Jane Mepham, CFP (00:02.552)

You're a foreign executive coming to the U.S. on the L1 visa. Do you know the three most important considerations?

The Two Types Of L1 Visas

L1 visas are granted to foreign executives or managers coming to the U.S., which means there's a foreign office or foreign company and they have a U.S. branch and they send these executives or managers or specialized workers to come and work in that office.

They're classified into two. L1A is the manager or the executive officer, and then L1B is an individual with specialized skills who is still coming to work in the office.

Now, in terms of the validity of these visas, you initially get it for three years, but the L1A can be extended for up to seven and the L1B can be extended up to five years.

And this is critical for what we are going to address. But if you have, legal or immigration questions around U.S., those are best addressed by an immigration lawyer.

But now let's talk about the three most important financial and tax considerations if you're coming to the U.S. on the L1 visa.

Manasa Nadig, EA (01:27.599)

Yes, yes, yes. Considering that a foreign executive who is here on an L1 visa can be here for a pretty long period of time, these are three broad areas of what we think you should consider. And these are really important to know.

The first is the U.S. income tax filing and compliance.

Then the compliance with foreign financial assets and other assets.

And then lastly, but not least, are U.S. estate and gift tax considerations.

So as always, let me jump right into the U.S. income tax filing and compliance part of it, which...

As you know, when you become a tax resident in the U.S., you must declare your worldwide income and financial assets. And as an L1 visa holder, you are subject to that as well. So what are the considerations of that?

Timing your arrival, that can make a difference. If you're coming in the beginning of the year, then you have to take into account what that foreign income and assets are for the entire year versus towards the end. Doing pre-immigration tax planning would mean working with advisors on both sides, both in the U.S. and in the country where you're from, and maybe looking into investment reorganizations.

And if you're married and if your spouse is going to come here with you to the U.S. or not,they are coming to the U.S., then they are allowed to work here on a dependent visa.

But if they are not, then you have to factor in their status in the for tax planning. And you should always think about what could change if your non-U.S. spouse at some point might join you in the U.S.. So keep all of those big picture things in mind.

Manasa Nadig, EA (03:44.082)

So we did timing, pre-immigration tax planning, the spouse. And another important thing to consider when you're looking at timing your arrival is your substantial presence test. And we've talked about this in a different episode and we link it in our notes. Meeting this test may mean filing a Form 1040 and disclosing your worldwide income for the entire year.

Additionally, to determine if you are eligible for a closer connection exception, consider whether you are in the U.S. for less than 183 days and maintain a tax home elsewhere. A dual status filing based on the number of days you're in the U.S. versus the days you were still abroad as a non-resident alien.

And always looking at the treaty or the double tax avoidance agreement between the country you're a resident of and the U.S. to see what clauses are available to you to maybe mitigate some of all of these or help you with your tax planning. That was the first thing to consider.

Foreign Financial And Other Overseas Assets

Jane Mepham, CFP (05:10.074)

You've addressed a lot in this one thing. So, what I'm going to do is jump straight into point number two. This includes your foreign financial assets and other assets located overseas. You've already alluded to the fact that once you become a U.S. tax resident, you're subject to U.S. taxation in disclosure. And so, the thing you want to think about regarding your foreign assets is, one, do you have bank accounts? Check balances.

Do you have accounts where you just have signatory authority in FBAR and FATCA thresholds?

We joke a lot about you're in the U.S., your cousin adds you to a bank account somewhere overseas and right there, you need to start reporting that account.

So it's getting very clear on what your assets are. Check on your retirement account. And actually, this is both here and overseas. So you want to understand access.

On the U.S. side, you're thinking more about what your goal is, your end goal, as you think about what accounts you want to get into, what are the rollover options, and of course, the U.S. tax treatment.

Again, a lot of this, I know it sounds like I'm confusing the two, but it's both your overseas accounts and your U.S. accounts. Think about your investments.

You want to review your investment account. And the most significant danger of consideration on this is what we call PFIC, Passive Foreign Investment Companies or accounts.

So if you end up with a PIFIC and pretty much almost all foreign-based or foreign-registered mutual funds fall under this, your tax filing that Manasa had just talked about at the beginning is going to be a lot more complicated.

So, you want to examine those accounts, find out what's going to fall under PFIC filing, and come up with a game plan for treating this. And this, of course, includes even things like your foreign insurance, right?.

You need to think about your digital assets, your crypto, what are the reporting and taxation requirements again, because they are overseas and you're expected to report everything.

Jane Mepham, CFP (07:32.638)

If your company is going to be giving you equity compensation, so things like RSU stock options, you really need to be thinking about taxation and the taxation implications.

And again, how they end up being treated depends on how long you're going to be here. I know it's not an easy thing to figure out as you're arriving, but also where you're going to go when you leave and when these things vest. So, there's definitely a lot to be thinking about.

