Jane Mepham, CFP (00:02.38)

How do you determine if an overseas security mutual fund is a PFIC or not? By the end of today's show, we're going to give you three ways of identifying if a security or a mutual fund overseas is a PFIC or not, which is critical for you as a U.S. tax resident with overseas assets in the U.S.

But first, let's do a quick refresher of what is a PFIC and why should we be concerned about.

What’s a PFIC?

Manasa Nadig, EA (00:33.879)

Yes, so a PFIC basically stands for Passive Foreign Investment Company.

And the acronym is PFIC. The key word here is passive. So remember that a PFIC is a non-US corporation that meets either a 75 % passive income test or a 50 % passive asset test, which means it earns most of its income from passive sources like dividends, interests, and so on, or holds most of its assets. Assets that produce passive income. So the US tax laws created these PFIC rules to prevent US taxpayers from deferring taxes and put in place a very punitive tax law around these PFICs. So basically that is what a PFIC is, Jane.

Jane Mepham, CFP (01:36.696)

So let me just ask the question one more time. Okay. We know they're not illegal, right? They're okay to invest in, but why should people be concerned about investing in PFIC fix or not? Before we can talk about how you identify them. If somebody asks you that question, how would you answer it?

What’s The Problem With PFICs

Manasa Nadig, EA (01:58.153)

Of course, we have to talk about that because they are legal. You can definitely invest in them or hold on to them if you've already invested in them. That's not the issue. What the issue here is the punitive tax regime around the so-called PFIC Now, let me explain it in short where if you look at the growth in the mutual funds,

In the US, a growth in the mutual fund is taxed at favorable long-term capital gains rates, which are unrealized capital gains. But...If these were foreign mutual funds, then the growth in these mutual funds do not get that favorability as far as taxes go. In fact, they are taxed at the highest ordinary income tax rates. So depending on how much you are holding and what the growth in these funds are, they could become quite a bit of a tax burden.

On a person holding these PFIC funds. there are specific elections that could be made to mitigate this, what is called an excess distribution regime or a PFIC tax regime. You could also look at tax treaties between the country where your mutual fund is and the US.

But you may or may not get a mitigation for taxes in this case, Now, really quickly, the tax part of this holding your mutual funds is reported on the IRS form 8621. In fact, the IRS themselves say that it could take up to 25 hours to complete a form 8621. So,

Manasa Nadig, EA (04:07.072)

You know, if you are holding on to, let's say, let me give you some examples. Let's say foreign mutual funds fall into this category, definitely. And these would be foreign registered mutual funds and or foreign registered money market funds. Sometimes a foreign retirement account could also be considered a PFIC and or life insurance policies in foreign countries that are invested in the market could also be categorized as PFIC But of course, you would have to look at each one specially and determine whether they are a PFIC or not.

So these are just some of the examples of PFIC that we know.

Jane Mepham, CFP (04:56.096)

Right. And so let's talk about, because you've already talked about what's bad about them. If somebody comes to me and they give me a foreign statement and they say, Hey Jane, are these things PIFICs or not? We've come up with three ways of identifying if something is a PFIC or not that you can actually do at home. And that's what we want to address.

So this addresses mutual funds or securities, as we've said, which are registered overseas. And that's a key thing. They'll call them foreign-domiciled securities. And there three ways you can tell whether this thing is a PFIC or not.

3 Ways To Tell If a Foreign-Domiciled Mutual Fund Is a PFIC or not

One, and I always recommend, go down this path, reach out to your tax professional, your CPA, your EA, your cross-border professional, and ask them, are these things PFIC or not?

Let's see what they tell you. Number two, reach out to the foreign fund company overseas and directly ask them if these funds are PFIC exempt or not. What we've discovered is if they're PFIC, the foreign company is not going to be able to give you that assurance. So if they're not able to assure you that these things are PFIC exempt or not, assume they're PFIC right?

Number three, look at your statements. Look at the ISIN. The ISIN number is an international securities identification number, which is a number given to all international securities. It will uniquely identified as a security. So you look at that, it's usually a 12 character alphanumeric code.

If the first couple of digits are not US then you know this thing is a PFIC. Does that make sense, Manasa?

Manasa Nadig, EA (06:59.306)

It does. Although these there may be other instances of where you might be holding a PFIC, which may not fall into this. So definitely what Jane said, the first thing you should do is check with your CPA or EA and get their input if that investment could be categorized as a P FIC. So, yeah, Jane, I think we kind of covered the three things that

Manasa Nadig, EA (07:29.26)

we need to look at. Yes.

