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Frequently Asked Questions (FAQ)2017-12-29T19:54:01+00:00

Frequently Asked Questions (FAQ)

No.  U.S. citizens and green card holders are subject to the same tax filing requirements as those living in the U.S.; the common belief that you do not have to pay Federal Taxes because you moved out of the U.S. is simply not true.

Yes.  U.S. citizens and green card holders are subject to federal taxation on their worldwide income.  The fact that your income came from a country other than the U.S. makes no difference.

Yes.  As long as you have a green card, you are subject to the same tax filing requirements as a U.S. citizen.  The only way to avoid this is by surrendering your green card.

Yes.  On 2015, the U.S. Government approved a law titled The Fixing America’s Surface Transportation Act, also known as The FAST Act.  This law authorizes the U.S. State Department to revoke the U.S. passport from anyone who owes more than $50,000.00 in taxes to the IRS.

Yes.  On 1970, the U.S. Government approved a law titled The Bank Act, also known as BSA.  This law requires that U.S. citizens and green card holders who have $10,000.00 or more in financial accounts outside the U.S. to report these accounts to the U.S. Treasury Department.

Yes.  On 2015, the U.S. Government approved a law titled The Foreign Account Tax Compliance Act, also known as FATCA.  This law requires that Foreign Financial Institutions report to the IRS financial account ownership information of their U.S. account holders.  Foreign Financial Institutions who do not comply, will face tax withholding penalties on their institutional U.S. source income.

Yes.  As long as you have a green card, you are subject to the same tax filing requirements as a U.S. citizen.  The only way to avoid this is by surrendering your green card.

An Employee is someone who works for an Employer.  It is the Employer the one who is responsible for depositing all payroll withholding taxes and filing all payroll tax returns.

A Freelancer (also known as an independent contractor, a self-employed individual or a professional service provider) is someone who provides services to clients, outside an employer-employee relationship.  Freelancers are responsible for depositing their own payroll withholding taxes and filing all related payroll tax returns for themselves.

A Business Owner is someone who has become an Employer.  Business Owners are responsible for depositing all payroll withholding taxes and filing all payroll tax returns for themselves as well as for their Employees.

A Tax Deduction is an amount that reduce your U.S. taxable income; while a Tax Credit is an amount that reduce your U.S. tax liability.

In most cases, yes. Taxes paid to the “Dirección General de Impuestos Internos” (DGII), the “Tesorería de la Seguridad Social” (TSS) or the “Instituto Nacional de Formación Técnico Profesional” (INFOTEP). Depending on the nature of the tax paid, you may be able to claim a Tax Deduction or a Tax Credit you your U.S. Income Tax Return.

IRS Form 1098 is a tax document that allows you to claim the amount you pay in Mortgage Interest as a deduction on your tax return. Not filing Form 1098 with your tax return will cause you to overpay taxes.

Sample Image Popup Window for this question: FAQ – 1098.

IRS Form 1098-E is a tax document that allows you to claim the amount you pay in Student Loan Interest as a deduction on your tax return. Not filing Form 1098-E with your tax return will cause you to overpay taxes.

Sample Image Popup Window for this question: FAQ 1098-E

IRS Form 1099-B is a tax document that requires you to include the amount you received from Investment Transactions as income on your tax return. Not filing Form 1099-B with your tax return will cause you to underpay taxes, which will result in later penalties from the IRS.

Sample Image Popup Window for this question: FAQ – 1099-B.

IRS Form 1099-DIV is a tax document that requires you to include the amount you received from Dividends as income on your tax return. Not filing Form 1099-DIV with your tax return will cause you to underpay taxes, which will result in later penalties from the IRS.

Sample Image Popup Window for this question: FAQ – 1099-DIV.

IRS Form 1099-INT is a tax document that requires you to include the amount you received from Interest as income on your tax return. Not filing Form 1099-INT with your tax return will cause you to underpay taxes, which will result in later penalties from the IRS.

Sample Image Popup Window for this question: FAQ – 1099-INT.

IRS Form 1099-MISC is a tax document that requires you to include the amount you received from services performed as a contractor or other concepts as income on your tax return. Not filing Form 1099-MISC with your tax return will cause you to underpay taxes, which will result in later penalties from the IRS.

Sample Image Popup Window for this question: FAQ – 1099-MISC.

IRS Schedule K-1 is a tax document that requires you to include the amount you received from a partnership, an S corporation or other concepts as income on your tax return. Not filing Schedule K-1 with your tax return will cause you to underpay taxes, which will result in later penalties from the IRS.

Sample Image Popup Window for this question: FAQ – K-1.

Normally, the custodial parent is the taxpayer entitled to claim a dependency exemption in his or her tax return. However, if you are a noncustodial parent, you still may claim your children as dependents on your tax return. Just make sure that you reach an agreement with the custodial parent and have your former spouse sign IRS Form 8332. Don’t forget to include IRS Form 8332 when you file your tax return.

Sample Image Popup Window for this question: FAQ – 8332.

Yes. There is a growing problem in the U.S. with tax identity theft. U.S. Expats are especially vulnerable, by being outside the U.S., it is more difficult for the IRS to get in contact with an affected taxpayer. Therefore, if you change your address, it is strongly advice that you notify the IRS immediately. Report a change in home address using IRS Form 8822 and a business address using IRS Form 8822-B.

