Expatriate Tax Returns
The United States is a member of a small (but very elite!) group of three countries, the other two members being Eritrea (a tiny 3rd-world country in Africa) and Communist China. This group is notable in that it is comprised of the only three countries in the world whose respective systems of individual income taxation are citizenship-based rather than residency-based. Consequently, if you are a citizen (or, in the case of the U.S., a “green card” holder) of “The Land of the Free” or 3rd-world Eritrea or Communist China, your country demands to know, and levy an income tax, on all your income, no matter where in the world you may reside or work.
Sarcasm aside, one of the most important reasons to file a tax return, even if you owe no taxes, or are not even legally required to file a tax return, is to start the clock ticking on the statute of limitations. In general, the IRS has 3 years, starting from the due date of the return or the date the return is filed (whichever is later), to initiate an audit. Consequently, if you never file, the statute of limitations never runs out. This being the case, a wise expatriate, despite a preliminary determination that his gross income is less than that required by law to file a tax return, would nevertheless file a return, in order to preclude the IRS from contacting him more than 3 years later to challenge his honest, but possibly erroneous, calculation of gross income.
Another important reason to file is that the right to claim the Foreign-earned Income Exclusion may be lost if not claimed in a timely-filed tax return. In general, the choice to utilize the exclusion can most confidently be made within one year of the due date of the return. After this time (i.e., via a late-filed return), the exclusion is generally accepted, but only if the choice is made before contact by the IRS. In other words, if the IRS contacts you to request (an) unfiled tax return(s) more than a year overdue, there is a very real risk that the Foreign-earned Income Exclusion will not be allowed.
By taking advantage of the Foreign Tax Credit, the Foreign-earned Income Exclusion, and other deductions available to expatriates, we are able to prepare expatriate tax returns for our clients that often reflect little or no tax due to the IRS.
We are also able to prepare U.S. state and municipal returns, if required and requested. However, please be advised that there are a small number of states and municipalities that do not follow the example of the federal government in the provision of one or more of the above-mentioned expatriate-related deductions, exclusions, and/or credits.
Filing Back Taxes
If you have not filed tax returns for prior years, we can help bring you up-to-date. The IRS generally requires only the past 6 years, even if you have missed more than this. (If you qualify, you might also be able to take advantage of a program in which the IRS requires only the past 3 years.) In most cases, clients end up owing no taxes, due to the Foreign-earned Income Exclusion, or the Foreign Tax Credit. In general, late-filing penalties will not be levied if the late return reflects no tax due.
IRS Representation and Correspondence
We can save you time and stress by acting on your behalf in dealings with the IRS. Whether IRS correspondence is initiated by phone or by postal mail (the IRS does not correspond via email), we are ready and willing to help you clear up any problems, at competitive rates. Many problems can be cleared up with a single phone call. This service will require the signing of a Power of Attorney.
Tax Returns for Non-resident Aliens
Aliens (non-U.S. citizens) resident in the U.S. are generally taxed in the same manner as U.S. citizens. Non-U.S.-resident aliens, on the other hand, are taxed by the U.S. (if at all) on only (1) their income from sources within the U.S., and (2) certain items of income connected with the conduct of a trade or business in the U.S. Tax rates will also often differ from those levied on residents.
A complication arises, however, if the alien taxpayer has spent only part of the year in the U.S. In this case, complex rules determine whether he is classified as resident or non-resident, or even, in some cases, as dual status. This classification (resident, non-resident, or dual) is pivotal in the determination of what kinds of income are taxable and at what rates; and what forms need to be filed. By carefully examining your fact situation, we will be able to accurately determine your residency classification, and prepare and file the correct tax forms for you. (This service is not restricted to residents of Japan, but, rather, is available to non-resident aliens wherever in the world you may reside.)
Tax Preparation for non-Resident Alien Investors of U.S. Real Estate
The U.S. tax rules applicable to non-resident alien owners of rental real estate differ in some important respects from those that apply to U.S. persons. The foreign investor who fails to submit a timely income tax return loses the right to claim deductions against the rental income, and is subject to a flat 30% tax withheld on the gross rents. We can help you avoid this pitfall by applying for exemption from withholding, and preparing timely tax returns for your rental real estate income. We can also prepare any state or local income tax returns you may require. (This service is not restricted to residents of Japan, but, rather, is available to non-resident aliens wherever in the world you may reside.)