to Non-Resident Citizens: 'Pay Up, or Face the Consequences'
The Nestmann Group, Ltd.
by Mark Nestmann: Austria
Restricts Gold Purchases…NOT
Are you one
of the seven million U.S. citizens or green card holders living
abroad? If you are, the IRS has a simple message: Were looking
U.S. Treasury, and the IRS are moving forward on several fronts
to identify millions of foreign residents it believes are subject
to U.S. tax and reporting obligations, but are not complying with
them. You see, the United States is the only major country that
imposes the same tax and reporting obligations on its non-resident
citizens as on U.S. residents. Long-term U.S. residents (green card
holders) living abroad face the same obligations, even if the green
card is expired. You must comply with these requirements even if
you pay tax in the country in which you now live.
States is also one of the few countries that awards citizenship
to anyone born in its territory. Youre also are a U.S. citizen
if you have at least one U.S. citizen parent and that parent met
certain residency or physical presence requirements prior to your
birth. Combine the sweeping claims of taxing authority with the
extraordinary ease of qualifying for U.S. citizenship, and you can
understand why millions of U.S. citizens living abroad who dont
comply with these requirements now have a king-size problem.
Theres no consensus on how many U.S. citizens living abroad,
but the State Department estimates the total number at around 7
million. Yet, the IRS believes that only a small percentage of these
individuals file U.S. tax and information reporting returns. Mind
you, theres rarely any tax evasion, because Americans living
abroad usually pay tax in the country theyre living in. But,
youre still supposed to file U.S. tax returns and reporting
forms acknowledging offshore accounts and offshore entities youve
created or in which you have an interest.
were born in the United States, but grew up abroad. Or maybe you
grew up outside the United States, but have a U.S. parent. It doesnt
matter if you havent visited the United States in decades,
or even if your feet have ever touched U.S. soil. Bare your soul
to the IRS, and write a large check, or face the consequences.
not complying? Here are the penalties you face:
to file a U.S. tax return. Once youre discovered, you
face a penalty of 5% of the balance due, plus an additional 5% per
month, up to a maximum of 25%.
to pay U.S. tax due. Count on another 5% monthly penalty on
the tax you owe, up to 25%. You can be dunned another 20%-40% for
failing to file an accurate tax return. Fortunately,
if youve filed tax in another country, you can generally set
off the tax you paid in that country against your U.S. tax obligations.
If you fail to file a return or to pay tax due and the IRS can demonstrate
fraud, you can be liable to penalties that amount to as much as
75% of the unpaid tax.
to disclose offshore financial accounts. Any U.S. citizen or
green card holder with non-U.S. bank, securities or other
financial accounts must report them if their aggregate value exceeds
$10,000 on Form TD F 90-22.1 (FBAR). The civil penalty
for willfully failing to file an FBAR can be as high as the greater
of $100,000 or 50% of the total balance of the foreign account per
violation. Criminal penalties may also apply for willful violations.
Non-willful violations are subject to a $10,000 penalty per account
to file reporting forms for foreign trusts or foreign business entities.
U.S. citizens who create or fund a foreign trust or any foreign
business entity such as an offshore corporation must make extensive
disclosures. Penalties for failing to do so are draconian. For instance,
if you own property in Mexico through a Mexican trust (Fideicomiso),
you must tell the IRS when you form, fund, or make a transaction
involving the trust. The penalty for failing to file just one of
these forms (Form 3520) is 35% of the amount that should have been
reported. Thus, if you formed a Fideicomiso, then transferred
$100,000 to it to purchase property in Mexico, and didnt file
Form 3520, you owe the IRS $35,000. Stiff penalties also apply for
failure to file information returns relating to foreign corporations,
foreign partnerships, etc.
Are you depressed
yet? You should be, if youre not compliant with this draconian
tax and reporting regime. In Part II, Ill describe Uncle Sams
greatly increased efforts to extract as much revenue as possible
from its non-resident citizens and green card holders. Ill
also discuss how you can become compliant if youre in this
situation without paying the maximum penalties. Finally, Ill
show you how to legally and permanently eliminate your obligation
to file U.S. tax and reporting forms. Stay tuned!
with permission from The
Nestmann Group, Ltd.
Nestmann [send him mail]
is a journalist with more than 20 years of investigative experience
and is a charter member of The
Sovereign Society’s Council of Experts. He has authored over
a dozen books and many additional reports on wealth preservation,
privacy and offshore investing. Mark serves as president of his
own international consulting firm, The
Nestmann Group, Ltd. The Nestmann Group provides international
wealth preservation services for high-net worth individuals. Mark
is an Associate Member of the American Bar Association (member of
subcommittee on Foreign Activities of U.S. Taxpayers, Committee
on Taxation) and member of the Society of Professional Journalists.
In 2005, he was awarded a Masters of Laws (LL.M) degree in international
tax law at the Vienna (Austria) University of Economics and Business
© 2011 Mark
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