Living and working overseas can be a great way to see and experience the world and everything a different culture has to offer. Hong Kong is a unique location where Anglo and Chinese culture comes in close contact and frequent cultural exchanges occur. Part of the reason for Hong Kong’s unique cultural underpinnings is the fact that Hong Kong developed and entered the modern world as a British colony. However, the Special Administrative Region was, by agreement, ceded back to the People’s Republic of China in 1997.
Today, Hong Kong is one of the world’s leading financial trading hubs. For many Americans, Hong Kong is an appealing destination where they can advance their career. In fact, Hong Kong is one of the leading destinations for bankers and sophisticated financial professionals. Some professionals may even decide to permanently settle in Hong Kong until the next appealing career opportunity arises.
Robert Hoffman of the Hoffman Law Offices is an experienced tax attorney who frequently works with expats regarding their tax concerns. He can help you satisfy prospective obligations such as required tax filings and offshore account and asset disclosure obligations. To schedule a free and confidential tax consultation with Mr. Hoffman call 800-897-3915 or contact us online.
Do Expats Have An Obligation to File Taxes & Make Disclosures While Living and Working Outside the United States?
While it comes as a surprise to some, many financial professionals are aware of the basis upon which the IRS and U.S. government levy taxes. The U.S. government is the only government in the developed work that taxes on the basis of citizenship rather than on the basis of physical presence of where the economic activity was carried out. This means that income earned in Hong Kong is subject to U.S. taxes similar to as if it was earned in Los Angeles. This system of taxation can lead to double-taxation due to the taxes imposed on the individual by the government where the job was performed or the income was earned. However, there are tax treaties and agreements designed to reduce the impact of double-taxation on U.S. individuals working internationally.
However, the income tax filing obligation is not the sole tax obligation held by U.S. taxpayers whether living at home or abroad. All citizens, legal permanent residents, and some others are required to file annual disclosure or disclosures regarding covered foreign financial accounts and assets. This obligation is triggered after a certain aggregate value threshold is satisfied. For Report of Foreign Bank & Financial Accounts (FBAR) the threshold at which one must disclose foreign assets is set at $10,000. The threshold for filing Foreign Account Tax Compliance Act varies by one’s filing status and whether they are living in the United State or in a foreign nation. However, expats and others living outside of the United States are granted an increased filing threshold since they are more likely to have offshore accounts for legitimate purposes.
The failure to satisfy one’s tax filing obligations or offshore account disclosure duties can result in significant fines and penalties. A failure to satisfy FATCA can result in an initial penalty of $10,000 with additional, increased fines if the individual continues his or her noncompliance. FBAR penalties also start at $10,000 for accidental violations of the disclosure obligation. However, intentional or voluntary disregard of the FBAR filing duty can result in significantly heightened penalties. Violations of this type can be penalized by the greater of $100,000 in fines or a penalty of 50% of the original account balance. As such, maintaining one’s compliance with these laws is essential.
OVDP Can Fix Offshore Disclosure Non-Compliance – Contact a Tax Lawyer for Help
If you failed to understand your obligations or if other reasons prevented you from making a timely and accurate disclosure, it is not yet a foregone conclusion that you will face the full extent of the penalties authorized by law. If you have not already been contacted regarding your FATCA or FBAR compliance issues, you may be able to reduce your liability and receive some insulation from criminal prosecution through a voluntary disclosure. Disclosures can be made through the Offshore Voluntary Disclosure Program or Streamlined Disclosure. However, you should speak with an experienced tax lawyer before taking any action because the programs are appropriate for different situations of non-compliance.
To schedule a free and confidential consultation with an experienced tax lawyer call the Hoffman Law Offices at 800-897-3915 or contact us online today.