Nestled in the heart of our vibrant global community, Argentina holds a special place as one of our main hubs. With a significant number of our team members based in the country, our decision to direct the efforts of Bright!Lights toward Argentina is not just about giving back; it’s about supporting our community.

Meet the non-profit organizations

A Glimpse into FuCaS Marita Iturriza: One of the recipients of our support is Fundación Capitales Solidarios (FuCaS) Marita Iturriza. With a mission to create positive change in society, FuCaS tirelessly works towards empowering those in need. The funds from Bright!Lights will fortify their ongoing projects, ensuring a sustained impact on the lives they touch.

(Consuelo Viramonte, IT Manager, and Noella Leonor, General Coordinator of FuCaS)

Nourishing Hope with Fundación CONIN/Nutrir: Another beacon of hope that received our donation is Fundación CONIN/Nutrir. Committed to fighting child malnutrition, this organization has been a stalwart in ensuring that no child goes to bed hungry. With the financial aid from Bright!Lights, they can continue their vital work, nourishing the future of Argentina.

(Activity day at Fundacion Nutrir)

Supporting the Community through Parroquia M. Inmaculada: Last but not least, we extended our support to Parroquia M. Inmaculada, an organization deeply rooted in community service. The funds provided by Bright!Lights will enable them to strengthen their outreach programs, fostering a sense of community and providing essential services to those in need.

(Dafne Adams, Client Engagement Specialist, delivering the donation to Father Luis, from Parroquia M. Inmaculada)

Creating a Wave of Positive Impact

Our partnership with these remarkable organizations is more than a financial contribution; it’s a collaboration that sparks immediate positive change across Argentina. We believe in the transformative power of collective action – it’s about the lives we touch, the hope we instill, and the communities we uplift.

Bright!Lights: A Commitment to Global Good

As we reflect on 2023, we’re reminded that the true essence of the holiday season lies in giving, sharing, and spreading joy. We’re immensely proud to be a part of this global movement towards creating a better tomorrow.

In the true spirit of giving, Bright!Lights shines a light on the power of collective action. The generosity of our team, combined with the dedication of FuCaS Marita Iturriza, Fundación CONIN/Nutrir, and Parroquia M. Inmaculada, illuminate the path towards a more compassionate and connected world. 

As we step into the new year, may the glow of Bright!Lights inspire us all to continue making a positive impact, one act of kindness at a time.

The post A Season of Giving: Bright!Lights Philanthropy Project Illuminates Hope in Argentina appeared first on Bright!Tax Expat Tax Services.

Our journey is marked by a relentless pursuit of excellence and a deep understanding of the complexities of international tax laws. But at the heart of our success lies unwavering support and appreciation for our team.

We are profoundly grateful for the collective effort, skill, and dedication of our team. As a direct result of their work, we served more members of the expat community this year than ever before.

As such, we are thrilled to announce the Bright!Tax Global Week of Rest.

What is the Bright!Tax Global Week of Rest?

From December 25th through January 1st, Bright!Tax will be turning the proverbial storefront sign to “Closed.” In so doing, we give our team a well-deserved break in acknowledgment of their hard work and dedication throughout the year.

This is a new initiative that reflects our commitment to the health and well-being of our team. During this “Week of Rest,” our team members will be fully unplugged. This chance to step away from their desks will allow them to recharge and be fully present with loved ones. We believe that by investing in this period of rest, we are fostering a healthier and more mindful work environment.

This, in turn, equips our team to return in the new year with renewed vigor and a fresh perspective, ready to continue delivering the exceptional service our clients have come to expect.

What this means for our valued clients

We understand that for our clients, dealing with US taxes overseas doesn’t pause during holidays or breaks. To ensure a seamless experience, we’ve taken careful steps in preparation. We intend to ensure that all urgent matters with existing clients are addressed before our Week of Rest.

On January 2nd, we’ll be back, not just from one corner of the world, but from all around the globe. Our team will be eager and ready to embrace the new year with renewed energy. We can’t wait to do it alongside you.

Need to get in touch before the break? 

For any immediate needs or concerns, please reach out to us before December 25th. Your dedicated CPA or our support team is here to assist you. Rest assured, any inquiries during our break will be promptly addressed upon our return.

As we step into this period of rest and reflection, we extend our warmest wishes to you and your loved ones for a season filled with joy, peace, and rejuvenation. We look forward to serving you in the new year with even greater enthusiasm and dedication.

Happy Holidays from all of us at Bright!Tax! 

The post Bright!Tax Embraces Well-Being: Introducing Our Global Week of Rest appeared first on Bright!Tax Expat Tax Services.

However, recent developments have shown that not all tax preparation firms handle your sensitive data with the same degree of care and security.

An uncomfortable revelation: US taxpayer data at risk

A recent investigation published in The Markup unearthed disturbing news: several online tax filing services that were once considered safe havens for personal data have been sharing their clients’ private information with Big Tech companies, including Meta.

This operation isn’t a clumsy error or an accidental leak. Instead, it’s an orchestrated process facilitated by a deceptively small (and commonly used) piece of code known as the ‘Meta Pixel.’

What is the Meta Pixel?

The Meta Pixel is also known as the Facebook retargeting pixel that, as a baseline, helps companies track website visitor activity. It also plays a role in measuring advertising effectiveness. It is a small piece of code that, when used inappropriately, can operate as a courier to transmit your personal data straight into tech giants’ databases.

The information shared extends beyond simple identifiers like names and email addresses. More intimate details about income, filing status, refund amounts, the number of dependents, and even college scholarship information have been leaked. 

