Us Taxation Issues for Expatriates Seminar May 10 slides

1. AmCham Bahrain Presents:
‘U.S. Taxation Issues for Expatriates’
Evening Seminar
‘U.S. Taxation Issues for Expatriates’ Seminar 10 May 2017

2. Guest Speaker
Stuart Horwich
U.S. Attorney

3. U.S. Tax Issues for
Expatriates
Amcham Bahrain
May 10th, 2017

4. US Citizens are liable for U.S. federal income taxation
irrespective of residence.
Individual states may also tax income, either on the basis of
“domicile” or based upon income sourced from that location.
In addition, US citizens typically must file bank account
reporting forms (formerly known as FBARs) disclosing all foreign
bank accounts in which they have either a beneficial interest or
signatory rights. This is now due with the tax return.
Basic Provisions

5. US tax rates range from 10% to 39.6%. These brackets opened on filing status.
(e.g. single, married filing jointly, married filing separately, head of household)
Rates and Filing Status
Brackets
Single Married
Jointly
Married Separately Head of Household
10% 0 - 9,325 0 - 18,650 0 – 9,325 0 – 13,350
15% < 37,950 < 75,990 < 37,950 < 50,800
25% < 91,900 < 153,000 < 76,550 < 131,200
28% < 191,650 < 233,350 < 116,675 < 212,500
33% < 416,700 < 416,700 < 208, 350 < 416,700
35% < 418,400 < 470,700 < 235,350 < 444,500
39.6% 418,400 + 470,700 + 235,350 + 444,500 +

6.  U.S. citizens and green card holders that either (i) spend 330
days outside the US in a given year or (ii) maintain a bona fide
residence outside the US are eligible to exclude $102,100 (in
2017) of earned income.
 Eligible taxpayers may also exclude housing costs over a floor
of £16,336 (in 2017). That housing exclusion is capped for
Bahrain at $48,300. Thus it is possible to receive an additional
exclusion of $31,946 in Bahrain.
Earned Income Exclusion

7. Assume a married couple where both earn $200,000 per annum. The tax
generally on $400,000 would be $102,224.
If the taxpayers excluded $204,200 under earned income exclusions, their
taxable income would be $195,800. Absent the anti-stacking rule, the
taxpayers would owe $35,885 of tax.
However, as a result of the anti-stacking rule, the tax is computed as:
In essence, the anti-stacking rules eliminate the benefit of the lower bracket
amounts.
Anti-Stacking Rule
Tax on $400,000 :
Tax on $195,800 :
Tax Due :
$102,224
$35,885
$66,339

8. FACTA requires foreign banks to report US account holders to
the U.S. government.
The first wave of reporting is currently occurring and the foreign
banks are having to analyze all account to see if there is US
indicia of ownership (e.g. US passport on file, US place of birth,
etc.).
The IRS will ultimately receive that data and begin to contact US
non-filers or where underreporting of income has occurred.
FACTA

9. What to do if you are a non-filer?
1) Do not panic. We have helped 300 non-filers get back into the
system with no penalties or other adverse consequences.
2) Do not ignore. It is a digital world and with FACTA and other
information (Bradley Birkenfeld), the IRS is going to round up non-
filers. Moreover, there is a statute that allows the State Department
to cancel your passport for non-payment of significant tax
obligations.
3) Do come clean. The situation is very different if you go to the IRS
rather than the IRS coming to you.
Streamline Reporting

10. 1) Three years of past due returns
2) Six years of bank account statements
3) Explanation of why your conduct was not “wilful attempt to
avoid” US taxes
The IRS does not impose any penalties for streamline returns
accepted into the system and we have a 99.7% acceptance rate.
You will have to pay tax and interest on anything due from those
three years.
What is Required for Streamline Reporting?

11. This stands for “passive foreign investment companies”, which is
broadly anything resembling a US mutual fund, but formed
under foreign law.
Taxation of PFICs ranges from very bad to truly tragic.
The basic theory is that deferral is not allowed and all possible
presumptions will be made against the taxpayer, including
interest charges.
There can be some relief for publicly traded collective
investment schemes
PFICS

12.  Qualified dividends
 Avoidance of anti-deferral rules
 Foreign tax planning
 Pension contributions
Planning

13.  Stuart is a US lawyer who has spent his career specializing in United States tax issues for international clients, including both
US persons who have business ventures abroad (including expatriate American citizens) and non US persons whose affairs in
some way touch the US tax system. Stuart heads the London office of UK US Tax Services LLP, an accounting firm specializing
in US tax advising and compliance services.
 Stuart’s working career has provided him a wealth of experience allowing him to solve complex tax issues for clients,
whether they be US citizens working or living abroad, foreign businesses that need to plan in both their local jurisdictions
and the United States, or US businesses that are expanding internationally. His practice involves not only tax planning, but
also controversy work against the IRS. Most recently, Stuart litigated a case successfully challenging in the District of
Columbia Court of Appeals the proper interpretation of the French totalization agreement, overturning a Tax Court decision
in favor of the Government.
 Stuart’s career has included:
 Law clerk to the Washington Supreme Court (1985-1987)
 Appellate Lawyer, Department of Justice (1987-1989)
 Senior Attorney, Securities and Exchange Commission (1989-1990)
 Associate, Zapruder & Odell, Washington DC (1990-1994)
 Partner, Zapruder & Odell, London (1994-1999)
 Managing Director and Head of Tax, Evans Randall (1999-2005)
 Partner and Chief Counsel, Deka Capital Partners (2005-2010)
 Partner, UK US Tax Services LLP (2010 to Present)
 Stuart received his Bachelor’s Degree in European History from University of California in San Diego (1978-1982), followed by
a Juris Doctor Degree in Berkeley – School of Law from the same university in the years 1982-1984. In autumn 1984, he
started studying English Law at University of Cambridge in England where he graduated with a Master of Laws degree in
1985.
 Stuart is also the founder of The Anglo-American Charitable Foundation Ltd, a charity registered in both the US and UK. A
dual citizen of the US and the UK, Stuart has lived in Europe for over 20 years.
Stuart Horwich Biography

14. Q&A