If you hold business interests in foreign countries or companies, you should consider this when making decisions. We need to think about your foreign income. And overall, the goal is we need to plan to be doing not only your tax returns on foreign income, which needs to be reported in the U.S., but most likely you'll need to continue filing your taxes in the foreign country.

We obviously cannot file foreign taxes for you, but the goal is to take all that into consideration. Start putting a plan together for how your overseas CPA or EA will work with your U.S. cross-border tax professional, because it's really the only way to consolidate all this under one roof and streamline it. Manasa, before we jump into three, anything else you want to add to that?

Manasa Nadig, EA (08:59.417)

Yes, yes. The foreign financial asset compliance, and we keep talking about this in our episodes, non-compliance or failure to report these come with humongous U.S. penalties. Just dealing with that can become quite a cumbersome affair. So, understand what

Jane Mepham, CFP (09:00.504)

Okay.

Manasa Nadig, EA (09:28.845)

Jane just talked about, and all of those assets that you have know that they have to be declared if the amounts are past the threshold. Working with professionals on both sides of the border is an extremely important thing to remember. Jane and I just cannot reiterate that enough.

U.S. Estate And Gift Tax Implications

So that being said, you moving on to the next biggest implication or aspect of moving to the U.S. as a foreign executive, we talk to wealthy or high net worth executives moving to the U.S. on L1 visas a lot. And we understand that you've already probably have a big financial footprint in the country where you are.

You have been living and working there for, you know, for a number of years. So we expect that you will have a high net worth investment. Going back to, you know, the aspect of planning for how many years you will be in the U.S., what your future plans out that determines our next part or the next big part, which is the U.S. estate and gift tax implications. So gifting can kind of take on its own ramifications. If you are getting a gift from a non-U.S. person, going over certain thresholds is reportable. Or if you're giving gifts to non-U.S. persons, then that might entail gift reporting or gift taxes also. So think about that.

Think about maybe setting up what are called blocker entities to organize your foreign assets and protect them from U.S. taxation and compliance. There is such a thing called a step-up in basis. And we won't go into it too much because that in itself is an entire episode.

Manasa Nadig, EA (11:52.942)

But step up in basis is an option that you should explore for your foreign investments. And Jane already covered this and I will say this briefly.

If you have holdings in foreign entities, then that needs compliance and declarations. So look at that and see what you want to do with it, where it's going, and how big a part of your tax and financial plan your business holding is going to be.

So you may need to plan for that as well. And of course, the covered expatriate status, if you're going to switch to a green card down the road, all of that comes into the long-term goals and plans on whether you want to stay here in the U.S..or go back to your country down the road and how much of a footprint you already have in the other country and what you want to keep really.

That's kind of what is something that you have to keep in mind no matter what you do, of course, but it gets to be really important if you are a high net worth foreign executive coming to the U.S. on an L1 visa. Anything else you would like to add, Jane?

Jane Mepham, CFP (13:17.71)

So we have those three points. I think the bottom line is, before you actually get to the U.S., work with a tax advisor, a financial planner, a cross-border financial planner, a cross-border tax advisor to get all these things into place. Because if you wait until you get here, it might be too late for some of it.

But if you're already here, let's make sure we fix these three things by addressing those three key points. I think in terms of that, we've addressed the three main considerations. So yeah, I think I'm good there.

Manasa Nadig, EA (13:59.895)

All right, so thank you dear listener for tuning in and listening to our episode. Don't forget to subscribe for more insights. We have a newsletter, we'll send it to you as soon as a new episode drops. So until next time, stay informed and be prepared. Thanks for listening, bye.

Jane Mepham, CFP (00:03.114)

Do you know what a tax treaty is? And do you know how this impacts your taxation? By the end of this short guide, you'll know exactly what it is, how to use it, and what it does to your finances.

Manasa Nadig, EA (00:20.708)

Yes, so what is a tax treaty? A tax treaty is a bilateral agreement, which means a two-party agreement, basically a double tax avoidance agreement that resolves potential double taxation of citizens in two countries.

So what I mean is when an individual or a business invests in foreign country or moves to a foreign country and earns money in that country, the issue of which country should tax that investor's earnings or investment income may arise. So, then this tax treaty provides a blueprint of which country can tax that income.

A treaty could also cover income taxes, estate and gift taxes, and social security benefits.

And interestingly, there are some so-called tax havens which may not have any tax treaties with other countries, which kind of sounds, you know, that's why it would be called a tax haven.

Anyway, so the purpose of a tax treaty is that It avoids double taxation of the same income by more than one country, of course.

But then it also tells you which country has the right to tax that income. And this could be based on the source of the income and or the residency of the person or the business earning that income.

