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A single member LLC is considered a “disregarded entity” for U.S. tax purposes, and accordingly its operations are reported on the member’s individual tax return. Where a single member LLC is owned by a non U.S. person or entity, new regulation 301.7701-2(c)(2)(vi)(A) classifies these entities as corporations. This triggers Internal Revenue Code section 6038A under which, effective for tax years ending after 2016, Form 5472 must be filed timely each year to report transactions with foreign owners, even if a tax return is not required. Failure to file form 5472 can result in a penalty of $10,000 per occurrence. Let’s examine how this new rule impacts a SMLLC directly owned by a ‘US person”

Do you have any other USA source income or tax withholding in the current year? Has a US payer, such as a casino, a bank or financial institution withheld tax on payments to you (such as interest, dividends or winnings and possibly issued you a Form 1042-S or Form 1099)? In many cases the US payer over-withholds because you’re often entitled to a treaty benefit of a lower tax rate You can claim a refund of that over-withholding on a tax return (our office prepares such returns). You're in the above situation and you're already annually filing a US return to report US property rental income/loss or sale income/loss? Combine your reporting onto the same return as your rental income return. (ou

Why is basis of gift reported on 709? The form is trying to determine the Adjusted Basis (purchase price plus improvements minus adjustments such as depreciation) vs the Fair Market Value on the date of the gift. Recipients generally are not entitled to a stepped up basis in the gift. To figure out the basis of property you receive as a gift, you must know three amounts: The adjusted cost basis to the donor just before the donor made the gift to you. The fair market value (FMV) at the time the donor made the gift. The amount of any gift tax paid on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. If the FMV of the property at the time of the gift is less than the d

IRS offers two higher-education tax credits. The American Opportunity Tax Credit provides up to $2,500 worth of credit for each student, 40% of which is refundable. The credit is equal to 100% of the first $2,000 of college tuition and qualified expenses and 25% of the next $2,000. The AOTC only applies to the first four years of post-secondary education. The Lifetime Learning Credit only provides a maximum $2,000 of credit (20% of up to $10,000 of eligible expenses) per family. None of it is refundable, meaning it can only be used to offset the taxpayer’s tax liability, and any additional credit amount is lost. Can tuition payments to a foreign university, say in Canada, qualify for the edu

Does a Canadian or American need a driver’s license number to file an IRS 1040 or state income tax return? For Canadians while the underlying reason for needing one is moot in most cases, the tax preparation software is foremost designed with American taxpayers in mind. Thus, tax software will ask in the general profile set-up for a driver’s license number and will require that input if it is requested by a state in which a taxpayer is filing a return. Thus, in many cases, the way to make the e-file process the simplest in preventing e-file rejection errors and making the e-file set-up easier, is to provide one’s Canadian (or foreign country) driver’s license including the license number an

https://www.cbc.ca/news/politics/taxation-canada-u-s-irs-1.4025880 https://globalnews.ca/news/3309306/u-s-sues-vancouver-dual-citizen-for-over-1m-for-not-reporting-accounts/ The U.S. Justice Department is suing a Canadian resident for the equivalent of $1.1 million Cdn, for failure to file FBAR. He did file his income tax returns with IRS. He prepared his own U.S. tax returns (omitting the FBARs), something he now regrets.“Don’t file your own taxes,” he says. “Make sure if you’re living in Canada, that you’re hiring a professional. If you don’t cross all your Ts and dot all your Is, they will find some way to mess you.” https://www.courtlistener.com/opinion/4416987/dewees-v-united-states/ ht

New Jersey new budeget legislation provides for a new amnesty program for 2009-2017 tax liabilities: Period to participate: The Division of Taxation will announce a ninety-day period for taxpayers to participate in the amnesty. The period to enter the amnesty program will end on or before January 15, 2019. Term: For taxes due on and after February 1, 2009, but prior to September 1, 2017 Interest relief: 50%. Penalty relief: No late payment penalty, late filing penalty, cost of collection, delinquency penalty, or recovery fee

Because our practice is located outside the USA in Toronto Canada, we see many return refund claims of over-withholding amounts such as on real property sales (FIRPTA), foreign partner of USA partnership (8805), USA casino or financial institution (1042-S) and the like. It is imperative for the taxpayer to ensure and check with and about the withholding agent that proper withholding was made and remitted by the withholding agent. In such case, the IRS record of withheld amount should match the return refund claim amount and the process is smooth. When, however, the withholding agent doesn’t remit the correct withholding amount to IRS or other taxing authority (such as a state when a non-resi

Form 8938 serves a different purpose than FBAR. The purpose of Form 8938 is to facilitate compliance with FATCA and is part of the tax return, while the FBAR was designed to aid in law enforcement. FBARs can be and are shared among governmental agencies and are used primarily by the Treasury Department's Financial Crimes Enforcement Network to track and combat international money laundering. People often get nervous when 'double-counting' money on FBAR when funds have been transferred between accounts, when there should generally not be such concern since it's not a taxation reporting. Form 8938 is designed to be used by the Internal Revenue Service for combating international tax evasion. T

FOREIGN ENFORCEMENT QUESTIONNAIRE – SSA 7161, SSA 7162 The Social Security Administration contacts beneficiaries outside the United States annually or biennially to verify their current status if they have a foreign address on record. The purpose of the FEQ is to determine if benefits should be deducted, suspended, or terminated. SSNs ending in 00-49 are sent questionnaires in even numbered years (e.g. 2014, 2016, 2018) SSNs ending in 50-99 are sent questionnaires in odd numbered years (e.g. 2015, 2017, 2019) SSA-7162is for beneficiaries who are their own rep payee. SSA-7161is for beneficiaries who have a rep payee. The rep payee is responsible for completing it. Don't let this horror story

If a Canadian resident seeks to invest in the USA either alone or in partnership with a US citizen or entity, what tax structures may work best? LLP may work if formed prior to April 26, 2017 due to “administrative grandfathering” CRA granted to Canadian taxpayers with investments in US Limited Liability Limited Partnerships (LLLPs) and US Limited Liability Partnerships (LLPs). LP can be a solution but US investors often seek corporate protection not provided by an LP. There is no one-answer-fits-all as there are numerous moving pieces and variables - such as whether US estate tax is an applicable concern. Some planning structures involve trusts, for some scenarios using a trust makes no sen