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Monthly Archives: November 2019

NRAs Spending > 120 Day in the US May Have US Tax Liabilities

Spending more that 3 months a year in the U.S. may trigger taxable residency without realizing it, bringing with it the additional responsibility of financial reporting obligations and potentially creating tax liability for any affiliated offshore companies.

You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least:

  1. 31 days during the current year, and
  2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
    • All the days you were present in the current year, and
    • 1/3 of the days you were present in the first year before the current year, and
    • 1/6 of the days you were present in the second year before the current year.
You were physically present in the U.S. on 120 days in each of the years 2012, 2013, and 2014. To determine if you meet the substantial presence test for 2014, count the full 120 days of presence in 2014, 40 days in 2013 (1/3 of 120), and 20 days in 2012 (1/6 of 120). Since the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2014.

People who unknowingly pass this threshold may be insulated from U.S. income taxes, where there country of residence as an income tax treaty with the U.S., but they’re still considered U.S. residents for other purposes like information reporting.

As explained in IRS Publication 519 (U.S. Tax Guide for Aliens): Effect of Tax Treaties… If you are a dual-resident taxpayer, you can still claim the benefits under an income tax treaty. A dual-resident taxpayer is one who is a resident of both the United States and another country under each country’s tax laws. The income tax treaty between the two countries must contain a provision that provides for resolution of conflicting claims of residence (tie-breaker rule). If you are treated as a resident of a foreign country under a tax treaty, you are treated as a nonresident alien in figuring your U.S. income tax. For purposes other than figuring your tax, you will be treated as a U.S. resident...

Where a foreign resident is able claim Treaty Tiebreaker provision, they may still need to file:

  1. Form 114 - Report of Foreign Bank and Financial Accounts (FBAR),  
  2. Form 5471- Information Return of U.S. Persons With Respect  to Certain Foreign Corporations
  3. Form 8938 - Statement of Specified Foreign Financial Assets (where treaty tiebreaker claim is not made on timely file return). and
  4. Forms 3520 or 3520-A - Annual Reports Regarding Foreign Trust.

The penalty for failing to file any of the above mentioned forms is: 

  1. Form 114 is $10,000 where the IRS believes that the taxpayer didn't intentionally fail to file the FBAR. However, where the IRS believes the omission was willful then the penalty for failing to file Form 114 is the greater of $100,000 or 50% of the balance in the foreign account.

  2. For Form 5417 & 8938 the IRS may assert a $10,000 penalty for each failure for each applicable annual accounting period, plus an additional $10,000 for each month the failure continues, beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $60,000.
  3. Form 3520: Greater of $10,000 or the following (as applicable):
    • 35% of the gross value of any property transferred to a foreign trust for failure by a U.S. transferor to report the creation of or transfer to a foreign trust. 
    • 35% of the gross value of the distributions received from a foreign trust for failure by a U.S. person to report receipt of the distribution.
    • 5% of the gross value of the portion of the foreign trust's assets treated as owned by a U.S. person under the grantor trust rules (Sec. 671 through 679) for failure by the U.S. person to report the U.S. owner information.
    • Form 3520-A: Greater of $10,000 or the 5% penalty (discussed above).

This is just one more reason that NRA's should consult with an experienced attorney before coming to the US for any long period of time and certainly for pre-immigration planning!

Want To Come To The US Hassle Free?

Contact the Tax Lawyers at 
Marini& Associates, P.A. 
for a FREE Tax Consultation at:
or Toll Free at 888-8TaxAid (888) 882-9243


Read more at: Tax Times blog

Trump's Change of Domicile from NY to Fl Will Save Him $$$

Donald Trump has announced that he intends the change his residence from New York to Florida. Many others wealthy individuals know that this change of domicile results in:

  1. $0 in Florida State income tax, down from top rates in New York state of 9% and New York City of 4%.
  2. $0 in Florida Estate tax, down from New York’s estate tax, which can be as high as 16%, and
  3. Florida provides significant asset protections via its generous homestead exemption laws.