When Does A Tax Treaty Come Into Play

So then. When does this come into play? Let's say there is income in another country and you are resident in that country. Now the country that you're resident in wants to tax that income. So, what would you do? You would go to the articles on the tax treaty, which your country has with the income from the other country and

Manasa Nadig, EA (02:42.0)

See if any of those articles address the type of income that you have and help you mitigate double taxation.

Let me give you an example. So let's say that you used to live in the US, you were on a non-immigrant work visa and you had a 401k and some brokerage accounts. And let's say you're done with your work visa and you decided to go back to the country where you're from, let's say Spain. So we know that the US and Spain have a tax treaty with each other. So, once you're back in Spain, you still have the US brokerage account and it's earning interest and dividends. So now, because you are a citizen of Spain and you are a tax resident of Spain, Spain wants to tax your interest and dividends.

And because now this is US source income, the US also wants to tax that income too. You would look at the treaty to see if there is some kind of mitigation available.

There are many court cases that have been fought in the courts, and some of them have gone on the side of the taxpayer.

Basically, these court cases kind of give you guidance on how to interpret the tax treaties. And I’m going to kind of leave it at that, but sometimes you have to look at both the tax treaty and the court case to get more solid guidance on the income that you’re looking at for that country.

Jane Mepham, CFP (04:28.242)

That’s a fantastic way of addressing this. One thing I do want to call out about these tax treaties, every tax treaty has what's called a saving clause. And the reason I bring it, because people will see the saving clause and assume it means, I'm going to save some money. But actually, no. When you look at the saving clause, the savings clause, what that means is that your country, for example, the US reserves the right to tax its own residents and citizens as if the tax treaty was not in place.

So if the saving clause comes into being, it's not a good thing, but there's not much you can do. Please be aware that you will be taxed as if the tax treaty did not exist.

Which Countries Have Tax Treaties With The U.S.?

And so the next question is, does my country have a tax treaty with the US?

I don't know, but here's what I'm going to tell you. There are approximately 70 countries that have income tax treaties with the U.S., and I think what we're going to do is we'll link a document or a link that tells you exactly what countries are on this list. And again,

remember the tax treaties work on both sides, right? Now, on top of that, there are two other types of agreements that Manasa has mentioned or alluded to.

Gift & Estate Tax Treaties

One is a separate estate or gift tax treaty. There are approximately 15 of these. So, there's about 15 countries that have this estate and or give tax treaties with the U.S. And when this comes into play I think the best use case for this is let's say you're an NRA, you're a foreign national resident, you already left the U.S., but you've left what's called US situs assets.

If something happens to you, these assets would be taxed at 40 % and only 60K or $60,000 is exempt from this taxation. Now, this is in contrast to a U.S. tax resident who now with the passage of the latest tax bill has up to $15 million that could be exempt.

This 60K, you can see how that would impact you. And so if there's an estate end or gift tax treaty with the U.S., the treaty will help mitigate some of that.

As part of your estate planning, you should definitely look into that.

Totalization Agreements

And then there's a second type, what we call totalization agreements. There are approximately 30 countries that have totalization agreements with the US.

And the whole idea with these totalization agreements is to eliminate social security coverage and taxation. They ensure that you're not paying social security on the same income to two different countries. So that does help to keep some of your income back.

So if you end up, let's say, working in a foreign country, check to see if your country is one of the 30 that has a totalization agreement with the U.S.

Manasa Nadig, EA (07:46.36)

Oh, yes, yes. And you know, the whole thing comes together when you're moving from one country to another or you'll have income in another country, but you're a resident of a different country like we talked about.

But all of this comes together when you have to plan on how to mitigate double taxation. And it is important at that point to work with somebody who is very familiar with how these tax treaties work.

And you make sure that you make the right decisions, and maybe save taxes, or maybe not, because the savings clause has basically caught that.

So be careful when you're working with tax treaties if you are doing your own taxes, which I would not recommend. Let's wrap this up, Jane. What do you think?

Jane Mepham, CFP (08:42.966)

I'm happy with this,

Manasa Nadig, EA (08:46.058)

Okay cool, so thanks for hanging out with us dear listener and well, improving your English. So please keep coming back for more and subscribe to our newsletter. Thank you, bye.

What Is NIIT (Net Investment Income Tax)?

Jane Mepham, CFP®  

And we are back with one of our favorite formats, “a shortie”, in which in 10 minutes or less, we take a term used in used in the cross-border finance/tax space and kind of tell you at a very high level what it is.

So, the other day I was reviewing one of my clients' returns, let's call him John, and John had a really great income and he noticed as I started explaining that he had been charged 3.8 % tax on some income. And so, as I explained to him what this is my thought process was there are quite a few people who may not be aware of it.

So, in today's shortie we're going to tell you or explain what the Net Investment Income Tax is. Manasa, want to jump into it?

