On behalf of Silver Tax Group posted in Offshore Accounts on Wednesday, May 10, 2017.
We have often spoken about the difficulties taxpayers face concerning compliance with offshore income reporting requirements. This includes significant enforcement of regulations contained under the Foreign Account Tax Compliance Act (FATCA). The reporting requirements under FATCA are stringent.
Not report certain foreign income
Sometimes, however, tax authorities provide foreign asset holders a break. A recent IRS announcement concerns the foreign earned income exclusion. Use of such exclusion provides taxpayers an opportunity to not report certain foreign income on their filings.
When a resident alien or U.S. citizen lives abroad, income earned worldwide generally receives tax treatment. However, under the IRS announcement, it is possible to exclude significant amounts of income “up to an amount of your foreign earnings” while taking adjustments for inflation. For the year 2015, this amount was as much as $100,800.
Per this IRS announcement, you are also able to exclude from your income “the value of meals and lodging provided to you by your employer.” The IRS provides guidance regarding such exclusions in prior publications. And payments pertaining to services in particular combat zones may also be excludable from reported income.
Having a tax layer by your side
For our Michigan readers, it is important that they know the facts before excluding any foreign income. We must reiterate what we have said before: the rules pertaining to foreign income and assets are extremely complex. The failure to comply with such rules can lead to bank levees, wage garnishments, seizure of assets and jail time.
For this reason, please consider speaking to an experienced tax attorney whenever you have concerns about reporting of foreign income. Such guidance may prevent closer scrutiny of your tax filings by the IRS.