There are several ramifications here – and this isn’t just about data. It’s about lives, about the hard-working American individuals who entrusted their sensitive information to these tax filing services. It’s about the potential misuse of this information, the sense of feeling financially vulnerable, and the resulting emotional stress. In essence, this is a critical issue that demands attention and action.

A congressional investigation by Senators Elizabeth Warren, Ron Wyden, Richard Blumenthal, Tammy Duckworth, Bernie Sanders, Sheldon Whitehouse, and Representative Katie Porter has been formally opened. The initial report names several online tax filing services, such as H&R Block, TaxAct, and TaxSlayer.

Understanding the use of the Meta Pixel

As the investigation into the sharing of sensitive data with Big Tech companies unfolds, it’s natural to question why online tax filing services utilized the Meta Pixel in the first place. While its usage raises concerns about data privacy, there are reasons companies cite for implementing this controversial tool.

As mentioned previously, the primary purpose of the Meta Pixel is to enable targeted advertising and analytics. By embedding this pixel on their websites, companies can track user behavior and collect valuable data on website visitors. This information allows them to optimize marketing campaigns, tailor advertisements to specific audiences, and gain insights into user preferences.

Targeted advertising can be an effective strategy for tax filing service providers, helping them reach the right audience and deliver relevant content. It enables them to personalize their offerings, improving the overall user experience. Additionally, the data collected through the Meta Pixel can be used for analytics purposes, aiding in understanding user trends, identifying areas for improvement, and refining their services.

While these intentions may seem beneficial on the surface, it’s crucial to strike a balance between providing a tailored experience and safeguarding customer privacy. 

How to check if your data is safe: A step-by-step guide

Concerned about the security of your data with your chosen tax service provider? Fear not; determining whether your personal information is being kept secure is easier than you might think. 

Follow this simple, 3-step guide to put your mind at ease:

Step 1 – Inspect with a Right-Click

Begin by right-clicking on your tax service provider’s website and selecting ‘Inspect’. This action will open up the source code of the site, providing you with a behind-the-scenes glimpse of its inner workings.

Step 2 – Observe: Tracking the Data Flow

With the ‘Inspect’ panel now open, locate the ‘Network’ tab. Once found, give it a click.

From here, you’ll need to reload the webpage, letting the digital currents flow and enabling you to monitor the data’s journey through the site.

Step 3 – Search: Hunting for Clues

With the ‘Network’ tab open, it’s time to embark on a virtual hunt. Using the search function, you’ll scan for traces of the Meta Pixel, those elusive markers of potential data compromise. 

Enter the start of the pixel code into the search field exactly as follows:
https://www.facebook.com/tr?id= 

If this appears in the results, proceed with caution, as it could indicate the presence of the Meta Pixel and the potential compromise of your data.

Bright!Tax’s commitment to your privacy

In the midst of mounting concerns surrounding data privacy, Bright!Tax staunchly advocates for your confidentiality and security. And – we practice what we preach. We prioritize your privacy above all else, ensuring your personal information remains safeguarded throughout the tax preparation process.

We also work in “the cloud,” which allows us to securely store client data outside our physical laptops. In turn, client data is sequestered in what is effectively an Internet bunker, all of which is to assure that your data remains private and protected. 

Even further, we have implemented stringent measures to protect your data. Our commitment to privacy encompasses both technological and procedural safeguards. We utilize advanced encryption protocols, robust firewalls, and regularly updated security systems to fortify our digital infrastructure. Additionally, our team undergoes rigorous training to ensure compliance with industry-leading standards and regulations. We also closely follow the latest IRS guidelines around online privacy best practices.

All this to say, we take pride in our transparent approach, and we welcome questions regarding our privacy practices. By choosing Bright!Tax, you not only gain access to exceptional tax preparation services but also join a community of individuals who prioritize privacy and security. 

Need help securely navigating US taxes overseas?

We understand the concern around privacy and the need to protect yours. Our team is ready to provide professional and reassuring expat tax guidance on your expat journey.

Get Started

References

1. Creating a Written Information Security Plan for your Tax & Accounting Practice
2. H&R Block and other tax-prep firms shared consumer data with Meta, lawmakers say

The post Is Filing Taxes Online Safe? What US Expats Should Know appeared first on Bright!Tax Expat Tax Services.

But what exactly is FATCA, and how might it affect you? Read on below for a primer.

What is FATCA?

FATCA is a 2010 law that requires all foreign financial institutions to disclose American account holder information to the US government in an effort to make it easier to identify and discourage tax evasion.

Is FATCA just for banks?

Beyond requiring foreign financial institutions to share information on American account holders, FATCA also requires Americans with a certain amount of assets in foreign financial accounts to report them on Form 8938 — so it affects taxpayers as well.

Read more: The Top 8 Things You Need To Know About FATCA

What are the filing thresholds for FATCA & Form 8938?

FATCA compels Americans residing within the US to file Form 8938 if they own $50,000 or more in foreign financial accounts. For Americans abroad, however, the reporting threshold is significantly higher. Expats must file Form 8938 only if their foreign financial assets exceed $200,000 on the last day of the tax year, or over $300,000 at any point during. This threshold doubles for jointly-filing, married couples to $400,000 on the last day of the year, or over $600,000 at any point during.

What does the Bank Secrecy Act of 1970 have to do with FATCA?

The Bank Secrecy Act of 1970 was passed by Congress as part of an effort to fight money laundering. The law requires financial institutions to keep thorough records, file reports, and report any suspicious activity that could indicate money laundering, tax evasion, or other financial crimes. It also requires Americans with $10,000 or more in foreign financial accounts to file a Report of Foreign Bank and Financial Accounts (FBAR) each year via FinCEN Form 114.