The Source Of NIIT

Manasa Nadig, EA

Yeah, it is pronounced NIIT  by the way. Because we know we love acronyms. So, the net investment income tax basically depends on two conditions.

-           One is that you have investment income and then your MAGI or the Modified Adjusted Gross Income exceeds a certain amount.

The net investment income tax was imposed by section 1411 of the Internal Revenue Code. And this applies a rate of 3.8 % tax on certain investment income of individuals, estates, and trusts that have income over the statutory thresholds. Now, the statutory thresholds are based on your filing status.

So, if you're married filing jointly, or you're a surviving spouse, it's $250,000. If you're single or married filing separately, it's $125,000, and all others are $200,000. So that's when the 3.8 % NIT is applied to your investment income. And basically, you should also note that even if you are someone who is exempt from Medicare taxes, you may still be subject to the NIIT because remember the NIIT is based on investment income and your MAGI being over the thresholds we just talked about.

What Contributes To NIIT

Jane Mepham, CFP®

Okay, so let's define what this net investment income tax itself is. So, in general, investment income includes, but is not limited to, you know, interest, dividends that you most likely see in your brokerage account, passive rental, and royalty income. What's the other one? Non-qualified annuities, income from businesses involved in the trading of financial instruments or commodities.

Manasa Nadig, EA

Good idea.

Jane Mepham, CFP®

Businesses that are passive activities to the taxpayer, and I'm sure Manasa can give you the exact code for that. Capital gains from the sale of stocks, mutual funds, and distributions from mutual funds. Again, this is where we see a lot of it. Sale of investment of real estate, including, which is interesting, the sale of a second home, but not the primary residence.

Sale of interest on partnerships and c-corps to the extent that you're the passive owner. And the way they calculate it, of course, this is higher, right? Your investment income is reduced by sudden expenses properly allocable years to the income. I had to think of that word.

And so then the question is what is not net investment income, Manasa?

Income Not Included In NIIT

Manasa Nadig, EA (04:04)

Yeah, so all of the income that is not investment income is basically, know, like your wages, your unemployment income, the operating income that you have from your non passive businesses, that is the businesses that in which you are an active participant in, of course, your social security benefits, your tax exempt interest, any self-employment income.

And there are some vague stuff in there, like Alaska permanent fund dividends and distributions from some qualified plans, et cetera. So those are not net investment income.

So you do not pay the 3.8 % net investment tax on that.

And so that brings us to how do you report and pay the net investment income tax? So all of this, the net investment income, and your MAGI is looked at on form 8960. And if all of these rules apply to you, then you calculate the 3.8 % tax and it flows to your form 1040 and the 8960 is attached to the1040. And basically you pay this tax.

The same for estates and trusts, but for them, It's calculated on form 1041, whereas the individuals, it's form 1040, of course. And you are also subject to estimated tax provisions if you are subject to this, which is if you fall short on paying your net investment income tax, there will be an income tax penalty that you might end up paying.

So make sure that you're looking at this if that applies to you.

Jane Mepham, CFP® (05:38)

Okay.

How Does NIIT Apply In A Cross-border Context

Manasa Nadig, EA (05:59)

Now, coming to the most interesting part of this is how does the NIIT apply in the cross-border context? So this has been something that we look at on a constant basis. Now, you have a client who's an expat who lives overseas or who lives in the US and has a large amount of foreign income, which comes from investments.

Then we have the net investment income tax apply to that investment income. Now, these same people might also be filing taxes in the other country, but then the income taxes that they are paying in the other country cannot be claimed as a foreign tax credit against the net.

Court Cases and NIIT

Having said that though, there have been recent court cases which have looked at this and for specific countries, which are France and Canada right now, and we link these court cases in our episode notes, they have allowed the tax paid in that country in France and in Canada to be claimed against the NIIT

Jane Mepham, CFP® (07:05)

Yep.

Manasa Nadig, EA (07:21)

On the US tax return. So if you're a financial planner or a tax preparer who sees this, then be aware that this is a possibility and is available. But for the most part, until we have more clarification on this for other countries, foreign tax credit is not allowed against the NIIT.

 So, that's more or less everything about the net investment income tax, Jane. Do you have anything to add?

Jane Mepham, CFP® (07:52)

The court cases are interesting and it might be interesting one of these days to just take a bunch of those and kind of talk through them, kind of nerd out on them. But I think you've addressed the most important aspect of it, the two conditions. And I think with that, we hopefully still under 10 minutes we can bring it to a close.

Manasa Nadig, EA (08:12)

Absolutely. one thing that I would like to add here is if you know that this is something that you're subject to and it's a possibility for you and you do not want to have the hassle of paying estimated taxes every quarter and you have a W-2, just increase your withholdings to cover for that. So yes, here's what we conclude the Shortie episode.

