must be reported on your U.S. tax return AND foreign financial accounts must also be reported to the Department of Treasury/IRS. This is nothing new, but has been more heavily enforced by the IRS over the past 5 years. The IRS has unveiled various versions of the Offshore Voluntary Disclosure Program in 2009, 2011, 2012 and now 2014, to encourage individuals with unreported offshore income and financial accounts to 'come forward' and become tax compliant. The program has high penalties, but was really designed for the taxpayer that willfully tried to evade paying U.S. taxes (imagine millions stashed in secret Swiss bank accounts). The HUGE problem with the these programs was that they treated everyone who had unreported foreign income and accounts as tax evaders and criminals...and in my experience, this is definitely not the case. 

I have helped many U.S. persons with foreign accounts (both living in the U.S. and abroad) who simply were not aware of the reporting rules, or had just got behind on filing their taxes for a few years...but were not willfully evading taxation by any means. This left many in a sticky situation...do they hide? Subject themselves to very high penalties meant for tax evaders?  File their returns outside the program and hope the IRS doesn't notice? The IRS realized this problem and issued the Streamlined Filing Procedures in 2012. Unfortunately, while this was a step in the right direction, the program requirements were very restrictive and only applied to U.S. persons living overseas. The IRS has now taken another step in the right direction and issued the following changes:

New Streamlined Filing Compliance Procedures

-The 2012 Streamlined procedures required a questionnaire to be filled out. The submission would also be subjected to a risk assessment process by the IRS. These have been eliminated. For those who have already submitted under the 2012 Streamlined Procedures and have not been notified by the IRS in regards to its risk determination, the IRS will simply process the returns without regard to the risk assessment.

-New Streamlined Procedures have been added for individuals residing in the United States. This is a huge change. Here is an example: Let's say Diane moved to the U.S. years ago from her native country of Singapore and became a U.S. citizen or green card holder. She married, had children, worked, paid taxes and filed all of her U.S. tax returns on a timely basis. When living in Singapore she had also worked, contributed significant amounts to some investment accounts and had some local bank accounts. After moving to the U.S., the accounts remained open but inactive as she planned to save those funds for retirement.  Diane never new she was required to report to the U.S. any income from her foreign accounts or even report them on an FBAR. The non-reporting was not willful, due to fraud or an intent to evade U.S. tax. Under the former programs, Diane would be forced into the Offshore Voluntary Disclosure Program and could loose a substantial chunk of her retirement funds. These new Streamlined Filing Compliance Procedures For Residents could be a better option for her. 

The IRS also issued changes to the Offshore Voluntary Disclosure Program (OVDP). These are not all the changes, but a summary of a few important ones:

-A new 50% penalty will apply if the financial institution or individual that helped establish the offshore arrangement has been identified, under investigation, or cooperating with the authorities. 

-Additional information is required for pre-clearance into the program.

-The entire offshore penalty is now required to be paid at the time of the submission.

-All account statements must be provided at the time of submission regardless of the account balance. They may also be provided on a CD.

For more information and links to details on each program:



If you, or someone you know has unreported offshore income and/or accounts, it is imperative that they come forward under one of these programs and become compliant. In just two weeks, FATCA goes into effect and many foreign financial institutions will begin reporting to the IRS names of their U.S. account holders. Simply not doing anything is becoming a terrible option. My office specializes in helping individuals navigate the complexity of these programs - please feel free to contact me if I can assist.



Overseas Contractors & the Partial Foreign Earned Income Exclusion

posted Aug 30, 2013, 2:58 PM by Kaitlin Krozel

What prompted me to write this post is that I've had a few emails in the last week from contractors working in Afghanistan asking me to review their prior year tax returns. Both individuals had heard through conversations with co-workers that they were entitled to a partial foreign earned income exclusion for the year they moved overseas to work. They each had paid tax professionals to prepare their taxes, but the preparers they hired were not familiar with how taxation works for overseas contractors.  Well guess what? I've just completed one amendment which resulted in a 3K refund to the contractor! 

He had left the US in October 2011 to take a long term position in Afghanistan, but the person who prepared his return did not take an exclusion for the period October - December. A lot of contractors are aware of the income exclusion and also the Physical Presence Test, which is normally how an overseas contractor in Afghanistan would qualify for the exclusion. The Physical Presence Test states that one needs to be in a foreign country for 330 days out of a 365 day period. What some taxpayers (and tax preparers as well) don't realize is that the 365 day period does not have to be January 1 - December 31. You can use any 365 period. So since this individual was overseas for 330 days between Oct 2011 to Oct 2012, he qualified to take a partial exclusion on his 2011 return for the period October - December. 

