The best way to tell how good a business really is, is to listen to its customers. Our customers have left for us over 255 reviews on independent web sites (Google Checkout and LinkedIn). In other words they are 100% real testimonials and we have no control over them. You can find these reviews on this page.
To answer this question we draw an analogy to medicine - if you have a toothache and a foot problem, do you look for a dentist who is also a podiatrist or do you talk to two separate specialists? The same works for taxes. As long as your US tax specialist is well versed in expat returns - they will certainly know everything about your local country issues and how they should be integrated in your US tax return.
Let's look at the UK as an example. While you can probably find one or two firms that specialize in dual-filing of UK&US taxes, the fees they charge will likely border between obscene and ridiculous. The reason is simple - while there are thousands of Americans in the UK who need to file taxes in both countries, the number of competent tax preparers who can do both is minuscule. And (their marketing spiel notwithstanding) truth be told, there is nothing special about UK (or any other foreign country) as far as IRS is concerned. All taxes paid abroad are counted the same whether they were paid in the UK or Ukraine. The same works for National Insurance, ISA contributions, QROPS, council tax or anything else that you think is unique to the UK - it is not.
The only real upside from hiring one accountant to deal with both tax systems is reduced communication. However - do you want to pay three or four times for the same service just to have to deal with one professional instead of two? This is certainly a personal decision - but make the determination knowing exactly why you make the choice.
We think this is a very good question and we'll look at it in depth. There are a number of reasons why you might want to work with an accountant locally vs remotely. Let's consider them:
Expertise. By working with us you will avail yourself of the top expert in the field of US expatriate taxation (see http://www.taxesforexpats.com/about/why-hire.html). We exclusively focus on American expats and, therefore, deal with all kinds of situations that regular accountants (even those working abroad) may see rarely or never. Your local accountant is simply unlikely to possess the same level of expertise. While they may be knowledgeable in tax issues pertaining to the country you're living, ultimately what matters is how versed they are in US Taxes and how much they deal with the IRS. There are simply no accountants outside the US who can match us on this count.
Cost If you live in a high-cost location (such as most of EU, Switzerland, Singapore or Australia), local accountants will charge fees that exceed ours by a factor of 2-3 (and then add a 20% VAT on top). On the other hand, if you live in a developing country (ie the rest of the world) - there simply aren't any knowledgeable local accountants that you can approach for US tax help.
"Visiting the Office". Reason most often cited when looking for a local accountant is the 'ability to stop by the office'. But let's consider it. Your first visit will likely take roughly 2-3 hours (unless you share the same office building). Thereafter - will you visit your accountant every time you need to ask a question, or will you use email / phone instead? Most likely you will email or call for years to come. However, once you are communicating by email, it is irrelevant where the office is located - it takes as long to for an email to reach NYC as it does to travel next door.
Trust. You probably want to meet your accountant so that you can assess how trustworthy, competent and knowledgeable he or she appears. But let's face it - what qualification do you possess to gauge whether he really knows the tax law, how promptly he will answer your questions and how much attention your case will receive? Will you ask to see their CPA exam scores?
We think that the best way to accomplish this is to see real references from real clients left independently (ie placed on 3rd party web sites not controlled by the firm). We challenge you to find another accountant who will have over 250 clients vouch for them, as we do: http://www.taxesforexpats.com/about/client-testimonials.html
So at the end of the day - you have to decide whether the privilege of meeting your accountant once in a nice office justifies paying triple + VAT for years to come.
We have many clients living in Low-Tax Countries who earn above the Foreign Earned Income Exclusion and need to make estimated payments to the IRS. They also frequently do not have all figures available to them early in the year.
We handle it the following way. Client completes our Tax Questionnaire with preliminary (estimated) figures. We prepare a draft of the return. Once paid, it's released to the client who uses it to make estimated payments. Then, as final figures become available later in the year, we update the draft of the return and file it with the IRS.
The best thing to do now is file your income taxes right away and pay any related penalties and interest (before they grow). You have to file only for those years where your earned income was more than the specified amount for that year (usually $9,000).