Jane Mepham, CFP (07:31.926)

Sounds good, then let's conclude it. This is a shortie

Manasa Nadig, EA (07:35.057)

Absolutely. So thanks for listening folks and if you like our content please follow us on Spotify or on Apple wherever you listen to our podcasts give us a five-star rating because if you rate and you subscribe and listen to us our podcast will be pushed out to more listeners and that would be great and we hope you share our podcast with your friends and family. Thank you for listening. Bye.

Jane Mepham, CFP (00:03.136)

Living and working in the US on a work visa is a unique path that millions and millions take. You're trying to build a life in a place where you're not certain about the future. This brings up some very serious challenges that may not be faced by others around you if they are not on a work visa, which is really hard for others to relate to.

We've seen it in our practices and in our lives.

Also, we know you want to live your best life and you want to make optimal decisions about how you'll deal with the complex tax and financial obligations while trending this path. And so in today's episode, we're going to address some of these challenges and in particular, we're going to address one very specific challenge.

And at the end of this episode, we'll give you a possible solution of dealing with this.

Challenges On A Work Visa

Manasa Nadig, EA (00:59.127)

Yes, we, Jane and I, have walked this path and we work with many professionals and clients who are on work visas. So we understand what these challenges are. And there are many efficient strategies to mitigate these challenges and continue to build your dream around what we call a temporary permanence.

So What are these challenges? It could be a lack of clarity about your financial future. You may be worried about a job loss, et cetera. We have another episode that relates to this and we will link it in our show notes.

Another challenge is obviously about taxation. A very complex tax situation for those with a footprint in two different countries. State and international, you know, and so on.

You do have a challenge with uncertainty about retirement and how to go about saving for it. And where will you be when you retire?

Basically, you could also have the challenge of being confused about where to invest, whether you would want to buy a home, if that is a good idea for you to buy a home.

And if you do want to make big purchases, would credit or debt be easily available to you?

You could also have a challenge of where you're wondering whether you should have a long-term plan of building a home here in the US or back in the country where you may want to go back.

You may have children who want to go to college in the US, or they may be born here in the US.

O they may have come with you here on a visa. And you may be wondering how you want to save for college if that's what their plan is.

Also, you may have travel restrictions because your passport is not a US passport.

And so there might be unique visa restrictions.

Manasa Nadig, EA (03:25.33)

And another big one is, of course, estate planning. And how do you go about thinking about that? And planning for it. So those are some of the challenges, right, Jane?

The Challenge Of leaving The US While On Work Visa

Jane Mepham, CFP (03:32.094)

Yeah. And the interesting thing is as you're going through the list, I'm kind of checking them off thinking, yeah, I've dealt with that. Yeah, I dealt with that.

Yes. I remember the travel challenges. So this is real to us, but I think the challenge I want to highlight to deal that I want us to talk about today is the idea of leaving the U S while you're on a work visa. This is becoming real. We're getting a lot of where people are saying because of the political situation, for example, we're concerned that we may need to leave in a hurry, that's one, or because of the visa issues. You know how for some people the priority date is so far out, chances are even though they've been approved for the green card, they'll probably never get it in their lifetime.

And so we're getting a lot of, yeah, I think. When I'm ready to leave, there's a lot of things that I do want to have to deal with.

And so the question is, if you're on a work visa, how do you leave in parentheses or in quotes in the right way? And by leave in the right way, what I'm talking about is how do you leave the US in a way that does not jeopardize your current and future taxes, finances and your life.

You've so, so hard to get to where you are, to see what you have, that it's important that we plan for this. And so we want to talk about the careful planning for your financial interest and legal standing to make sure everything is protected in the U.S. And so what we're going to do is sort of break this up into the different challenging areas that we see or that we want to deal with.

as you prepare or as you think about leaving the US, well, you're on a work visa.

Manasa Nadig, EA (05:32.663)

Yeah, I know. We must have used the word challenge quite a lot by now. So you kind of get the idea. However, breaking this down may help you feel like you can take this on without help. So the first one is the financial exit strategy. Now, the financial exit strategy kind of revolves around

Jane Mepham, CFP (05:37.646)

Yeah.

Manasa Nadig, EA (06:01.973)

A couple of things. One is what are you going to do with your retirement accounts when you have to leave? Very quickly, you may have to understand rollover options, withdrawal rules, tax implications for 401ks and IRAs when you are moving abroad.