While FATCA wasn’t created as part of the Bank Secrecy Act of 1970, it did build upon the goal of deterring financial crime and boosting tax compliance by making it easier for the US government to monitor and investigate foreign financial accounts.

Read more: FinCEN Form 114 Vs IRS Form 8938 – What Expats Need To Know

How does the IRS enforce FATCA today?

With the information provided by foreign financial institutions, the federal government is able to identify which Americans meet the Form 8938 threshold. If somebody is obligated to file it but fails to, they’re subject to a $10,000 penalty which can reach up to $50,000 if they continue to withhold payment after notification by the IRS. Americans facing a non-compliance charge may also be subject to a penalty of 40% if they underreport their assets thereby paying less than they are obligated to.

FATCA: Frequently Asked Questions

Want to learn more about FATCA? Find out the answers to some of the most frequently-asked questions below.

What’s the difference between FATCA and FBAR?

FBAR refers to a specific report that American taxpayers who meet the threshold must file, which was created as a result of the Bank Secrecy Act of 1970. FATCA, on the other hand, refers to an entire law — one that is separate from the Bank Secrecy Act of 1970.

How to stay compliant with FATCA as an expat?

Any American living abroad who meets the reporting threshold must file Form 8938 and include it along with their annual tax return. 

What needs to be included when declaring FATCA?

Form 8938 has six different sections that must be completed:

• Section I – Foreign Deposit and Custodial Accounts Summary: Detail the number of foreign financial accounts (both deposit and custodial) that you hold, along with their value, and whether any were closed during the tax year
• Section II – Other Foreign Assets Summary: Report any other foreign assets you hold that are not either deposit or custodial accounts
• Section III – Summary of Tax Items Attributable to Specified Foreign Financial Assets: Report the interest, dividends, royalties, other income, gains and losses, deductions, and credits related to your foreign financial accounts
• Section IV – Excepted Specified Foreign Financial Assets: Indicate whether you have already reported specified foreign financial assets on a different form or forms within your tax filing
• Section V – Detailed Information for Each Foreign Deposit and Custodial Account Included in the Part I Summary: Provide information on your foreign financial accounts like the financial institution name, type of account, account number, and more
• Section VI – Detailed Information for Each “Other Foreign Asset” Included in the Part II Summary: Provide information on other foreign financial assets like asset type, maximum value, mailing address associated with it, and more

Form 8938 can be confusing, so if you have any doubts, don’t hesitate to contact a Bright!Tax expat-tax specialist.

How do I become compliant with FATCA?

If you were supposed to file Form 8938 in a previous year and didn’t, you may be able to catch up penalty-free through the IRS Streamlined Procedure. To qualify for this program, you must:

• Have a Taxpayer ID number (usually your Social Security Number)
• Not yet have been contacted by the IRS regarding a missing return or form
• Attest that your failure to file was not intentional

The Streamlined Procedure requires you to file:

• Your last three tax returns
• Your last six years of FBARs (if you met the threshold)
• Form 14653

Read more: Get Caught Up With The Streamlined Procedure — How To File Form 14653

The Best Way to Ensure You’re in the Clear With FATCA

US tax requirements are complex, frequently-changing, and enforced more tenaciously than ever. Any mistakes, late submissions, or missed tax exemptions can cost you significantly – even if they were unintentional. 

To get your taxes in on time with minimal effort on your part and maximized tax exemptions, consider an expat US-tax filing service like Bright!Tax. Whether you need someone to file your taxes, answer your questions, or help you with tax planning strategies, we’re here to help.

Get started today and one of our tax specialists will reach out regarding next steps as soon as possible.

The post <strong>FATCA Enforcement: What US Expats Need to Know </strong> appeared first on Bright!Tax Expat Tax Services.

If you’re a US citizen living abroad with questions about what the expat tax filing requirements are, you’re not alone. Some expats aren’t even aware they need to continue filing US tax returns while living overseas. 

Expatriate tax is a complicated realm for Americans overseas. For one, expats must often claim exemptions or credits to avoid double taxation. On top of that, they may also have to report foreign-registered businesses, bank accounts, investments, and other assets.

Luckily, the Bright!Tax team specializes in helping Americans abroad navigate the complicated world of US expat taxes. We’re here to shed some light on 12 key important pieces in the process.

Expatriate tax and US reporting requirements

1. Earned income

Almost every other country in the world taxes either a) those who live in the country or b) those who earn income originating from that country. 

The US, however, taxes every US person (both American citizens and permanent residents/Green Card holders) on their worldwide income. Even folks living abroad who have never lived in the US or held an American passport could be on the hook for US taxes if they were born on American soil (including military bases) or have an American parent.

All US persons filing as ‘single’ or ‘married filing separately’ must file a federal US tax return using IRS Form 1040 if their total earned income exceeds $13,850 in 2023.

For married couples filing jointly, that minimum changes to $27,700. However, there are some circumstances in which the minimums are even lower. For example, if you’re self-employed and make $400 or more, you must file a US tax return. Additionally, if you are a US person married to a foreigner and filing separately, or vice versa ($5). If you’re not sure if you meet the tax filing requirement for your situation, check out our post about the minimum filing thresholds for various expat circumstances.

Social Security and Medicare taxes for expats

Some American expats who work abroad may also need to pay US Social Security and Medicare taxes on their earned income. For example, self-employed US expats and those who work for a US-based employer must file an expat tax return. 