But first Trump must be abandon his New York domicile and he will most likely be subject to a NY tax audit, when he claims loss of domicile on his New York tax returns.

In such an audit, New York will likely look to see if Trump has stopped spending much time in New York, which for the time being it appears that he has, and how much time and connection he has now established in Florida. That includes not just time spent in Florida, but things such as registering to vote in the state, setting up bank accounts, and visiting Florida doctors and other professional people in Florida.

You need to prove by clear and convincing evidence that you not only left first state, New York, but relocated to the new state, Florida.

Need To Change Your Domicile For Tax Savings?

Contact the Tax Lawyers at 
Marini& Associates, P.A. 
for a FREE Tax Consultation at:
or Toll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog

Court Told IRS Can't Summons Bank Docs In French Probe- But in Reality They Can!

According to Law360, a third-party IRS summons on a U.S. citizen's bank records for an investigation into a French company's tax liabilities in France violates federal tax laws because it's not connected to a U.S. debt, an Indiana federal court has been told.

The summons, issued to JPMorgan Chase & Co. seeking Joseph Dadon's bank records, should be quashed because it violates the Internal Revenue Code by requesting information on a tax liability not connected with the U.S., Dadon told an Indiana federal court in an amended petition filed Tuesday.
Under IRC Section 7602(a) , a summons can be issued to determine only if a person owes the U.S. taxes, Dadon said.

The IRS issued the summons to get information on potential value-added taxes that the French company, Société Française de Négoce International, owed the French government, and such a summons is not authorized by U.S. law, Dadon argued. The summons “was not issued in connection with any investigation relating to taxes due to the United States,” the petition said. The case is Joseph Dadon v. U.S., case number 1:19-cv-03862.

But Mr Dadon's attorney must not have read our May 21, 2019 post "Another IRS Summons on Behalf of a Foreign Government" where we discussed that on March 13, 2018 we posted District Court upholds Another IRS Summons Issued Pursuant to a Tax Treaty Request  discussing that a district court had upheld a summons that IRS issued to an American law firm, pursuant to a request from the French tax authorities, with respect to transfers of funds made by an alleged French citizen to a client trust account maintained by the law firm. (Franck Hanse v. US, Case No. 1:2017cv04573).

Furthermore, we previously posted on August 1, 2013 Federal Courts Authorize John Doe Summonses Seeking Identities of Credit Card Use For Norweign Tax Authority!  where we discussed that federal courts in Minnesota, Texas, Pennsylvania, Oklahoma, Virginia and California had entered orders authorizing the Internal Revenue Service (IRS) to serve John Doe summonses on certain U.S. banks and financial institutions, seeking information about persons who have used specific credit or debit cards in Norway
We also discussed how the DOJ, petitioned the U.S. District Court for the Western District of North Carolina to authorize IRS summonses to uncover the identities of Finnish residents using U.S.-issued payment cards in Finland. The DOJ and IRS are pursuing this matter under the U.S.-Finland tax treaty and at the request of the Finnish government.

“Our continued success in combatting Offshore Tax Noncompliance has been helped by the Assistance We Receive through the Network of Tax Treaties Around the Globe,” said IRS Commissioner Charles Rettig. 
“Yesterday’s effort reflects that the U.S. will return this help by working under the law with tax administrators in other nations to help them in their fight against tax evasion and avoidance. A global economy should not be allowed to serve as a possible vehicle for tax evasion in any country.”. 
Becoming A Believer That Fiscal Transparency Really Exists?

Have Undeclared Income from an Offshore Account?

Want to Know What OVDP Program is Right for You?

Contact the Tax Lawyers at 
Marini& Associates, P.A. 
for a FREE Tax Consultation at:
or Toll Free at 888-8TaxAid (888) 882-9243


Read more at: Tax Times blog