Welcome
to the Wiesenberg & Co. Certified Public Accountants foreign
property owner tax update.
Becoming
a United States tax resident is an extremely easy process that
visitors to the US rarely think about. There are significant tax
consequences when this happens. This newsletter discusses the
pitfall of becoming a US tax resident and how to avoid this outcome.
Gaining
US tax residency status can have severe consequences because United
States law assesses taxes on residents' worldwide income. An overseas
investor, considered by the Internal Revenue Service to be a United
States resident, will be taxed on income that he or she generates
anywhere in the world. A retired couple, for example, who earns
dividend and interest income in England, could be liable for taxes
in the United States on this income. If a large income-realizing
event occurs, such as a sale of an asset in the UK, significant
US taxes may result.
A
non-resident visitor to the US does not need to worry about becoming
a resident if he or she will be in the United States for less
than a quarter of a calendar year. If a person is in the US between
half and a quarter of a calendar year, care needs to taken to
avoid gaining residency status. It is necessary to investigate
the relevant laws and how they relate to the specific travel situation.
If an individual is in the US for more than 183 days in a calendar
year, becoming a resident is unavoidable in almost all situations.
It
is important to keep careful track of the length of time one stays
in the US. A change in travel dates, sometimes by just a few days,
can save a person from acquiring US residency status. On the other
hand a delayed departure caused by a flight cancellation could
result in inadvertent U.S. tax residence status.
Sometimes
becoming a resident may be unavoidable. In these situations planning
strategies can keep taxes at a minimum.
Reminder:
The tax deadline for residents of the United States is April
15th. The deadline for non-residents is June 15th.
Tax
tip of the day
If
an overseas resident has assets in the United States, such as
real estate, it is easy for the American tax authorities to place
a lien on the property to ensure collection of outstanding taxes.
Please
contact us with any comments or questions
you may have.
(This
newsletter is designed to be of general interest. The specific
techniques and information discussed may not apply to you. Before
acting on any matter contained herein, consult with your professional
advisor.)
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