Sample Image Popup Window for this question depends on which link is selected by the user: FAQ – 8822 or 8822-B.

An Expat (or Expatriate) is a person who resides (temporarily or permanently) in a country other than that of his or her citizenship. Commonly, the term refers to professionals sent to work abroad by their companies as well as persons that have chosen to spend their retirement years living in a foreign country. However, with the advancement in remote collaboration technologies, the word Expat is increasingly used to described self-employed freelancers that have chosen to live anywhere in the world that has a Wi-Fi connection; redefining the very concept of personal freedom.

Few things are more exciting than beginning a new life in a new country. New horizons, new friends, new costumes, new everything. However, like everything else in life, there are challenges. As soon as a U.S. citizen becomes a U.S. Expat, he or she will discover (1) new U.S. Federal Government scrutiny on his or her financial affairs / (2) new tax reporting complexities / (3) new severe penalties for federal non-compliance / (4) new difficulty in finding professional assurance from my new tax advisor…the list goes on and on. That is where we come in, because being far from home doesn’t mean you have to be alone.

If you are a U.S. citizen, your worldwide income is subject to U.S. Federal Income Taxes, regardless of where you live. The common belief that you do not have to pay Federal Taxes because you moved out of the U.S. is simply not true. For example, let’s assume that you are a U.S. citizen living and working in Las Terrenas, Dominican Republic. As a consequence of the U.S. worldwide system of taxation, you are still liable to the IRS for taxes based on the income you generated while living in the Dominican Republic; that on top of any taxes imposed by the Dominican Government. This situation (known as “double taxation”) is what makes U.S. Expat’s taxes different. A U.S. Expat has to pay income taxes to two different countries for the same income. Fortunately, U.S. tax laws provides mechanisms to alleviate and (sometimes) eliminate the cost of double taxation. That is where we come in; to make sure you don’t pay more taxes than you should.

The Foreign Account Tax Compliance Act (FATCA) is a U.S. Federal Law that requires foreign financial Institutions to report to the U.S. Treasury information regarding the assets held by U.S. citizens outside the U.S. FATCA also requires U.S. citizens to report to the U.S. Treasury information regarding their foreign assets held outside the U.S. The IRS compare the information provided by the foreign financial institution and the U.S. citizen to determine if one of the parties is legally liable for non-compliance. FATCA provides stiff penalties for U.S. citizens who fail to comply with financial reporting. That is where we come in; to make sure you are always in compliance.

The Fixing America’s Surface Transportation Act (FAST Act) is a U.S. Federal Law that allows the U.S. State Department to revoke U.S. passports from delinquent taxpayers. Under the FAST Act, if the IRS determines that a U.S. citizen owes more than $50,000.00 in taxes, the U.S. Treasury Dept. will notify this situation to the U.S. State Dept. and the U.S. State Dept. will proceed to revoke the U.S. passport from the delinquent taxpayer. The $50,000.00 threshold is not a per year, but the total amount owed by the taxpayer, including interest and taxes. If you are an Expat, your passport is your life; you depend on your mobility to and freedom to work, live, and thrive. That is where we come in; to make sure something as important as your personal freedom is not compromised by a tax liability.

No. In order to operate a business in the D.R., business owners are required by law to use a “Fiscal Solution” an accounting system (comprised of both, hardware and software) approved by the Dominican Government.

Yes. The Tax Code of the Dominican Republic specifically mandates that a business established in the D.R. must maintain separate accounting records from any foreign entity.

Yes. The Tax Code of the Dominican Republic specifically imposes the obligation on business owners to collect value added taxes from its customers, withhold income taxes from its vendors and withhold payroll taxes from employees.

A “RNC”, which stands for “Registro Nacional de Contribuyentes” (Taxpayer’s National Registry), is a tax identification number similar to the Employer Identification Numbers (EIN) issued by the IRS, back in the U.S. Every taxpayer in the D.R. (either a business or individual) is required to obtain a RNC before generating income from the D.R.

“NCFs”, which stands for “Números de Comprobante Fiscal” (Fiscal Voucher Numbers), are D.R. Government issued serial numbers printed on business transactions for tax identification purposes. The use of these serial numbers is mandatory by law.

A “Fiscal Solution” (“Solución Fiscal” in Spanish) is an accounting system (comprised of both, hardware and software) approved by the Dominican Government capable of legally issuing NCFs to customers. Every business operating in the D.R. is required by law to use a D.R. Government approved Fiscal Solution to record its business transactions.

We know how challenging it is to find the right answers for your particular situation. You ask yourself, how am I supposed to get answers for complex U.S. Federal Tax Laws from an accountant in the Dominican Republic? Sure, there are accounting firms in the Dominican Republic, but they do Dominican Taxes, not U.S. Federal Taxes. That is where CPA Samaná comes in, because helping you reach your financial goals is our goal. Please contact us for a free consultation.

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2000 Carr. 8177
Suite 26, PMB 422
Guaynabo, PR 00966

Phone
1 (787) 410-4362

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