So if you are a contractor in Afghanistan and did not take a partial exclusion for the year you left the US to begin working (or the year you returned to the US after your contract ended), you should file an amended tax return ASAP (the IRS has a 3 year statute of limitations from the filing due date to file an amended return for a refund).

Feel free to contact me as I am available to review your returns and prepare amendments if needed. 

Will Grant wrote a great article for Dangerous Magazine in March 2013 that all contractors should read about taxes:

How To File the 2012 FBAR (Form TD F 90-22.1)

posted Jun 24, 2013, 1:25 PM by Kaitlin Krozel

The FBAR is not filed with the filer's federal income tax return. You may not request an extension for filing the FBAR.


The FBAR is an annual report and must be received by the Department of the Treasury in Detroit, MI, on or before June 30th of the year  following the calendar year being reported (i.e. your 2012 FBAR is due by June 30th, 2013).

  

         1)    You can efile your FBAR at http://bsaefiling.fincen.treas.gov/Enroll_Individual.html

 

Note that efiling will be mandatory beginning July 1, 2013.

 

If you normally file your FBAR with your spouse the efiling process does not yet allow for both signatures on the same electronic form. So if you efile, each spouse will have to efile a separate FBAR.

 

2)   You can mail your FBAR, provided that the mailing is received by June 30, 2013:

 

          Print and sign/date the FBAR (Lines 44 & 46 of page 1)

          If you are filing a joint FBAR, both sign on Line 44 (yes, it is small so sign tiny!).

File by mailing the FBAR to:

United States Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621

If a private delivery service is used (i.e. FedEx, UPS, DHL), address the parcel to:

IRS Enterprise Computing Center
ATTN: CTR Operations Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226

Delivery messenger service contact telephone number: (313) 234-1062.

Keep the proof of mailing for your records.

June 17th - U.S. Expat Tax Deadline Around the Corner

posted Jun 13, 2013, 9:54 AM by Kaitlin Krozel   [ updated Jun 13, 2013, 9:59 AM ]

There are only five days left until the 2012 expat tax filing deadline. If you need help filing an extension, please contact me as I can Efile one for you as part of a tax preparation engagement. If you also need to pay any taxes, I can set up an electronic funds withdrawal from a U.S. bank account direct to the IRS or provide a voucher for you to mail with a check.

There are two types of extensions for U.S. expats:

Form 4868 – if you have been living overseas since before January 1, 2012 this is most likely the extension you will need to file.

Form 2350 – if you moved overseas in 2012, there is a possibility that you may need to file this extension instead.

Note that all extensions are only extensions to FILE taxes, but do not extend the time to pay your taxes…so if you think you owe it may be beneficial to make a payment now. The penalties for not filing are actually higher than the penalties for not paying, so always best to file an extension even if you can’t make a payment. Late payments will accrue penalties of .5% per month and interest at 3%.

If you try to contact the IRS, all offices will be closed on Friday June 14th due to budget cuts. See my last posting IRS Inconsiderate of Expat Tax Filing Deadline. If you need assistance, please contact me through email at kaitlin@krozelcpa.com, Skype at kaitlinkrozelcpa, or my U.S. phone at (619) 997-7320 (Pacific Standard Time).

IRS Inconsiderate of Expat Tax Filing Deadline

posted May 17, 2013, 12:55 PM by Kaitlin Krozel

Due to budget cuts, the IRS will shut down operations for 5 days in 2013.  Unfortunately, one these days is Friday June 14, 2013.  This also happens to be the last working day before the 2012 expat tax filing deadline of Monday June 17 (note the deadline is normally June 15, but, since it falls on a Saturday this year you have until Monday). This is a bit upsetting as this is a major deadline for U.S. persons living overseas.  Can you imagine the craziness if the IRS decided to shut down on April 14, right before the regular tax deadline? 

So if you do need to call the IRS for any reason, do not wait until the last minute this year. Here is another great tip.  Did you know the IRS has a special phone number with extended hours for overseas taxpayers?  Here it is:

Contact the IRS Internationally


Tel: 267-941-1000 (not toll-free)


Phone service available from 6:00 am to 11:00 pm (EST) M-F




Note the IRS also has offices in Frankfurt, Paris, London and Beijing.