For the 2023 tax year, the rate for expat employees is 7.65%. Self-employed expats, however, are responsible for both the employer and employee contribution, meaning that the total is double, (15.3%).

Let’s look at the breakdown side by side:

The earned income mentioned above includes everything you have actively earned from your employer(s) and any clients (if applicable), as well as certain benefits (such as from a union strike or disability benefits). However, you must also report passive income as well.

Passive income is also called “unearned income” and refers to income you didn’t actively work for. This includes income gained through investments, interest, and payments, among other forms of unearned income.

Common forms of passive income US expats may owe taxes on include retirement plan payments, income from foreign rental properties, and Social Security payments (in some circumstances).

3. Foreign accounts

Beyond reporting your worldwide income, you may also need to report your foreign account holdings via a Foreign Bank Account Report, or FBAR. 

This filing requirement applies to US taxpayers who have accumulated $10,000 or more (in total) across qualifying foreign financial accounts at any time in 2023. The FBAR is filed using FinCEN form 114.

Qualifying financial accounts include checking, savings, investment, and pension accounts (most of the time). If you have control or signatory authority over any other account, such as a joint or business account, you must report those as well — even if they aren’t in your name.

FBARs for the 2023 tax year are nominally due by April 15, 2024, but expats receive an automatic extension until October 15, 2024.

4. Foreign assets

The Foreign Account Tax Compliance Act (FATCA), signed into law in 2010, helps the US prevent tax evasion for people using foreign accounts. FATCA requires Americans to report significant foreign financial assets on IRS Form 8938 each year. For those abroad, the minimum reporting threshold starts at $200,000 for expats, but it can vary in some circumstances. (Find out everything expats need to know about FATCA.)

A word of caution: Penalties for individuals who fail to file this form, if necessary, can be steep (up to $10,000 per year for a maximum of $50,000). Furthermore, foreign financial institutions are required to report American clients’ information to the US government, so it’s important to get caught up and stay compliant if you haven’t already done so. 

(More information on a penalty-free way to catch up is detailed below!)

5. Foreign businesses

Expats’ foreign business interests are also subject to US reporting and possibly taxation. All foreign-registered corporations that are a) owned by Americans who own at least 10% of the company and b) not considered disregarded must be reported on Form 5471 annually. If it is part of a foreign-registered partnership, however, it should be reported on Form 8865.

Those with a foreign-registered LLC must file IRS Form 8832 initially and then Form 8858 annually before it can be classified as a “disregarded entity,” as US-registered LLCs automatically are. Once your LLC is considered disregarded, the tax reporting will be included as part of your personal tax return.

Additional expatriation tax filing requirements for Americans Living abroad to keep in mind

6. State & local taxes

Most states require you to pay taxes if you retain significant ties via property, investments, voter registration, dependents, etc. The exact tax rate and requirements, though, vary quite a bit from state to state.

By that token, if you don’t have significant ties, and can demonstrate that you live abroad, many states will not require you to file an expat tax return. A handful of states, however — Virginia, California, New Mexico, and South Carolina in particular — require you to keep paying taxes unless you a) change your residency to another state or b) prove that you will never return.

On the other hand, some states don’t tax income at all. These include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. There are a couple of special cases, too. Recently, Washington passed a 7% tax on capital gains income above $250,000 a year. New Hampshire, meanwhile, taxes investment and interest income, although these taxes will be phased out for the 2023 tax year.

And while there are relatively few areas in the country that levy local taxes, they do still exist. So, make sure to look up the tax obligations of the last place you lived to avoid any surprises down the road.

Related: Filing State Taxes as a US Expat: What You Need to Know

7. Foreign taxes

Depending on which foreign country you reside in and/or earn income from, you may also be subject to foreign taxes. However, the US has several tax treaties in place designed to prevent Americans living abroad from being double-taxed on the same income.

These treaties stipulate that expats living abroad for a short time (typically three to five years) should continue paying social security taxes to the US but not to the country in which they reside. If they will be living abroad for longer, they should pay these taxes to the country in which they reside, but not to the US.

Unfortunately, thanks to a tricky clause, very few US expats benefit from US tax treaties. Expats who can benefit from a tax treaty provision should claim it on Form 8833.

IRS provisions to use when filing taxes for expats

8. The Foreign Tax Credit

If you aren’t able to benefit from a tax treaty, you’re not completely out of luck. The US offers a couple of programs that ease the burden of US expat taxes, like the Foreign Tax Credit (FTC). 

The FTC essentially allows expats to subtract what they’ve paid in taxes to foreign governments from what they owe the US. And because so many countries have a higher income tax rate than the US does, this often reduces your US tax bill to 0.

Note, however, that these taxes must be: 

• legal
• based on your foreign-earned income
• paid
• charged to you specifically to qualify for the FTC. 

To claim the FTC, Americans living abroad must file IRS Form 1116 along with their annual return.

9. The Foreign Earned Income Exclusion (FEIE)

Another IRS provision that can help expats lower, and often eliminate, their tax bill is the Foreign Earned Income Exclusion (FEIE), which allows expats to exclude a certain amount of income from taxation. 

For the 2023 tax year, the eligible exclusion amount is $120,000. 

For the 2024 tax year is increased to account for inflation. Expats can exclude up to $126,500 on their 2025 tax return.

It’s important to note that the FEIE can only be applied to earned income, not passive/unearned income. Additionally, you cannot apply both the FEIE and the FTC to the same income. 

However, you may be able to apply each of them to different incomes if it’s beneficial to do so.