The second one in this strategy is your tax obligation. So what would your tax obligation be? Would you need to file final tax returns? You would need to understand exit tax requirements if those are applicable to you. And if this situation applies to you, then you have to plan for ongoing US tax reporting obligations even after you have left the US.

The third one is a banking relationship.

What would you need to do if you have to maintain US bank accounts if that is needed for your ongoing tax obligations and other financial obligations?

And you may also have some FATCA reporting from the other side. The fourth financial exit strategy revolves around investment liquidation. And this is something that Jane is always helping clients work with, the investment liquidation is the timing of the sale of the investments and real estate strategically to minimize your tax impact.

Jane Mepham, CFP (07:46.54)

So let me jump into the next, I'm still going to use the word challenge, right? Or category. This would be the legal and administrative category or challenges or things you need to think about. So the first one is we know you're here on a work visa. You want to think about the visa compliance. And this is probably one where you might want to talk to a legal person.

But anyway, the key thing is you want to ensure proper departure procedures to avoid future immigration complications. I think that's all I'm going to say about that. You've also accumulated a lot of documents over the number of years you've been here. So document preservation is something else you want to think about.

So you want to make sure you've secured copies of all your tax returns, literally all the tax returns you've ever done, immigration documents, employment records, anything that shows your life financially legal in the US. And then we also need to think about professional licenses, depending on what you have.

Is this something you hope to continue using, wherever you're going to go to? So you want to understand how to maintain or transfer some of those professional certifications.

And then there's a whole idea of healthcare continuity. You need to plan for insurance gaps, although we know once you leave the US that's it, but it's probably more around medical record transfers. You want to make sure you have those. So if you're going to go obviously look for another doctor, you have something that you can share with them.

It's pretty much thinking about how do I move my life from here to another country when there's a possibility I may not be, I may not be able to ever come back to grab some of these things.

Asset Protection

Manasa Nadig, EA (09:44.427)

I know. That kind of takes us right into the next one, right? When you're thinking about moving, the next thing is asset protection. So the asset protection part of it is something that would, or if it was me, I would lay awake for...

days on end trying to figure things out because these are not easy decisions. The first one in your asset protection would be the decisions you need to make around real estate. So if you own property or you've bought a home and or other assets around real estate, you have to evaluate whether you want to sell that immediately.

or you want to maintain that as rental property. And if you did decide to maintain that as rental property, then you have to put into place proper management aspects that would take care of things when you're gone. And then there is the credit preservation part of the asset protection. And this kind of gets a little more tricky.

And the part of a credit preservation is where you have to maintain your credit relationships that might be valuable for you if you decided to continue to do or make investments in the US, even if you were living abroad or you have future plans for business ideas in the US. And speaking of business, if you already have a business in the US which you have to leave behind, then you have to make sure you have properly wound up all of those interests if you're putting those to an end, or you have transferred any business ownership or any other ownerships you have in partnerships, or also you may want to think about your tax obligations in the country you're moving to if you have business interests in the US. So those are the asset protection part of it.

Jane Mepham, CFP (12:00.204)

So actually, Manasa, let me add one more thing here. You talked about credit relationships. The other one we want to include here is your identity protection. Because once you leave the country, it's easy for somebody to steal your identity and you may not have a way of protecting it. So you want to make sure that's locked tight before you leave to avoid that

Manasa Nadig, EA (12:11.341)

yes.

Manasa Nadig, EA (12:14.894)

Yes.

Jane Mepham, CFP (12:26.198)

And then I think the other one here is estate planning. You talked about asset protection. So how do we ensure on top of that, that if you leave anything behind, you will not be taxed punitively, which is what happens when you leave your side as assets. that God forbid something happens to you that these would go to the right people.

Somebody the other day said to me, I don't mind paying IRS what I owe them, but I don't want them to get anything that they should not get.

And so I say, it sounds like you're talking about us doing some estate planning. So I think we want to include that. The next category is what we are calling family considerations. family considerations, really, it's about your immediate needs. So we're thinking about, let's say, your children.

So your children's status, right? If your kids by the time you leave a US citizen, though we know that could end up changing with what's happening, you do want to have the proper documentation. Make sure you secure the documentation for those kids, as well as plan for their future access to US benefits. So do they have a birth certificate from here, for example? Do you have the US passport? Those are the things you want to think about.

