THE TRANSATLANTIC MAGAZINE
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2019 Expat Tax Challenges
Preparing for the Year Ahead: Reducing Risk and Tax Exposure for American Expats
By Janathan L. Allen, Tax Attorney/Partner – Allen Barron, Inc, & Janathan L. Allen, APC
2019 will continue to present many US expats with financial and tax related challenges. Recent changes in US tax laws, the continued integration and enforcement of world-wide FATCA agreements, as well as international developments, such as Brexit and trade tariffs, present challenges and opportunities for the American expatriate.
Should you convert foreign currency/investments and transfer them into US dollars? What is the status of the IRS FBAR? How should an American expat structure their affairs based upon new financial and tax developments?
Which currency would best fit your investment, tax and financial needs? Many expats wonder if now is the time to convert their holdings and investments into US dollars. What is the projected stability or volatility of your present currency (Pounds sterling, Euro, US Dollar, etc.)?
Look for experienced international financial and tax advisors who can provide an integrated perspective on not only the financial implications of your decision, but the tax ramifications which may inure as a result. The cost of potential transfer taxes as well as the short and long term stability of associated currencies are the primary considerations in this equation to ensure the retention of the value of your hard earned investment dollars.
Continuing impact of FATCA
Many US expats are surprised to learn of their continuing FBAR related reporting requirements. Primary banking and investment accounts should be obvious and most international institutions now require extensive documentation (if they’ll open an account at all). But form 8938 has disclosures that go beyond the FBAR reporting requirements of Form 114.
Disclosures for US expatriates also include:
★ Life insurance policies
★ Retirement accounts (particularly those which are similar to a superannuation)
★ Assets and accounts of a spouse
★ A Foreign grantor trust in which you are a trustor or beneficiary
★ A foreign non-grantor trust in which you are a beneficiary
★ Any foreign financial account in which you are a signator
★ Foreign investment holdings in mutual funds, stocks, bonds, annuities
★ Ownership in any foreign entity and in many cases the accounts associated with that entity
The penalties associated with the failure to disclose any foreign account, income or asset remain in effect and enforcement continues to be a primary focus of the IRS.
The Value of a Transactional Plan to Leverage New US Tax Laws
How will the new US tax laws impact American expatriates? The elimination of many Schedule A deductions among others may provide more than a few surprises for American expatriates worldwide.
To mitigate these tax law changes, utilize a transactional plan to create an organizational structure which reduces and mitigates your tax exposure. For example, do you own or are you considering the acquisition of a foreign entity or income producing real estate?
New Tax Code section 199A provides a 20% deduction from gross income for properly structured flow through entities and the income they generate. Consider utilizing foreign limited entities to hold assets or groups of assets which are ultimately held by a US flow through entity(ies) owned by you, the US expat.
Current trade wars, political uncertainty, and economic volatility raise many questions regarding the structure of your financial investment holdings, strategies and their associated tax implications. Are you an American expatriate who is searching for a way to reduce risk while re-positioning to leverage changes in US tax laws for short and long term financial gain? Now is the time to implement a transactional plan to minimize tax exposure and strengthen your position.
Janathan L. Allen, of Janathan L. Allen, APC is a principal in Allen Barron, Inc. Allen Barron is a professional services firm based in San Diego, California which integrates the perspectives of tax, legal, accounting and business consultation. Jan Allen is primarily focused upon complex international business and tax issues advising corporations, business owners, US citizens, persons and expatriates who have international connections. For any questions, please feel free to contact Jan directly at this number: +1 866-631-3470, via e-mail: firstname.lastname@example.org or visit the website: www.allenbarron.com.