To qualify for the FEIE, you must meet one of two tests:

• The Bona Fide Residence Test requires an expat to prove that they were a permanent resident in another country. This is achieved through official documents like visas, rental contracts, or foreign tax returns (among others).
• The Physical Presence Test requires expats to prove they spent at least 330 days outside of the US. This window of time doesn’t necessarily follow a calendar year. It can be 330 days in any 360-day period.

To claim the FEIE, file IRS Form 2555.

As a bonus, if you’re eligible for the FEIE, you’re also eligible for the Foreign Housing Exclusion (FHE). The FHE allows you to exclude the value of qualified housing expenses like rent, utilities, and necessary repairs from taxation. Any fees arising from foreign property that you own (like mortgage payments or property taxes) don’t fall into this category, but just like in the US, they are tax deductible.

10. Other common tax breaks

US expats are eligible for many of the same expatriate tax breaks as Americans who reside within the country. This includes a variety of tax credits, exclusions, and deductions, such as the:

• Child Tax Credit: Gives you a $2,000 tax credit per qualifying dependent child living with you if your income is at or below the given threshold ($400,000 for joint filers, $200,000 for other filers)
• Student Loan Interest Deduction: Allows you to deduct up to $2,500 in interest paid on qualified student loans
• Medical Expenses Deduction: Allows you to deduct qualified medical expenses above 7.5% of your adjusted gross income

You can research other common tax breaks online, but the best way to ensure that you don’t miss out on any is to work with a tax professional.

Navigate expatriate taxation like a pro (or with one!)

11. Catch up on your US taxes with the Streamlined Procedures

Behind on your US taxes? Don’t panic — the IRS has a voluntary amnesty program called the Streamlined Procedures. It allows expats who qualify for the program to catch up without financial penalty. 

The Streamlined Procedures requires expats to

• File their last three annual tax returns
• Submit their last six FBARs
• Self-certify that their previous non-compliance was non-willful.

This program is only available voluntarily, however. In other words, you must reach out to the IRS first to take advantage of the program. Don’t let them beat you to it!

12. Seek assistance

Let’s quickly review a couple of key points when it comes to taxes for expats:  

• With the passing of FATCA, the IRS is now able to enforce US tax filing globally more easily than ever. 
• Due to recent legislation, the IRS has increased funding and plans to hire additional agents to enforce compliance.

While this may feel scary if you’re just getting started (or have accidentally fallen behind!), expatriate tax is complicated by nature. Fortunately, the best expat tax service may be just a click away.

A Brighter Way to File US Taxes Overseas

Bright!Tax CPAs aren’t just certified to file taxes for expats, they’re people who are passionate about finding you the best and most tax-efficient strategies. Share some details about your circumstances, and they’ll be in touch in one business day (or less!) to guide you through the next steps.

Meet Your Dedicated CPA

The post US Expat Taxes 2024: 12 Tips from the Best Expat Tax Service appeared first on Bright!Tax Expat Tax Services.

But a common slip-up that some American expats run into when moving to a new country is neglecting their US tax obligations. Yes, you heard that right: even overseas, you must still file an annual US tax return to the IRS. This slip-up is so common that of the ~8 million Americans overseas, only about 17% are filing US tax returns. 

The US is one of the few countries (alongside Eritrea) that applies citizenship-based taxation. US expats must declare their worldwide income and foreign assets to the IRS regardless of where they live. 

So what do you do if you’ve been living overseas for some time and have never filed a US tax return (or you’re simply behind)? Does that mean the IRS may penalize you? 

Thankfully, this is where the Streamlined Filing Compliance Procedure program comes in. 

In this article, we’re going to answer the six most common questions we get from our clients when it comes to understanding the Streamlined Procedure and how it applies to Americans living abroad:

1. What is the Streamlined Filing Compliance Procedure? 
2. Who is eligible for the Streamlined Filing Compliance Procedure? 
3. How do I file the Streamlined Filing Compliance Procedure?
4. What is the IRS standard for willfulness? 
5. Will I pay penalties when filing the Streamlined Filing Compliance Procedure? 
6. How long does the Streamlined Filing Compliance Procedure take? 

Let’s dive in.

1. What is the Streamlined Filing Compliance Procedure?

Only 17% of Americans living overseas are filing their tax return. Many US expats living abroad aren’t aware of their US tax obligations and, as a result, have never declared their worldwide income or foreign assets. 

“Over the past ten years, I’ve spoken to thousands of Americans living outside the US who learned of their IRS tax filing obligation out of sheer coincidence. Some have been informed by their local banks, others by a friend, and in some cases, a news article reveals that they’ve overlooked an important tax responsibility. The recurring theme here is that many people aren’t filing US taxes because they don’t know they have to. It’s not because they don’t want to, or are trying to hide something from US tax authorities.”

– Katelynn Minott, Bright!Tax CEO, CPA 

The Streamlined Filing Compliance Procedure is an IRS program, originally introduced in September 2012, that helps US expats catch up on their taxes, penalty-free. 

2. Who is eligible for the Streamlined Filing Compliance Procedure? 

Here’s a quick rundown on the eligibility criteria for the Streamlined Filing Compliance Procedure:

Your tax noncompliance was not willful

You must state under penalty of perjury that your failure to comply with your US tax obligation wasn’t intentional. In other words, your noncompliance was from a mistake or a lack of understanding of your US tax obligations overseas. 

The IRS must not have initiated a civil investigation on any of your tax years

If you’ve been under civil investigation (i.e. an audit) from the IRS before for tax evasion, you won’t be eligible for the Streamlined Filing Compliance Procedure.    