Jane Mepham, CFP® (08:32)

Great idea.

Manasa Nadig, EA (08:42)

Thank you so much for listening. If you like this episode and you want to hear more of our shorties, where we distill all of the complex stuff into quote-unquote plain English, please make sure to go on our YouTube and catch one of our episodes there. The handle is the International Money Cafe. So youtube.com forward slash at the International Money Cafe. Thank you so much for listening.

What Is NIIT (Net Investment Income Tax)?

Jane Mepham, CFP®  

And we are back with one of our favorite formats, “a shortie”, in which in 10 minutes or less, we take a term used in used in the cross-border finance/tax space and kind of tell you at a very high level what it is.

So, the other day I was reviewing one of my clients' returns, let's call him John, and John had a really great income and he noticed as I started explaining that he had been charged 3.8 % tax on some income. And so, as I explained to him what this is my thought process was there are quite a few people who may not be aware of it.

So, in today's shortie we're going to tell you or explain what the Net Investment Income Tax is. Manasa, want to jump into it?

The Source Of NIIT

Manasa Nadig, EA

Yeah, it is pronounced NIIT  by the way. Because we know we love acronyms. So, the net investment income tax basically depends on two conditions.

-           One is that you have investment income and then your MAGI or the Modified Adjusted Gross Income exceeds a certain amount.

The net investment income tax was imposed by section 1411 of the Internal Revenue Code. And this applies a rate of 3.8 % tax on certain investment income of individuals, estates, and trusts that have income over the statutory thresholds. Now, the statutory thresholds are based on your filing status.

So, if you're married filing jointly, or you're a surviving spouse, it's $250,000. If you're single or married filing separately, it's $125,000, and all others are $200,000. So that's when the 3.8 % NIT is applied to your investment income. And basically, you should also note that even if you are someone who is exempt from Medicare taxes, you may still be subject to the NIIT because remember the NIIT is based on investment income and your MAGI being over the thresholds we just talked about.

What Contributes To NIIT

Jane Mepham, CFP®

Okay, so let's define what this net investment income tax itself is. So, in general, investment income includes, but is not limited to, you know, interest, dividends that you most likely see in your brokerage account, passive rental, and royalty income. What's the other one? Non-qualified annuities, income from businesses involved in the trading of financial instruments or commodities.

Manasa Nadig, EA

Good idea.

Jane Mepham, CFP®

Businesses that are passive activities to the taxpayer, and I'm sure Manasa can give you the exact code for that. Capital gains from the sale of stocks, mutual funds, and distributions from mutual funds. Again, this is where we see a lot of it. Sale of investment of real estate, including, which is interesting, the sale of a second home, but not the primary residence.

Sale of interest on partnerships and c-corps to the extent that you're the passive owner. And the way they calculate it, of course, this is higher, right? Your investment income is reduced by sudden expenses properly allocable years to the income. I had to think of that word.

And so then the question is what is not net investment income, Manasa?

Income Not Included In NIIT

Manasa Nadig, EA (04:04)

Yeah, so all of the income that is not investment income is basically, know, like your wages, your unemployment income, the operating income that you have from your non passive businesses, that is the businesses that in which you are an active participant in, of course, your social security benefits, your tax exempt interest, any self-employment income.

And there are some vague stuff in there, like Alaska permanent fund dividends and distributions from some qualified plans, et cetera. So those are not net investment income.

So you do not pay the 3.8 % net investment tax on that.

And so that brings us to how do you report and pay the net investment income tax? So all of this, the net investment income, and your MAGI is looked at on form 8960. And if all of these rules apply to you, then you calculate the 3.8 % tax and it flows to your form 1040 and the 8960 is attached to the1040. And basically you pay this tax.

The same for estates and trusts, but for them, It's calculated on form 1041, whereas the individuals, it's form 1040, of course. And you are also subject to estimated tax provisions if you are subject to this, which is if you fall short on paying your net investment income tax, there will be an income tax penalty that you might end up paying.

So make sure that you're looking at this if that applies to you.

Jane Mepham, CFP® (05:38)

Okay.

How Does NIIT Apply In A Cross-border Context

Manasa Nadig, EA (05:59)

Now, coming to the most interesting part of this is how does the NIIT apply in the cross-border context? So this has been something that we look at on a constant basis. Now, you have a client who's an expat who lives overseas or who lives in the US and has a large amount of foreign income, which comes from investments.

Then we have the net investment income tax apply to that investment income. Now, these same people might also be filing taxes in the other country, but then the income taxes that they are paying in the other country cannot be claimed as a foreign tax credit against the net.

Court Cases and NIIT

Having said that though, there have been recent court cases which have looked at this and for specific countries, which are France and Canada right now, and we link these court cases in our episode notes, they have allowed the tax paid in that country in France and in Canada to be claimed against the NIIT

Jane Mepham, CFP® (07:05)

Yep.