Also think about their schooling needs. Whatever school they've been attending, you want to make sure you can obtain all the transcripts and records that may be needed for future educational professional opportunities, wherever you're going, because you don't want to go somewhere and they're like, we don't think these kids have whatever education you claim they do. So you really want to make sure you have that.

As well as we already talked about the medical records, the social security, that's another.

big one and we actually have a whole episode on this. So we'll link to that. You want to understand the future benefit eligibility and how you'd go about claiming it from abroad, assuming you qualify for that. And so I think then the next thing is to think about timeline. Manasa, what do you think about the timeline?

Manasa Nadig, EA (14:41.983)

I know, considering all of these and again, challenges that you have with moving outside the US, what is the timeline management here that we're talking about? So definitely you need advanced planning. So you need to begin your exit planning at least 12 to 18 months before your intended departure, if that is a possibility.

If it is not, definitely whatever planning that you can do in the time that you have before you leave the US, that's very, very important. Professional transitions. This is a very touchy subject, especially if you have been let go from the job that you're on.

So managing those career transitions thoughtfully and maintaining your professional relationships and references is also important. I was talking to somebody this week and this was something that they said which really kind of left me wondering about all of these different challenges, of course, that people have when leaving the US.

They said that even though they had been let go from their job, they were trying to keep a positive mindset so that they could go back to the country they're from and look for something there and find a different way of doing things so that they could continue to build their dream, but back in the country where they were going to go to.

So those are, but it's still important to maintain those professional relationships references, especially when you want to continue to work in the same field. And finally, the final obligations, which we just mentioned, the estate planning is part of this final obligation. Make sure that you've put those things into place like bills and trusts, et cetera, if need be, and show all your financial and legal obligations are properly closed and transferred. And this includes, of course, identity protection. So.

Manasa Nadig, EA (17:02.879)

All of these final obligations, financial, tax, legal obligations, should be properly closed and transferred. So these are the important ones that come under timeline management. Anything else you want to talk about, Jane?

Jane Mepham, CFP (17:20.43)

I actually think you've addressed it. The key thing is if you have the time, yeah, follow the timeline. But if you don't have the time, just you did say move ASAP. So I think you got it right. And so when I think about it, when we think about it, the work visa journey is ultimately one of adoption, right?

So it's the idea of learning to live in a state of temporally permanence. And I really like that. think we're to be using that terminology a lot. Temporally permanence while continuing to build a meaningful life, whether it's here in the U S or whether it's back in your home country or wherever you may end up moving. It can be done for sure.

Manasa Nadig, EA (18:09.415)

yes, yes. The temporary nature of your visa status does not in any way diminish or lessen the value of the life that you have built here. It just may add a few layers of complexity. And

if you can manage that in a good, thoughtful way, I think that it can definitely lead to a richer and more intentional decisions you make about your career, about your family.

And your future. I know that this might come across as a little preachy, but in the end, the work visa experience does teach us a most valuable lesson, that is, how do we build a meaningful life anywhere we choose to live? Well, considering that there are so many things to think about in this big move that you have to make outside the US.

The Complete Departure Checklist From The U.S. When On A Work Visa

Jane and I have put our heads together and we have built the complete checklist, the complete checklist, dear listener, for non-immigrant visa holders leaving the US. And it is almost a 50-something page checklist, I have to tell you.

And also to celebrate 50 episodes on our podcast.

We are now giving it at a discount of $50 for the next 50 days. Everything 50 here. So go to our website. You know that is theimcafe.com and grab it and let us know what you think about it once you have it. We will love your feedback. Thanks for listening. Looking forward to being with you all on the next one in two weeks. Bye.

.Jane Mepham, CFP (00:04.492)

What is English for life insurance, and how does it apply in a cross-border context?

In today's shortie episode, where in 10 minutes or less, we pick a term used in the cross-border space, we'll talk about what life insurance is, very high level, and whether you need it or not, and when you'd need it in a cross-border context.

Manasa Nadig, EA (00:30.707)

Alright, so Jane, what is life insurance?

Jane Mepham, CFP (00:35.936)

Okay, like the way you just jumped into it, but that's perfect. So, I'd like to think of life insurance as a contract between you, the insured and the insurance company. And essentially, what they're saying is you pay us a certain amount of money over a certain period of time. Obviously, there's more into it, and God forbid you get hit by a bus, we'll give a boatload of money to the person you've appointed to the beneficiary. In other words, think of it as we're replacing your income. So, if you have kids or family overseas, you're supporting and you were not there, what happens to them?