You have a valid taxpayer identification number

To submit your returns under the Streamlined Filing Compliance Procedure, you’ll need a valid taxpayer identification number (ITIN) or Social Security Number (SSN). For American citizens who have (or are eligible for) an SSN, it is not possible to file the Streamlined Procedure with an ITIN. If you’re not eligible for an ITIN and SSN, then the IRS won’t process your returns under the compliance program. 

You haven’t had ‘residency’ in the US for one or more of the three previous tax years

There are two versions of the Streamlined Filing Compliance Procedure: domestic and offshore. 

To be eligible for the offshore Streamlined Filing Compliance Procedure, you must certify to the IRS that you haven’t had a place of residence in the US for the last three years. Or, you must have been physically present for 330 days outside the US during one or more of the previous three tax years. 

3. How do I file the Streamlined Filing Compliance Procedure?

Though the breakdown feels somewhat simple, there can be a bit of heavy lifting involved in each step. Here’s what you’ll need to submit to the IRS in order to file the Streamlined Filing Compliance Procedure:

Get caught up on your three most recent tax returns

You must file your three previous years of tax returns – again, reporting your worldwide income.  

Some forms you might need:

• Form 2555: This is the form you can file to claim the Foreign Earned Income Exclusion (FEIE)² and reduce your US tax liability. With this form, you can exclude up to $112,000 of your foreign-earned income from your tax return.  
• Form 116: You can use this IRS Form to claim the Foreign Tax Credit (FTC)³, another tax relief plan. The FTC allows you to gain tax credits on a dollar-for-dollar basis based on the foreign taxes you’ve already paid.  
• Form 8938: Also called the Statement of Specified Foreign Assets⁴, you’ll have to file this Form if the total value of your foreign financial assets exceeds $300,000 at any point in the tax year ($600,000 if you file jointly). 
• Form 8833: The Treaty-Based Return Position Disclosure⁵ is to claim any benefits from the US tax treaty with your country of residence. Want more information on this to see if your country is eligible? Read more here. 

File your FBAR Forms from the six previous years

Typically, US expats only file an FBAR (Foreign Bank Account Report) if the money in their foreign financial accounts exceeds $10,000 at any point in the tax year. However, under the Streamlined Filing Compliance Procedure, you’ll have to file an FBAR for the six previous years.

A signed “Certification by US Person Residing Outside of the US” statement (Form 14653)

With this statement, you confirm to the IRS that:

• You’re eligible for the Streamlined Filing Compliance Procedure
• You filed all of the required FBAR forms 
• The failure to not comply with your tax obligations was not intentional.

Read more: How to File Form 14653 | Bright!Tax

4. What is the IRS standard for willfulness?

The IRS considers non-willful noncompliance as any “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.” Again, any behavior that clashes with this standard will disqualify you from the Streamlined Filing Compliance Procedure. 

For example, some people are “Accidental Americans,” which was the case for former UK Prime Minister Boris Johnson⁶. These people may have been born in the United States but left the country very young or had a parent register them abroad with a US consulate. They often have no ties with the US.

Additionally, Accidental Americans are often unaware of their US tax obligations since they’ve spent most of their life overseas. Consequently, the IRS qualifies their behavior as non-willful noncompliance, which makes them eligible for the Streamlined Filing Compliance Procedure. 

5. Do I pay penalties with the Streamlined Filing Compliance Procedure?

As mentioned, there’s good (great!) news. The foreign version of the Streamlined Filing Compliance Procedure allows you to catch up on your taxes without paying any penalties. 

If you’re behind on your US taxes but qualify for the Streamlined Filing Compliance Procedure, there’s no better time than now to start the program. If the IRS comes to you first, you’ll be ineligible. Under Foreign Account Tax Compliance Act (FATCA)⁷, countries are under the obligation to report the financial activities of US expats, so it’s best to get started early (read: before the IRS contacts you). 

6. How long does the Streamlined Filing Compliance Procedure take?

Typically, it takes the IRS around 90 and 120 days to process your streamlined tax returns. However, due to the backlog caused by the pandemic, the process could take up to a year or longer.

Read more: Expert Advice on Dealing with the IRS Backlog | Bright!Tax

Let Bright!Tax help you catch up on your taxes

Moving overseas to start over in a new country is an exciting opportunity. Filing your taxes? Yeah, not as fun!  

Managing your taxes can feel overwhelming, especially when you’re in the process of adapting yourself to a new country. 

That’s where we can help. At Bright!Tax, our CPAs help guide our clients through each step of the Streamlined Filing Compliance Procedure and handle all of their tax filings to give them peace of mind. Contact us today to learn more.

References

1. American Expats by Country 2023 (worldpopulationreview.com)
2. Foreign Earned Income Exclusion | Internal Revenue Service (irs.gov)
3. Foreign Tax Credit | Internal Revenue Service (irs.gov)
4. About Form 8938, Statement of Specified Foreign Financial Assets | Internal Revenue Service (irs.gov)
5. About Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) | Internal Revenue Service (irs.gov)
6. Boris Johnson among record number to renounce American citizenship in 2016 | Boris Johnson | The Guardian
7. Foreign Account Tax Compliance Act (FATCA) | Internal Revenue Service (irs.gov)

The post Streamlined Filing Compliance Procedure: The 6 Most Frequently Asked Questions (and Answers!) appeared first on Bright!Tax Expat Tax Services.