Manasa Nadig, EA (07:21)

On the US tax return. So if you're a financial planner or a tax preparer who sees this, then be aware that this is a possibility and is available. But for the most part, until we have more clarification on this for other countries, foreign tax credit is not allowed against the NIIT.

 So, that's more or less everything about the net investment income tax, Jane. Do you have anything to add?

Jane Mepham, CFP® (07:52)

The court cases are interesting and it might be interesting one of these days to just take a bunch of those and kind of talk through them, kind of nerd out on them. But I think you've addressed the most important aspect of it, the two conditions. And I think with that, we hopefully still under 10 minutes we can bring it to a close.

Manasa Nadig, EA (08:12)

Absolutely. one thing that I would like to add here is if you know that this is something that you're subject to and it's a possibility for you and you do not want to have the hassle of paying estimated taxes every quarter and you have a W-2, just increase your withholdings to cover for that. So yes, here's what we conclude the Shortie episode.

Jane Mepham, CFP® (08:32)

Great idea.

Manasa Nadig, EA (08:42)

Thank you so much for listening. If you like this episode and you want to hear more of our shorties, where we distill all of the complex stuff into quote-unquote plain English, please make sure to go on our YouTube and catch one of our episodes there. The handle is the International Money Cafe. So youtube.com forward slash at the International Money Cafe. Thank you so much for listening.

Things are bad in the U.S., should I move my money overseas?

We explore this question that has come up a couple of times, due to the economic uncertainty. 

We include tariffs, market volatility, practicalities of funds transfer, and financial goals as items to take into consideration.

Key Takeaways

• Moving money overseas can be complicated and requires an understanding of regulations.

• Exchange rates and compliance requirements are critical factors to consider.

• Assess the underlying reasons for wanting to move money.

• Financial planning should align with personal goals and timelines, maintain open communication with your financial advisor.

• Investing in diversified portfolios can mitigate risks. 
  
  Episode Links & Resources

• Where to Save Short-Term Money

• Ep 34: What Is English For FBAR

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

How long do you keep your tax records?

A shortie that packs a punch. We discuss how long you should retain your tax and other financial records. 

We explore the statute of limitations for tax records, the importance of supporting documents, and special considerations for non-residents and property sales.  

 Some takeaways

• Keep copies of all your tax records for as long as necessary.

• The statute of limitations for tax records is three years for refunds.

• If you never filed a tax return, keep records indefinitely.

• Non-residents should hold onto property sale records until the issue is resolved.

• Employment records should be kept until a Social Security application is submitted.

And a whole lot more.  

We emphasize the importance of maintaining accurate records to ensure compliance with tax regulations and protect against potential issues with the IRS.

Episode Links & Resources

• Ep 11: Navigating U.S. Taxes

• Ep 40: Avoid These Blunders With Your Cross-Border Taxes

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

Your uncle just sent you a ton of money from overseas - what are the tax implications?

We discuss the complexities of gift taxes, particularly for individuals receiving gifts from overseas.

We explore the annual gift tax exclusion, reporting requirements for large gifts, and the implications of receiving money from non-U.S. persons.

The conversation also touches on exceptions to reporting requirements and the potential issues surrounding covered expatriates. 

We emphasize the importance of transparency and consulting with experts to navigate these financial matters effectively.

Some Key Takeaways

• Gifts over $100,000 must be reported on Form 3520.

• Receiving money from non-U.S. persons (outside the US) generally has no tax implications.

• The reporting threshold for gifts from foreign entities is around $17,000.

• IRS penalties for non-filing can be significant, up to 25%.

• Late filing of Form 3520 may allow for a reasonable cause statement.

• Exceptions exist for qualified tuition and medical payments.

• Consulting with financial experts is crucial when receiving large gifts.

• Understanding covered expatriate status is important for tax implications.

Episode Links & Resources

• Ep 08: What Is English For "Domicile?"

• Ep 18: What Is English For "Situs?"

• Ep 22: What Is English For "Covered Expatriate?"

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

IRS expects you to report your overseas or foreign assets when you file taxes if you are a US tax resident (US citizen, Green card holder, or you meet the substantial presence test).

Many people are unaware of the requirements, and the IRS seems to acknowledge this.

IRS has come up with an amnesty program, which allows you to catch up and be tax compliant if you haven't reported your overseas assets.

In this episode, we discuss the process, known as "Streamlined Filing," and explore the penalties involved, if any, as well as the proper steps to follow.


Episode Links & Resources

• Ep 13: Mitigating Double Taxation

• Ep 04: Substantial Presence Test (SPT)

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

In this heartfelt episode,  we celebrate Mother's Day by reflecting on the lessons learned from our mothers, particularly in the context of financial education and cultural influences.

