Just because I don't agreed with what this government is doing, it doesn't mean I don't love the country. If I don't love this country, I would never volunteer to served in the military, in the most hardcore branch too.
Just a note on who has to file US Tax return...All US citizens. Anywhere in the world.
My wife is a US citizen, but has not lived in the US since the age of 14. According to US Tax Law, she must file a US tax return to be in compliance of Federal US Tax Law. She is a resident of Canada, pays canadian Income tax, therfore, because of US Canada agreement, she dosnt have to pay taxes on the same income twice...with some exceptions. Its very complicated...there must be 20 forms to fill out.
The penalties for not reporting everything from bank account to foreign property owned including investments can result in huge penalties and interest for each offence or, account. So, if you have a savings acount, checking, business account, investment acccount, retirement account in a foreign jurisdiction, and you havent filed a return, your penalty alone is 5 times 10,000.00 fine per account and penalties and interest of up to 25% of the value of each account if you are audited. Plus investigation costs. In other words, just because there are no tax liabilities in a foreign jurisdiction, does not mean that you dont have to file a return, or pay, or be subject to penalties in the US citizen. Most of you likely know this, right?
And there are anti avoidence rules. If a transaction is undertaken for the sole purpose of avoiding tax, it can be disallowed. Kind of. We have the smae rule in Canada. Its called the general anti avoidance regulation or GAAR. The taxpayer can appeal, but in tax law, the onus is on the taxpayer to prove the validity of their return.
US citizens are required to report all sources of foreign income. Check out teh IRS website on Voluntary Disclosure For US Non Residents on the IRS website.
Just clarifying the tax issue thing...Hope this helps.
Vince is correct. One minor correct, it apply to PR as well. That mean green card holder will be treated as citizen.
When IRS published the rule, they just slip it through and hardly anyone notice it. This included tax professional. It wasn't until months later for it get around to the tax professional, and finally they passed it on their their clients.
My EA friend said, you should always file a tax return even if you have no income. It is to prevent future complication from the IRS. Until the court, where you are innocent until proven guilty. With the IRS, you are guilty until they say you are innocent. NOTES: Just because you provide them your "proofs", they can still deny you.
US is the ONLY country in the world that tax world wide income base on status instead of residency. I believe US is also the ONLY country in the world that has a estate tax. This is money that has already taxed once.
The following user says Thank You to cw30000 for this post:
Yah, but the easy way to get around this is to just be a shareholder of a private company that pays for everything for you. That is how they all do it. Since you own the shares and not the company then the company does not have to report to the IRS. If you have distributions, then it is a different story completely.
You just have to set a value on those shares etc.. This is all complicated tax stuff, but nothing a tax attorney can't fix.
The following user says Thank You to bluemele for this post:
A penalty for failing to file Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations. Certain United States persons who are officers, directors or shareholders in certain foreign corporations (including International Business Corporations) are required to report information under IRC §§ 6035, 6038 and 6046.The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
If this is a foreign corporation, and you are the owner, and trading in this corporation, then you have to be an officer or director or shareholder. dosnt distinguish between public or private corporation. I dont see any exceptions for no distributions. If the company pays for you, all your expenses...then it is a taxable benefit. By definition. Particularily if the sole source of income is income from trading. If the IRS beleives there may be taxable benefit, they can require audited financial statements of the the corporation. An you have to comply because you are a US Citizen or PR shareholder.
There is further documentaion that requires names and addresses officers, directors and shareholders, as well as aggregate value of the corporation. Also requires when the business was established, where did the property originate. In the case of a trading account, the funds come from the US. (likely) There is another form covering the transfer of US property to the foreign account.
Over the last few years, the US and Canada are both attempting to plug up the Offshore Account foreign business owned account loopholes, given the explosion in global investment instruments, like offshore investments.
Daniel Webster himself wound't be able to get around this.
The following user says Thank You to VinceVirgil for this post:
Well I am in no way a tax expert but as an ex PR resident I know by fact that PR residents which are US citizens by born, do not pay federal taxes, as a PR resident you can not vote for the President :-( , there is always a catch, you can move there but cannot vote. And BTW non-capital gains are taxed at 12%.
The following user says Thank You to Prtester for this post:
Guys, recently I had been thinking what is the best option to build up a passive income source. Supposedly you have traded for a good number of years and had been able to have consistent profit monthly, in plan of retirement and you wish to trade less - much less, could you use part of your monthly to build up a passive income source over time?
The best option out there seems to be dividend stocks. Any other suggestions?
"Passive" is a tough word. As an old life coach of mine used to say, "The only passive income anyone will ever have is if you were born with a silver spoon and your trust has been set up for you to send you checks".
In my opinion, there is no safe haven.
Bonds, Treasuries, Dollars, Currencies, Derivatives of any kind, Insurance, etc.. They all go through their struggles.
Right now, I am buying up homes where I grew up (been doing it for 12 years) @ 15K - 20K per home and cashflow them like MAD. 30% IRR's, but it is management intensive.
In my opinion, TIC (Tenant-In-Common) real estate deals in a high demand area are some of the best deals for consistent income. Or a REIT that doesn't leverage etc.. Just my 10 cents, but I never dream of passive, just less active.