The four day summit, taking place from February 8-11, 2022, features presentations from some of the world’s leading authorities on a range of expat financial hot topics, including tax, financial planning and investing, cryptocurrency, voting, insurance, and international money transfer, all with a focus on US expats.

The event is brought to you by UK-based The American Magazine, though it is intended for all Americans living abroad, worldwide.

The summit is free to attend, and you will have the opportunity to put your questions to the experts.

The schedule is:

Tuesday February 8

9am ET/2pm GMT/3pm CET – Investment Strategies for Americans Living Abroad

– David Kuenzi, Founder, Thun Financial, a Creative Planning Company

11am ET/4pm GMT/5pm CET – Do U.S. Expats Need International Insurance?

– Joe Cronin, President, International Insurance

1pm ET/6pm GMT/7pm CET – Strategies for U.S. Expats Who Wish to Reduce Their Tax Bill

– Katelynn Minott, CPA, CEO, Bright!Tax U.S. Expat Tax Services

Wednesday February 9

9am ET/2pm GMT/3pm CET – What Biden’s Tax Changes Mean for U.S. Expats

– Monte Silver, Founding Partner, Silver & Co

11am ET/4pm GMT/5pm CET – What’s New in 2022 for U.S. Expats Filing U.S. Taxes From Abroad?

– Allyson Lindsey, CPA, CDO, Bright!Tax U.S. Expat Tax Services

1pm ET/6pm GMT/7pm CET – Pitfalls & Practical Issues for American Expat Investors

– George King, Senior Wealth Manager, Maseco

Thursday February 10

11am ET/4pm GMT/5pm CET – International Money Transfer Tips For Expats

– Jason Landrum, Strategic Partnerships, OFX

1pm ET/6pm GMT/7pm CET – Why U.S. Taxes Aren’t a Barrier to Voting in U.S. Elections

–Rebecca Lammers, DA Global Tax Task Force Chair, Democrats Abroad

Friday February 11

9am ET/2pm GMT/3pm CET – Themes for Americans Investing Abroad in 2022

– Brian Dunhill, Founder and CEO, Dunhill Financial

1pm ET/6pm GMT/7pm CET – Crypto and U.S. Tax in 2022 – What You Need To Know

– Janathan Allen, Founding Partner, Allen Barron, Inc

Find out more and book your place now at https://www.expatssummit.com/

The post Register for the 2022 Expats Virtual Financial Summit appeared first on Bright!Tax Expat Tax Services.

The Award is a biannual scholarship for ambitious, inspirational young Americans who are studying overseas.

Bright!Tax is the leading provider of US tax services for the 10 million Americans living abroad.

Bright!Tax founder Greg Dewald said, “Many years ago, I had the opportunity to study abroad. The experience ignited in me a lifelong passion for travel and exploring the world, including living in South America for ten years. I initiated the Global Scholar Award in 2016 to provide the same opportunity for a new generation of young Americans”.

Natalie triumphed in a crowded field of over a hundred exceptional candidates.

Natalie is in her first year of an undergraduate degree in Biomedical Science at the University of Essex in the UK.

She said, “I’m very grateful to receive the Global Scholar Award, as it will help me to financially support my aspirations to live and study abroad. After I finish my undergraduate degree, I plan to study medicine, and eventually to become a pediatrician. My dream is to someday work with “Doctors Without Borders.”

“I remember being fascinated by how black pepper sprinkled atop a small glass of water would scatter at the introduction of a drop of dish soap by a fingertip, and awed at how different substances cause the fire of a bunsen burner to turn different colors. My dad often took me as a child to science presentations for kids, and when I was older sometimes even to the lab at his workplace, where I imagined what the various mysterious contraptions, tools, and jars of substances might be used for.”

“Also, since my grandfather, who was a neurologist, died of melanoma cancer, my grandmother has been the driving force behind our family’s contribution and activism in the MelanomaKnowMore foundation, which funds skin cancer research and treatment. She has shown me how to turn passion and care into tangible, meaningful, and intelligent action.”

The Bright!Tax Awards Committee was impressed by Natalie’s passion, ambition, courage and academic achievements so far, and how she has reacted and adapted to the global disruption caused by the COVID-19 pandemic.

Greg Dewald continued, “Natalie is an exceptional young American with inspiring aspirations and a bright future. We wish her every success, and I’m sure she’ll achieve her every ambition.”

The post Natalie Heath Receives Bright!Tax Global Scholar Award appeared first on Bright!Tax Expat Tax Services.

The CPA Practice Advisor 40 Under 40 Awards recognize thought leaders who are transforming the accounting profession through their exemplary leadership, innovative thinking, and community outreach which extends the visibility of the profession.

Katelynn said: “I’m thrilled to have been recognized by CPA Practice Advisor for my work with Americans overseas. The accounting profession has allowed me to meet and make a difference in the lives of thousands of American expats around the world, which has been a humbling and deeply rewarding experience. Every American who moves overseas is a courageous pioneer with a compelling story to tell, filled with adventures and challenges. The opportunity to meet and support such fascinating people in all corners of the globe is inspiring, and empowering.”

Katelynn began her career at PwC, before moving  to Chile, where she co-founded Bright!Tax, a U.S. tax firm with a vision to serve American clients around the world remotely by harnessing the power of new online technologies. Bright!Tax has since won five global Emma awards for excellence as best expat tax provider and for financial services innovation, and has grown to a team of more than 40 located in 30 countries who serve American clients in over 200 countries. 

Katelynn is also a regular contributor to Forbes and Fast Company and has appeared as a guest-expert on various global tax webinars and podcasts including International Living Magazine, American Citizens Abroad, and Democrats Abroad.