While you do not qualify for the combat zone military pay exclusion, as this exclusion only applies to members of the US Armed Forces, you do qualify for an extension for the filing and paying of your income taxes. This extension gives you 180 days after your last day in the combat zone. During this period, no interest or penalties attributable to the extension period will be assessed.
First Form 1116 is the Foreign Tax Credit form. Second Form 1116 is Alternative Minimum Tax Foreign Tax Credit (displayed on top of form name). The purpose of the first form is calculation of the allowed amount of foreign tax credit. The purpose of the second form is calculation of Foreign Tax Credit for the purpose of AMT (Alternative Minimum Tax). For taxpayers from the countries with high tax bracket who end up having zero U.S. tax yet may have AMT tax, calculation of AMT credit is important to reduce their AMT tax.However - this is not an additional tax credit! This is an alternative tax credit applied to adjust Alternative Minimum Tax. This form is important only for saving of every dollar of AMT available for future years. Even if you do not care much about the carryover, it is required by the IRS.
When a taxpayer excludes all or part of his income on form 2555 (Foreign Earned Income exclusion), foreign tax subject to credit is reduced, too. Instructions to form 1116 read: "Reduce taxes paid or accrued by the taxes allocable to any foreign earned income excluded on Form 2555 or Form 2555-EZ". In other words, you cannot exclude income and then use tax paid on this income as a credit. A portion of income attributable to the excluded income is "disallowed" and the remaining foreign tax is applied for calculation of the credit towards U.S. tax.
However, you owe Self-Employment tax on income above $400. If
you were employed, your employer would have paid half of tax and
withhold other half from your paycheck - that's known as Payroll Tax. As a self-employed individual
you are responsible for the entire amount of Social Security and
Medicare tax. This tax cannot be reduced by the foreign earned income exclusion or any other credits or deductions.
No, this is not true. In order to qualify for ROTH IRA, a taxpayer must have earned income. Of course, if all of your income is excluded through the Foreign Earned Income exclusion, you cannot make contributions to ROTH IRA. However, there are methods that allow you to leave a portion of your foreign earned income not excluded. If you left $5,000 out of the foreign earned income exclusion, you remain in a tax-free zone (remember about personal exemption and standard deduction). At the same time, you became eligible to contribute to ROTH IRA up to the amount of earned income ($5,000).
Nope. Inventory is defined as stock of goods collected for future sale. If you buy fitness drinks wholesale and sells them to customers, the cost of unsold drinks is inventory. Yoga mats are considered supplies.
Unfortunately contributions to Pillar 2 and Pillar 3 plans are non-deductible on the U.S. tax return and have to be reported as income. There is some good news - albeit in the future, when you will start drawing money from the pension account. If the money were not taxed previously, once vested, you
would have to pay tax on the withdrawals. It would be considered ordinary passive income, not subject to the foreign earned income exclusion. Credit for tax imposed in Switzerland is lower than what you would owe in the US. With basis in the pension fund taxed in prior years, you will only owe tax on growth - and this tax will be fully offset by foreign tax credit from Switzerland.
So, at the end of the day, the concept of prevention from double taxation holds true, but the results are stretched over time.
Working as a Canadian government employee for the local government does not make you exempt from the U.S. taxation.
Paragraph 149 (1) of the Canadian Income Tax Act exempts
from tax, on a reciprocal basis, U.S. citizens paid by the United States for
services rendered in discharge of government functions in Canada. Similarly, United
States would not tax Canadian citizens
receiving remuneration from the Canadian Government for services rendered in
the discharge of government functions in the United
Donations to the Canadian charities are tax-deductible in the U.S. However, as opposed to the Canadian tax return where you can simply deduct donations, the U.S. return uses a concept of "itemized" deductions. Not every U.S. taxpayer benefits from itemizing; often "standard" (fixed amount) deduction is more cost-effective. However - if you do not itemize, you cannot deduct charitable donations. Please let us know your donations and we will figure out which route (itemized or standard) is more beneficial to you.