1000+ Verified REVIEWS
Tax Guide
About Us
Services
Pricing
Tax Guide
Contact

Mail Bag #14: W-2 Abroad, Qtrly Tax, Spouse FBARs, Relocation & Healthcare, Gifts, Repatriation Tax

Mail Bag #14: W-2 Abroad, Qtrly Tax, Spouse FBARs, Relocation & Healthcare, Gifts, Repatriation Tax
Ines Zemelman, EA
12 April 2018

W-2 Abroad

My company is U.S. based, I'm Austrian citizen but live & work in Spain (Barcelona). I need professional help to understand where & how I pay taxes for 2017 and future years.

If you performed work for a U.S. employer who issued a W-2 in your name, you are required to file a U.S. federal return - even if you had tax withholding throughout the year.

You will likely need to file form 1040NR. 1040NR is $450/$550 (over $100k).

W-2 Abroad

Qtrly Tax

For the first few months of 2016 I worked for Rio Tinto in Mongolia they withheld my US & Mongolian tax obligations, my employment with them ended March 26th 2016.

I started working for Jacobs Mongolia July of 2016 they only withhold my 10%Mongolian tax obligation but do not withhold any US taxes, this is left up to me.

Do I have to pay quarterly taxes now to the USA? If so who can I hire to insure I am following US tax laws & obligations?

Rio Tinto used KPMG for my taxes also they did a tax equalization that I was extremely unhappy with! I would prefer not to use KPMG in the future.

Any advise is greatly appreciated.

If you did not owe any tax last year, you do not need to make estimated payments before April 15. If you anticipate you may owe tax this year, please get your docs in early so that we can prepare your return ahead of April 15 (tax due from this date accrues interest).

If you owed U.S. federal tax last year and did not anticipate tax withholding through the employer you were supposed to pay quarterly estimated taxes. By default, quarterly payments are calculated under the assumption of 10% income increase in the following year. We’d also be happy to prepare a tax projection for you to determine the tax hit. In short, this service requires a $350 retainer, but$250 remains as a credit for when your tax return is ready to be prepared. Thus the net cost (if we prepare your return thereafter) would be $100. And, by the way, it is not KPMG fault that you were unhappy with the results. The way equalization works makes you pay more tax than you could have paid if you just filed on your own, using all benefits available to expats (curtailed by equalization tax principles).

Qtrly Tax

Spouse FBARs

I (US citizen) filed a joint tax return with my non-US spouse in 2015, electing to treat her as a US resident for tax purposes. I also filed an FBAR for my non-US spouse for 2015 - I didn't think this was necessary. Should 2016 and 2017 FBARs for spouse still be filed?

In 2016, FinCEN clarified in the preamble to the regulations that an election under IRC 6013(g) or (h) is not considered when determining residency status for FBAR purposes. This clarification has resolved the uncertainty on whether an NRA (non-resident alien) spouse electing to be treated as US person for US purposes must file FBAR or not. The spouse does not need to file FBAR anymore but filing for 2015 was the required measure of precaution.

Spouse FBARs

Relocation & Healthcare

I relocated back to the United States this August. However, I still receive my healthcare plan outside of the US through an international health insurance that is NOT compliant with the US Affordable Healthcare Act (aka Obamacare).

Given that I am located in the US for the next several months, does this mean I will pay a penalty for not having a health insurance plan that is covered under Obamacare? Do i need to urgently switch my healthcare plan rather than wait until January 2018? This is stressing me out as I read that there is a 3.8% additional penalty on my income for not paying for a AHCA approved healthcare plan even though my international healthcare plan is great. How will this penalty be calculated? Also let me know if you still can do taxes even though I am no longer an expat?

For the 2017 year if you relocated back to U.S. you will have to switch to US health provider. Returning from abroad is a "qualifying event" that allows you to purchase health coverage insurance now and not to wait for January.

To your last question -- of course! We handle returns for all of our clients that return to the states! We file returns for anyone with a U.S. tax filing requirement - in the U.S. or outside of it.

Relocation & Healthcare

Gifts

If I receive a gift of $14,000 in 2017, is that counted as income for the year? Do I need to pay taxes on gifts? Also does the gift need to be received by end of year or is there an extension into 2018?

You do not have to report such a gift receipt. If the sum of gifts you receive from non-US citizen were to reach >100k in the calendar year, then you should file form 3520 to declare this - it does not create a tax bill, but is simply informational. If the sum was over 14k, and the gifter was a US citien, then the filing requirement onus is on the person who gifted to file a Gift Tax Return.

Gifts

Repatriation Tax

I'm looking to make payment for repatriation tax - should I submit it with my extension?

Do not process Sec. 965 payment with extension - it will not be recognized!
The IRS recently put out an FAQ on this very matter.
Q10. How should a taxpayer pay the tax resulting from section 965 of the Code for a 2017 tax return?

A10. A taxpayer should make two separate payments as follows: one payment reflecting tax owed without regard to section 965 of the Code, and a second, separate payment reflecting tax owed resulting from section 965 of the Code (the 965 Payment). Both payments must be paid by the due date of the applicable return (without extensions).

The 965 Payment must be made either by wire transfer or by check or money order. This may be the first year’s installment of tax owed in connection with a 2017 tax return by a taxpayer making the election under section 965(h) of the Code, or the full net tax liability under section 965 of the Code for a taxpayer who does not make such election and does not make an election under section 965(i) of the Code. For the 965 Payment, there is no penalty for taxpayers electing to use wire transfers as an alternative to otherwise mandated EFTPS payments. Accordingly, taxpayers that would normally be required to pay through EFTPS should submit the 965 Payment via wire transfer or they may be subject to penalties. On a wire payment of tax owed under section 965 of the Code, the taxpayer would use a 5-digit tax type code of 09650 (for more information, see https://www.irs.gov/payments/same-day-wire-federal-tax-payments). On a check or money order payment of tax owed resulting from section 965 of the Code, include an appropriate payment voucher (such as Form 1040-V or 1041-V) and along with all other required information write on the front of your payment “2017 965 Tax.”

Repatriation Tax

Ines Zemelman, EA
founder of Taxes for Expats