Bright!Tax founder Greg Dewald said: “With her boundless enthusiasm and foresight, Katelynn was among the first to shatter the barrier that allowed Americans overseas, for the first time, to reliably and securely file their requisite U.S. taxes online. Previously, the very idea that one could file taxes remotely was unthinkable. With the emergence of social trust and online encryption, Katelynn, with her visionary brand of entrepreneurialism, recognized the opportunity and ran with it. Now with clients in almost every country in the world, the result has been remarkable to say the least.”

The post Bright!Tax COO Katelynn Minott Recognized with CPA Practice Advisor 40 Under 40 Award appeared first on Bright!Tax Expat Tax Services.

Living abroad is a golden opportunity to broaden our horizons by immersing ourselves in another culture, far from the familiarity and security of our homes, families and friends. More often than not, it is life-changing.

Bright!Tax founder and CEO Greg Dewald had the opportunity to study abroad while at university. It was an experience that completely changed his life and his world outlook. He founded the Global Scholar Award to provide the same opportunity to today’s young Americans.

Eleven highly intelligent and impressive young Americans have now benefited from a Bright!Tax Global Scholar Award. From a range of backgrounds and with expertise in a range of disciplines, they are united only in their exceptional track record and ambitions.

In this article, we’ll take a look at where our first nine Global Scholars are today.

Erin Moran, PhD in the UK

Since Erin was unveiled as the first Bright!Tax Global Scholar in 2016, she completed her PhD at University College London’s Institute of Education, presenting her research at national and international conferences.

She is now back in the US, working as Regional Coordinator for Positive Behavior Supports Corp,  a nationwide company that provides in-home therapy for children and adults with intellectual and developmental disabilities. She is a founding member of PBS’ Research Committee. She also serves on the Professional Advisory Board for the International Behavior Analysis Organization, which seeks to develop systems to better serve individuals with disabilities around the world. She is partnering with start-up technology company HiRasmus to develop a hands-on training tool for entry level professionals, parents, and teachers.

Kersey Schott, MA in Germany

After completing her Masters degree in European Studies at the University of Leipzig in Germany, Kersey was awarded the International Parliamentary Scholarship (IPS) in 2018. As part of the five-month IPS program, she worked in the office of an elected member of the Bundestag, the German Parliament in Berlin. After completing the scholarship program, she continued working in the Bundestag as a parliamentary assistant until May 2020, since when she has been working for the UK’s Department of International Trade at the British Embassy in Berlin.

Adeel Mufti, MSc in the UK

After completing his MSc, Adeel began working as a Research Engineer at FiveAI, a self-driving (autonomous vehicle) startup in the UK. He worked on the Prediction component, which seeks to determine how road users will react 10 seconds in the future. Adeel is currently working as a Senior Machine Learning Engineer at Cruise, in San Francisco, the largest startup and leader in the Autonomous Vehicle space.

Aina Swartz, BA in the UK

Aina is in her final year of university at King’s College London studying History and International Relations. She took a couple of years out of school due to health concerns. She is delighted to be returning to London to complete her studies this month. 

While back in the States, she started a baking business called Aina’s Swedish Bakery and worked part-time at the Swedish Cultural Center in Seattle. She plans to expand her successful baking business into the UK while she continues her studies.

Addison Noel, BA in Japan

Addison recently completed her undergraduate degree in International Relations at Tokyo International University. She plans to stay and work in Tokyo. While studying, she also taught English part-time, and had the opportunity to do some modeling. 

Brandon Fathy, PhD in the UK

While completing his archeology PhD, Brandon has received additional research awards from the Economic History Society, the Medieval Archaeology Society, and the Society for Post-medieval Archaeology. For his research, he investigated urban emergence at Anglo-Saxon Ipswich, successfully identifying the appearance of town zones and the intensification of some different types of urban/economic activities.

He has also worked with a non-profit organisation called the Brilliant Club to design and deliver courses in high schools.

Digital art he created based on his research has received an Interdisciplinary Research Award.

Nessyah Buder, PhD in Australia

Since receiving the Bright!Tax Global Scholar Award in 2019, Nessyah has continued working on her PhD. She has presented her research at the 2020 North American Saxophone Alliance Biennial Conference, the 2020 Musicological Society of Australia Conference, and for the Sydney Saxophone Network. She has also published new, typeset critical editions of three saxophone works by Dulcie Holland, and had an article published in The Saxophone Symposium.

She was recently awarded an Academic Assistantship at the University of Melbourne, and she is tutoring a class at the University’s Faculty of Fine Arts and Music.

She recently won a YouTube playlist competition for a video in which performed all four separate saxophone parts on soprano, alto, tenor, and baritone saxophones.

Skyler Rutkowski, MA in Kenya

After completing her MA in International Relations program at USIU-Africa, Skyler began working as a Risk Analyst while studying for the Foreign Service Officer test to begin the process of becoming a Foreign Service Officer (Diplomat).

David Miller, MA in the UK

David recently completed his Master’s in Health Data Science at University College London. He has just been offered a position as a researcher at UCL studying the causes of heart failure.

It’s been an incredible first five years, with some amazing ongoing success stories. From millennia-old archeological excavations to future autonomous vehicles, from diplomats to health research, music, and baking, at Bright!Tax, we are incredibly proud to be supporting the next generation of American global innovators and pioneers.

You can find more information about the Bright!Tax Global Scholar Award here.

The post The Bright!Tax Global Scholar Initiative – Five Years of Success Stories Abroad appeared first on Bright!Tax Expat Tax Services.