Tax Extension for U.S. Expats & Overseas Contractors

posted Apr 15, 2013, 11:34 AM by Kaitlin Krozel

If you are a U.S. citizen or green card holder living abroad, you have no reason to go crazy today and try to file your U.S. federal taxes or an extension. Why, you ask? The IRS gives you an automatic two month extension to file your federal tax return until June 15th. You don’t have to file an extension, call the IRS, or do anything but be overseas to qualify. Note that this is only an extension to file and NOT an extension to pay (of course the IRS still wants their money by April 15th!). But if you do think you owe money to the IRS this year but have not made a payment yet, the IRS won’t hit you too hard. As long as you make a payment by June 15th, 2013 the IRS will only charge you interest (currently at 3%) and no penalty. For example, if your total 2012 tax ends up being $10,000 and you file/make your payment June 15th, 2013 the total interest would only be $50 (61 days of interest at 3%).

If you are a civilian contractor working in a combat zone or contingency operation to support the armed forces, you qualify for the special extension available to military personnel (Per IRC Section 7508). The extension related to military service is 180 days from the last day of qualifying service or hospitalization, plus the number of days you had left to file when you began qualifying service.

For example, if you began serving in a combat zone on April 1, 2013 you had 15 days until your 2012 filing deadline. You will then have 195 days from your last day of service to file the 2012 return and pay any taxes due, or 180 days plus the 15 remaining from April 2013.  Although contractors do get this automatic extension, you may want to go ahead and take care of your filings now, as it is one less thing to worry about when you get home. If so, do not hesitate to contact me.

Another deadline you don’t want to forget though is the deadline to file your FBAR (Form TD F 90-22.1). This form might be required if you have foreign financial accounts. The deadline for this form is June 30th and there is no extension available. For more information on the FBAR see my last post.

If you need help filing your taxes or if you moved overseas in 2012 and are unsure of how to file, please feel free to contact me.

2012 FBAR Due Date: June 30th or June 28th?

posted Jan 29, 2013, 3:42 PM by Kaitlin Krozel   [ updated Jan 29, 2013, 3:43 PM ]

This year the 2012 Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (a.k.a FBAR) due date of June 30th falls on a Sunday. This is similar to last year when the deadline also fell on a weekend. So will FBAR forms received by the Treasury on Monday, July 1st be considered late? This is an important question as the FBAR instructions state:

"A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000 per violation". 

So this really is the $10,000 question!

As the U.S. Treasury has not yet issued an answer, it is highly recommended to make sure that your 2012 FBAR is received by the U.S. Treasury by Friday, June 28th 2013. Note that the mailbox rule does not apply to FBAR's, which means it needs to be received by the due date, not postmarked by the due date.

Note that there is a way to efile your FBAR, but please read my blog post from June 26, 2012 'FBAR E-File Process...Needs Improvement' before attempting. I had some clients last year who waited until the last minute to efile their FBAR and were not able to navigate through the confusing efile process. Eventually they ended up mailing in their FBAR's past the deadline. Hopefully the 2013 process has improved.

Do you need to file an FBAR?

You have a legal obligation to report all foreign accounts including bank accounts, securities and investments, life insurance, gold holdings, and retirement accounts (this list is not exhaustive) if the total in all accounts added together exceeded $10,000 USD at any one point during the calendar year. This includes accounts over which you have signatory authority and accounts held jointly with a foreign spouse. 

This is a separate and distinct requirement than filing your federal and state income tax returns, which means this is a separate form with a separate due date then your tax return. Failure to file required forms can result in the imposition of both civil and criminal penalties, which can be significant. 

If you have not filed the FBAR in the past and are interested in becoming compliant, I can provide you with information and a list of tax attorneys to discuss filing options.  

2011 FBAR...due June 29th or June 30th?

posted Jun 26, 2012, 2:21 PM by Kaitlin Krozel

It is coming down to the wire...so when is your 2011 FBAR due? Well, the instructions clearly state June 30th of the subsequent year (so June 30th, 2012). Note also there is no extension for the FBAR and the mailbox rule does not apply (i.e. the form is due the 30th, not postmarked by the 30th).  But wait…June 30th fall on a Saturday this year. Well conventional wisdom (and the way the IRS normally handles these situations) is to give until the next business day, but as this form is filed with the Department of Treasury I guess conventional wisdom does not apply and most organizations (including the American Institute of Certified Public Accountants) are stating that the 2011 FBAR is actually due to the Treasury by June 29th, 2012 (Friday) in order to make the Saturday deadline. I have not found an organization that actually states this has been confirmed by the Department of Treasury (nor could I find anything on the Dept of Treasury website), so my guess is everyone is following the FBAR instructions very literally to be careful. So my advice? Go with the 29th if mailing and the 30th with efiling (see my last blog post for issues, tips and tricks related to the FBAR efile process).

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