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U.S. Tax Planning forForeign Individual ResidingForeign Individual Residingin the U.S.December 9, 2010,
Jinho Park Sarah RodgersDirector, Global Employer Services Manager, Global Employer Servicesp y g p yDeloitte Tax LLP Deloitte Tax LLP
‒ Standard deduction vs Itemized (availability of deductions both U S‒ Standard deduction vs. Itemized (availability of deductions both U.S. and foreign)
‒ Personal exemptions‒ Filing statusg‒ Foreign tax credit opportunity‒ Appreciated assets outside the U.S.‒ Intended length of the U.S. stay
“First -Year Choice” – elect to be treated as part-year resident from first qualified day – IRC Section 7701(b)(4)q y ( )( )
There are two elections that allow married taxpayers to be treated asfull-year residents:
•Section 6013(h) – Dual-status residents •Section 6013(g) – Nonresident spouse •These elections change the residency start date to January 1st•These elections change the residency start date to January 1st
Combining Elections: We may combine the 7701(b) election with the 6013(g) or (h)(g) ( )
•Elect part-year resident status, then•Elect full year joint status
•Not a resident in the current or preceding year (i e 2009 or 2008)•Not a resident in the current or preceding year (i.e., 2009 or 2008)
•Will satisfy substantial presence test in subsequent year (i.e., 2011)
•Is present in U.S. for 31 consecutive days in current year (2010)
•Satisfies a 75% continuous presence test
•NOTE: ‘Present in the U.S.’ = Any day on which an individual is physically present in the U.S. at any time during such day unless specifically excluded
•Standard tie breakers, if resident of both countries (in order):–Permanent home–Center of vital interests (closest personal and economic relations)( p )–Habitual abode–Citizenship
R t f F i B k d Fi i l A t•Report of Foreign Bank and Financial Accounts
•Informational return required if aggregate of maximum balances in foreign accounts exceeded $10,000 at any point during tax yearforeign accounts exceeded $10,000 at any point during tax year
•If filing not required, then check ‘No’ on bottom of Schedule B
D e date is J ne 30th ith no e tensions a ailable•Due date is June 30th with no extensions available
•Filed with Department of Treasury in Detroit, MI and not with IRS
•Long-term residents (green card holders) – surrendering his or her green card (8 out of 15 years)
ANDAND
•Tax Liability Test – average tax of $139,000 (for 2008 subject to annual adjustment) for 5 years or;
•Net Worth Test – net worth of $2,000,000 or;
•Certification Test – fail to certify that he or she has complied with all U SCertification Test fail to certify that he or she has complied with all U.S. tax obligations.
About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited a UK private company limited by guarantee and its network ofDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/aboutfor a detailed description of the legal structure of Deloitte LLP and its subsidiaries.