IRS will soon examine U.S. taxpayers with undeclared Indian bank accounts.

Posted by Sanket Shah | General | Friday 19 May 2017 2:38 pm

Reporting on a California State Bar Tax Section Meeting, Tax Notes reports that the IRS will soon (as early as the week of 11/11/13) ) begin examining U.S. taxpayers suspected of holding undeclared accounts in Indian banks, according to Nicholas Connors, a supervisory revenue agent with SEP.

Read the full Tax Notes here.

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Ten Facts about Capital Gains and Losses

Posted by Sanket Shah | General | Friday 19 May 2017 2:27 pm

When you sell a ‘capital asset’, the sale usually results in a capital gain or loss. A ‘capital asset’ includes most property you own and use for personal or investment purposes. Here are 10 facts from the IRS on capital gains and losses:

1. Capital assets include property such as your home or car. They also include investment property such as stocks and bonds.

2. A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.

3. You must include all capital gains in your income. Beginning in 2013, you may be subject to the Net Investment Income Tax. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts that have income above statutory threshold amounts.

4. You can deduct capital losses on the sale of investment property. You can’t deduct losses on the sale of personal-­use property.

5. Capital gains and losses are either long-­term or short­-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long­-term. If you held it one year or less, the gain or loss is short-­term.

6. If your long­-term gains are more than your long­-term losses, the difference between the two is a net long­-term capital gain. If your net long-­term capital gain is more than your net short­-term capital loss, you have a ‘net capital gain.’

7. The tax rates that apply to net capital gains will usually depend on your income. For lower-­income individuals, the rate may be zero percent on some or all of their net capital gains. In 2013, the maximum net capital gain tax rate increased from 15 to 20 percent. A 25 or 28 percent tax rate can also apply to special types of net capital gains.

8. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.

9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they happened that year.

10. You must file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses with your return.

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Surrendering Green Card – New Form I­-407

Posted by Sanket Shah | General | Friday 19 May 2017 12:57 pm

In February 2015, the Department of Homeland Security, U.S. Citizenship and Immigration Services issued a new Form I­-407 for the abandonment of an individual’s United States green card (technically, “lawful permanent resident” status).

The new Form I­-407 now provides a separate section to obtain the consent of parents of minors who relinquish the green card. As in the old form, the new form asks for reasons for abandonment of the green card, but this question now appears to be more formally presented and appears to require a more detailed statement.

Giving It Up: No Fee — Yet!

Green card holders are taxed in the same manner as US citizens: they are both subject to US income tax on their worldwide income regardless of the source of that income and regardless of where the green card holder or citizen is living at the time it is earned. However, they are not treated exactly the same when it comes to relinquishing their US status. The US citizen who renounces his US citizenship, must now pay a fee of $2,350 for the privilege of doing so. On the other hand, there is still no fee for relinquishing one’s green card.

Internal Revenue Service is Notified When You Give Up the Green Card

Interestingly, the instructions to the new Form I-­407 specifically advise applicants that: “The Department of Homeland Security is required to provide the Internal Revenue Service (IRS) with the names of individuals who choose to abandon their LPR status. If you file this form with us, we will provide only your name and the filing date to the IRS. (Internal Revenue Code section 6039G(d)(3))”.

Dire consequences can result if an individual does not properly relinquish his green card and file all required paperwork with the IRS.

Please note, that simply because the green card has expired for immigration law purposes, it does not likewise “expired” for US income tax purposes thereby relieving them of the duty to pay US taxes.

Your Name May Appear On the “Name and Shame” List

Code Section 6039G implements the so­-called “Name and Shame” list. This is a quarterly publication in the Federal Register by the IRS listing the names of individuals about whom the IRS has received information of a loss of citizenship during the preceding quarter. This list is required to include the names not only of former U.S. citizens but of certain former green card holders. Under 26 U.S.C. § 6039G(d) (3), “the Federal agency primarily responsible for administering the immigration laws shall provide to the Secretary the name of each lawful permanent resident of the United States (within the meaning of section 7701 (b)(6)) whose status as such has been revoked or has been administratively or judicially determined to have been abandoned.”

The Federal Register provides that “for purposes of this listing, long­term residents, as defined in section 877(e)(2), are treated as if they were citizens of the United States who lost citizenship”. So, if you’ve held your green card for at least 8 of the preceding 15 tax years, your name will appear on the “Name and Shame” list when you return the card.

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Real Property received by US Person from their Indian parents.

Posted by Sanket Shah | Newsletters | Wednesday 6 February 2013 12:07 pm
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2013 Revised Tax Rates

Posted by Sanket Shah | International Tax | Tuesday 15 January 2013 12:49 pm

On January 11, 2013, Internal Revenue Service announced annual inflation adjustments for tax year 2013, including the tax rate schedules, and other tax changes from the recently passed American Taxpayer Relief Act of 2012.

The revised tax rates are as follows:

The other changes that are of great interest to most taxpayers include the following:

1. The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.

2. The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).

3. The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $250,000 ($300,000 for married couples filing jointly). It phases out completely at $372,500 ($422,500 for married couples filing jointly.)

4. The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).

5. The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $5,891 for tax year 2012.

6. Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.

7. For tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).

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US Persons investments in Indian Mutual Funds are treated as PFICs

Posted by Sanket Shah | Newsletters | Thursday 1 November 2012 8:47 pm
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US Person liable for Self-employment tax if they are self-employed abroad.

Posted by Sanket Shah | Newsletters | Friday 7 September 2012 4:15 pm
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A new streamlined filing compliance procedures for non-resident U.S. taxpayers went into effect on September 1, 2012

Posted by Sanket Shah | General | Tuesday 4 September 2012 4:33 pm

Description of the New Streamlined Procedure

This streamlined procedure is designed for taxpayers that present a low compliance risk. All submissions will be reviewed by the IRS, but, the intensity of review will vary according to the level of compliance risk presented by the submission. For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. Submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program (OVDP).

Taxpayers utilizing this procedure will be required to file delinquent tax returns, with appropriate related information returns (e.g. Form 3520 or 5471), for the past three years and to file delinquent FBARs (Form TD F 90-22.1) for the past six years. Payment for the tax and interest, if applicable, must be remitted along with delinquent tax returns.

Eligibility

The eligibility requirement is on the questionnaire that a taxpayer must submit (see attached questionnaire by clicking on http://slidesha.re/OjdYpH)

The taxpayer qualifies only if each of the following questions answered No.

1. Have you resided in the U.S. for any period of time since January 1, 2009?
2. Have you filed a U.S. tax return for tax year 2009 or later?
3. Do you owe more than $1,500 in U.S. tax on any of the tax returns you are submitting through this program?
4. If you are submitting an amended return (Form 1040X) solely for the purpose of requesting a retroactive deferral of income on Form 8891, are there any adjustments reported on the amended return to income, deductions, credits or tax?

You can read further about the program and its instructions at http://1.usa.gov/PFp8VJ

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Tax implications in India and US on sale of property held by US person in India

Posted by Sanket Shah | Newsletters | Tuesday 7 August 2012 10:52 am

NEWSLETTER SYNOPSIS:
Do you own, plan to purchase
or anticipate to receive an
immovable property in India.
What are the tax implications in
India and US on sale of property
held by US person in India.

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Taxability of [Indian] PPF Interest in USA

Posted by Sanket Shah | Newsletters | Thursday 26 July 2012 5:52 pm
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