Here is some additional useful information to plan for year-end.
Stamp Out Tax Season Stress!
Are you ready for tax time? There are a couple of steps you can take now to alleviate some of the stress of filing your return. Plan to get organized early. Begin by putting together a tax folder with monthly pay statements (W-2’s if any) from your employer, 1099s for other income you may have earned, bank and other financial statements and receipts for things like foreign taxes paid and charitable donations. A helpful video from the American Institute of CPAs offers more information on the best ways to get ready now and throughout the year.
Affordable Care Act and “Obamacare”
Do you have “minimum essential health coverage” or qualify for one of the exemptions? US citizens and green card holders living abroad are covered by the new Obamacare law and are also subject to the same requirements as those in the US. However, individuals may be exempt if they meet certain requirements. One exemption is having a “tax home” in a foreign country and qualifying under the physical presence test or bona fide residence test claiming the foreign earned income exclusion. More information can be found on the American Citizens Abroad website: https://americansabroad.org/issues/healthcare/americans-abroad-and-affordable-care-act/
The Affordable Care Act also added a 3.8% net investment income tax that became effective in 2013. The investment income subject to the tax is broad – including interest, dividends, capital gains, rental and royalty income, non-qualified annuities and businesses that are considered “passive activities.” This tax applies to single filers with modified adjusted gross income (AGI) of more than $200,000 and joint filers whose modified AGI exceeds $250,000. Foreign tax credits cannot offset this tax so there is a possibility that taxpayers who do not generally pay tax back to the US will still have to pay and possibly incur penalties for late payment.
Got Foreign Assets? FBAR May Apply to You
Are you aware of the nature of all your investments, domestic and international? Do you know if you have foreign accounts with an aggregate value higher than $10,000 at any time during the calendar year? U.S. taxpayers (including individuals and business entities) are required to report on foreign assets or investments they hold in offshore accounts. This may also include signature authority of a foreign account. Under the Bank Secrecy Act, you may be required to e-file what is known as the FBAR directly with the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department. Please be sure to keep record of any accounts opened or closed and save all your bank statements.
Conquer Your Capital Gains Concerns!
Do you take your cost basis into account when it’s time to sell an asset or investment? When you sell an asset or investment, your cost basis—or the amount you originally paid for it—is subtracted from the sales price to determine your capital gain on the sale. If your last tax return included some surprises on capital gains you incurred last year—and the related taxes—then you’re probably aware of the need to plan ahead when buying or selling assets or investments. It’s even more important in light of some recent tax law changes, including the new tax on net investment income.
If you have additional questions or would like to discuss further, please contact us today.
The information contained herein serves as a guideline and is only provided for general informational purposes. It should not be considered as offering any tax advice. Since tax laws are complex, you should consult your tax advisor on specific issues related to your tax situation.