We discuss the unique challenges faced by immigrant mothers in raising children in a new country, the importance of open conversations about money, and the role of mentorship in empowering the next generation. 

The conversation emphasizes the universal values of motherhood and the significance of sharing knowledge across generations.

Some key takeaways

• Lessons from our mothers often include important financial wisdom.

• Cultural influences can change the way we approach motherhood.

• Navigating parenting as immigrants presents unique challenges.

• Open conversations about money are crucial for financial literacy.

• Adapting financial lessons for the next generation is essential.

Tune in to find out who is saving for their daughter's wedding, just like their mother did.


Episode Links & Resources

• My Mom Is Not Afraid To Talk About Money

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

If you'd like to work with us on your finances or taxes, check out the process 

How do you find a good financial planner?

We share personal experiences and insights on the importance of cultural sensitivity, qualifications, fee structures, and effective communication in financial advising.

These are the things you want your financial planner to have in addition to cross-border technical knowledge.

We emphasize the importance of advisors understanding their clients' unique backgrounds and financial goals, as well as the fiduciary responsibilities they hold.

This will help you find the best financial advisor for your specific situation.

Key Takeaways on finding the right advisor for your cross-border needs

• Look for cultural sensitivity

• Look for advisors with CFP certification for quality assurance.

• Understand the fee structure.

• Ensure their communication will help you understand complex financial concepts.

• Ensure they are a fiduciary - put your interests first.

• Agree on how you define financial success and much more.

Episode Links & Resources

• Ep 37: How To Find The Right Tax Pro For Your Cross-border Needs

• Ep 31 Five Important Financial Planning Questions For Foreign-Born Families

• A Prospect's First Visit - Nightmare Os The Start Of Something Beautiful

• Kitces: Navigating Challenges Investing For Nonimmigrant Visa Holders

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

If you'd like to work with us on your finances or taxes, check out the process 

There is a huge difference between the gift and estate tax. This is highly magnified based on your immigration status (U.S. residents and non-resident aliens (NRAs)).

We also explain the annual exclusion for gifts, the unified tax credit, and the importance of tax planning to navigate these complex tax laws.

The conversation highlights the need for careful planning to avoid significant tax liabilities, especially for non-resident aliens with U.S. assets. 

Some Key Takeaways

• A gift tax is applicable during the lifetime of the giver.

• The estate tax is assessed after a person's death.

• The annual exclusion allows gifting up to $19,000 without tax in 2025.

• Non-resident aliens have a much lower exemption of $60,000, while U.S. tax residents have $13.99 million - set to sunset in 2025.

• Planning is crucial to manage tax liabilities effectively.

• Understanding domicile is key for tax implications.

Future episodes will delve deeper into the tax and financial planning strategies that will help with the above.


Episode Links & Resources

• Ep 08: What Is English For "Domicile?"

• Ep 18: What Is English For "Situs?"

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

We discuss the concept of Birthright Citizenship, its historical context, and its implications for foreign nationals in the U.S.

The 14th Amendment defines it.

We explore the ongoing debate surrounding the potential removal of birthright citizenship. We delve into the responsibilities of U.S. citizenship (taxes), which are not being discussed.

We touch on the global perspective of citizenship and the importance of compliance with immigration and tax laws. 

Finally, we give you some practical tips if this situation impacts you, especially if you are on a work visa. 

You are going to need to rely on our super strength - the immigrant mindset to get through this.


Episode Links & Resources

• The Fourteenth Amendment

• Bonus Episode: Post Election  - Thoughts And Mitigating Concerns

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

We've seen a lot of mistakes made by individuals filing taxes, particularly focusing on immigrants, foreign nationals, and green card holders living overseas.

In today's Shortie, we list these critical mistakes, hoping you'll avoid making them.

They range from ignoring taxes, ignoring immigration status, forgetting to report overseas gifts, including foreign dependents, all the way to completing the backdoor Roth wrong. 

We also address those overseas with expired green cards who are ignoring their tax obligations.

If you find yourself in this situation, please contact a tax pro to help you rectify these issues and hopefully avoid what could be a huge tax penalty.

Onto the 10 mistakes. 

Episode Links & Resources

• Ep 34: What is English For "FBAR?"

• Ep 22: What Is English For "Covered Expatriate?"

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

We discuss the intricacies of Backdoor Roth IRAs, a popular strategy for high earners to contribute to Roth IRAs despite income limits.

We explore the mechanics of the Backdoor Roth and the Mega Backdoor Roth, including eligibility, contribution limits, and tax implications.

We also cover the importance of understanding 401k options, the pro rata rule, and key considerations for executing a Backdoor Roth conversion effectively. 

We address work visa considerations when looking to complete a back-door role or a direct contribution.

We help you think through whether this is for you or not based on your work visa, your country of origin, and where you are likely to be when you finally withdraw the money.