Manasa Nadig, EA (01:21.459)

That's essentially what life insurance is. Now, can we talk about what are all the different types of life insurance?

Types Of Life Insurance: Term And Permanent

Jane Mepham, CFP (01:32.96)

Okay, again, high level, this is a shortie. There are two types of life insurance that we commonly discuss in this space. One is what's called term life insurance.

Term life insurance gives you a certain amount of time, right? So, you buy a policy for let's say 30 years and you pay more or less the same amount, although you do have different ways of paying it, once the 30 years are over, you're done.

Sort of like the car insurance. If, during those 30 years, something happens to you, your beneficiary will receive a payout of whatever the face value was. So, let's say you do something like a 30-year term, with a million dollars, and 25 years into it, something happens to you; your beneficiaries will receive the $ 1 million.

And then the second type of life insurance is what's called permanent life insurance. And under this, there's two, there's whole life and there's universal, but I won't go into the details.

The main differences, there's a death benefit, one, but there's also what's called a cash value. So, something happens to you after a certain period of time, your beneficiaries will get a certain amount of death benefit, but there's also a certain amount of cash that goes along with that, that you can actually take out at some point, depending on the details of the contract.

These ones tend to be a little bit longer, so you can go to a hundred years or something like that. And that's key for the next thing I think you might ask me, but let's move on.

Manasa Nadig, EA (03:14.108)

Yes, you guessed it. Next, can we discuss what type of insurance would be suitable, especially in a cross-border context?

Life Insurance And The Cross-border Considerations

Jane Mepham, CFP (03:30.702)

Okay, so the people that we work with, have foreign nationals and work visas, and we know these work visas are non-immigrant visas, so the assumption is, or not the assumption, you're going to be leaving the country at some point at the end of your term, unless, of course, you end up getting the green card and you end up staying.

And then we have the second group, they're already here on green cards, or they're U.S. citizens, but they have assets, or they have ties overseas.

And then you have U.S. expat, which are U.S. citizens or green card holders who live overseas. So, when I think of that group, and this is where each case is very specific and needs to be custom designed, but at a very high level, if you're the main breadwinner for the family and you're supporting kids and family overseas, the term life insurance...most likely makes sense for you.

Again, remember, we're just trying to replace you. This is not about wealth building; we're not thinking of that. We're just replacing you in terms of support. And so, if you're working and a W-2 employee, term life insurance makes a lot of sense.

The only difference is, or the key thing to watch out for is, the time-life insurance from a company that's willing to pay out, pay to your beneficiaries, regardless of where they live.

And those are the type of companies that we use in all practice. As long as you continue paying the premiums, and we can discuss how you do that, and you end up leaving the country, you will continue paying for 20 years. If something happens to you, these U.S. companies should still be able to pay your beneficiaries that amount.

That’s probably the best case for term life. And it's almost what I advise everybody to get.

Using Life Insurance To Mitigate The 60k Estate Tax Exemption

The second case, the permanent, the universal, the whole life portion of it, the best-case scenario for it when you're in a cross-border context is if you become an NRI, non-resident, which is a word alien, but that's what the IRS uses. You know what I mean.

Jane Mepham, CFP (05:47.254)

And you're not in the US anymore and you have what's called U.S. Situs asset. This is, let's say, shares, property, and you're not here, there's a very high possibility that your estate taxes, the exemption you have is 60K, not the current 15 million that almost everybody else has.

So if your exemption is only 60k what this means is God forbid something happens to you your family most likely will have to sell everything because they need to pay 40 % taxes on anything over 60k so this is a really good use case for a permanent contract because you wanted to go on for a long time but of course you'd want to make sure you find the right people to design this for you so something happens to you there's this estate taxes your family needs to pay, the life insurance will pay out.

Because remember, at that point, it's not going to be taxed. It covers the taxes and your family can enjoy the money.

And so those are probably the two use cases that I can think of right now, contrasting use cases in the cross-border context when it comes to life insurance. There's a whole lot of other use cases, but I think those are probably the two main ones that would apply to just about everybody in this space. Does that answer your question?

Manasa Nadig, EA (07:17.391)

Yes, that perfectly answers all our questions and I'm sure it answers our question on “what is English for life insurance?”. So now that we've learned about that in this shortie episode, thanks for listening to friends and thanks for stopping by.

If you like the content we share, please go to our website, theimcafe and subscribe to our newsletter and you will know ahead of time when our episodes are dropping. So thanks for stopping by.

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.