It’s a simple fact of life that business is becoming increasingly global. For American citizens earning income or living abroad, it can be a huge wake up call to learn that the United States taxes based on earnings, not on physical location. As a result, well-intentioned people get into sticky — and potentially disastrous — international tax controversy situations every year.
Fret not: a qualified international tax lawyer like the ones at Abajian Law can untangle your foreign tax issues… and help you manage your finances so that you don’t get into trouble in the first place. Today, we’re breaking down three reasons why you should seriously consider retaining an international tax lawyer if you have foreign earned income.
Whether you’re an expat or simply drawing income in other countries, the US government expects you to pay taxes on what you’ve earned. Yes, that’s right — in the United States, you are taxed because you are a US citizen, and it’s not based on where you’re physically located.
This confusion means that, yes, you are a likely audit candidate if the IRS feels you’re underpaying your tax obligation associated with foreign income. Since people who try to illegally underpay taxes frequently use foreign earnings to disguise their wealth, the IRS is particularly sensitive to these situations, and will take a very punitive approach to your case if it even has the hint of foreign tax evasion.
We hate to be the bearer of bad news, but there are serious legal consequences to those who intentionally or unintentionally mislead the IRS about their foreign assets. Depending on the severity of the situation, you could be looking at anything from huge fines to jail time. Needless to say, this is not an area where you want to run afoul of the law. Whether you think you’re a likely target of an audit because of your foreign tax situation, or you just received word that you’re being audited, you should seek the counsel of a qualified international tax controversy lawyer as soon as possible.
We all make mistakes, right? Well, it turns out that some mistakes are more costly than others. How does a hefty $10,000 fine sound just for making a clerical error on your FBAR? That’s the stark reality faced by many taxpayers who attempt to take care of their tax preparation alone, despite having overwhelming and complicated circumstances that beg for the steady hand of a veteran tax lawyer.
Wondering if this could possibly apply to you? If you’ve got more than $10,000 in overseas assets, it likely does. Hopefully you already know the importance of filing a squeaky-clean FBAR (Foreign Bank Accounts Report) to disclose your international earnings. This is arguably the most important aspect of your tax filing if you have substantial foreign assets, so it’s critical that you get it right the first time if at all possible.
Letting a veteran international tax attorney prepare your FBAR for you is a good way to remove the stress of filing completely, because you know that it’s being done in crystal clear compliance with what the law requires. You will definitely sleep easier at night knowing that there are no mistakes in terms of your FBAR compliance.
Think about it for a second: if you’re taxed based on your physical location by a foreign government, and then also taxed based on your status as a United States citizen, that’s an enormous tax obligation. For many taxpayers, it feels like being taxed twice, and can seriously cut into your hard-won earnings. A savvy international tax lawyer like the ones on staff at Abajian Law can help you legally minimize this so-called “double tax” by structuring your tax planning in the most intelligent fashion.
Everything from your business structure and associated corporate tax rate, to your capital considerations can have major implications regarding the amount of your tax obligation each year. It would be prudent, to put it mildly, to review these decisions with a Los Angeles based tax attorney to maximize your finances and eliminate headaches.
At the end of the day, earning income in multiple countries can be exciting, challenging, and a way to feel like a true citizen of the world. However, the dream of an international lifestyle can quickly become a nightmare if you don’t take the proper steps to shield yourself and your family from the massive penalties and consequences that come with errors or willful negligence during your tax preparation. The Abajian Law team is ready to take that responsibility off your shoulders today, so that you can stop worrying about whether you made a clerical error, and start enjoying the fruits of your labor.