We finally address the biggest mistakes we see when people DIY backdoor roth and the tax preparation that comes after that.

Episode Links & Resources

• Ep 20: What Is English For "Custodial Accounts?".

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

There is more than one type of individual retirement account (IRA). In this episode, we focus on the different types, including Traditional, Roth, SEP, SIMPLE IRAs, and spousal IRAs.

We explore each type's tax advantages, eligibility, and implications, especially for individuals with cross-border considerations.

The conversation also covers important aspects such as distributions, rollovers, conversions, and the significance of consulting financial and tax advisors for personalized advice.

A Few Takeaways 

• An IRA is a tax-advantaged investment tool for retirement savings.

• Traditional IRAs allow for tax-deductible contributions under certain conditions.

• Roth IRAs are funded with after-tax dollars, allowing for tax-free growth.

• Cross-border implications are crucial for those on work visas.

• Consulting both financial planners and tax advisors is essential for effective retirement planning.

• Withdrawals from traditional IRAs are taxed as ordinary income.

Tune in for the rest of the details.

Episode Links & Resources

• Ep 20: What Is English For "Custodial Accounts?".

• Ep 23: Applying For Social Security From Abroad.

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

Tax season is around the corner. If you are looking for a new tax professional, we have you covered.

In today's episode, we are going to walk you through how you select a good tax professional, especially if you have cross-border needs or assets overseas. 

The ten items or tips to consider as you select your tax professionals. If your tax preparer meets these tips, you are likely in excellent hands. The tips range from 

• Checking the preparer's history for any disciplinary actions, to service fees, to electronic filing, and realistic expectations, amongst others.

We end the episode by explaining what to do if you see suspicious or abusive tax preparers. IRS is interested in hearing from you.

Episode Links & Resources

• Loving v. IRS: Treasury's Authority to Regulate Tax Return Preparers

• Circular 230 

• Watch Out For Unrealistic Expectations and Falsely Inflating Returns

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

We discuss Tax Identification Numbers (TINs). We have fun discovering what they are called in various countries.

TINs are nine-digit numbers assigned by the Internal Revenue Service (IRS) or the Social Security Administration (SSA) for tax reporting purposes.

We discuss the history of TINs and the introduction of the Individual Tax Identification Number (ITIN) in 1996.

We also explain the eligibility criteria for obtaining a Social Security Number (SSN) and the process of applying for an ITIN. We highlight the importance of TINs for filing taxes, claiming treaty benefits, and opening bank accounts.

We also mention the Employer Identification Number (EIN) used for business entities.
 
Episode Links & Resources

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

In Part 1 of this podcast, we discussed figuring out your "why", for wanting to retire abroad, the residency/visa requirements, and the practical aspects of moving overseas. 

In Part 2 of this episode, we answer specific tax and financial questions. Some examples of the questions (amongst others) that we answer here are: -

• Do I still need to file U.S. taxes when overseas, and what does that entail? What about State taxes?

• How do I access my retirement income from overseas? How do I get my RMDs?

• Will my custodian allow a foreign address? How do I transfer my funds from the U.S.?

• Should I roll over my 401k to a rollover IRA before I leave the U.S.?

• Will I have enough SS credits to claim social security from abroad?

• Should I buy a home overseas?

• What about healthcare expenses? How do I deal with that?

• Are there other countries you should consider besides the usual?

We discuss the FBAR (Foreign Bank Account Report) and why it is important to be aware of it.

It's a FORM that needs to be filed under the Bank Secrecy Act if you have a financial interest or signatory authority over a foreign financial account.

And the aggregate value of these accounts exceeds $10,000 at any time during the reporting year. The FBAR filing requirement applies to all types of financial accounts, not just bank accounts. 

Failure to file the FBAR can result in substantial penalties. 


Episode Links & Resources

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.

There has been an uptick in the number of people looking to retire overseas. In Part 1 of this episode, we discuss the essential considerations for the decision. 

We start by grouping those who want to move into the following groups 

• Those like us, who came to the US ages ago and are now retiring.

• Those who have worked overseas and now want to return

• Those who've only visited as tourists.

We explore the motivations behind such a decision, the importance of choosing the correct country, navigating visa and residency requirements, and the practical steps needed to prepare for the move.

Other topics that we cover here, amongst others, are:

• Maintaining connections and communication while living abroad.       

• Safety and political stability are key factors in choosing a country.

• Visa and residency requirements.

• Visiting a country as a tourist for valuable insights before moving.     

• The cost of living to ensure affordability.    

• Maintaining a US address for various logistical reasons. 

• Healthcare access etc.  

In part two of this episode, we'll address the financial and tax aspects of retiring overseas.

Episode Links & Resources

• CNBC: Retiring Abroad Could Lower Your Cost Of Living

• Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.