Tax liability of resident alien

I and my spouse have been granted green card recently. I am 80 years of age and my wife is of 75 years of age. We have deposit accounts in foreign country where we worked earlier. My spouse is a state government pensioner. The value of our deposits are more than $100,000. Our income in foreign country is mostly interest income plus pension of my spouse. We have been regularly filing income tax returns in the foreign country separately on individual basis. We have no income in the US. For the current year 2013, we had resided in the foreign country till July 20. I wish to know the following for 2013 tax year in US:

1. Whether the interest and pension received abroad is taxable in US?

2. Is it sufficient if we declare the value of deposits to the treasury.

Answer : 

I and my spouse have been granted green card recently. I am 80 years of age and my wife is of 75 years of age. We have deposit accounts in foreign country where we worked earlier. My spouse is a state government pensioner. The value of our deposits are more than $100,000=======>>>>>>>>> 

As a US resident, you are subject to US taxes on your US source and world wide income.you are required to file an FBAR tdf 90-22.1due June 30 as long as you have a financial interest in or signature authority over at least one financial account located outside of the US; and the aggregate value of all foreign financial account exceeded $10K at any time during the calendar year to be reported.So, if your offshore bank account balances are more than $10K and you do not report FBAR, you can be subject to stiff fines and penalties by the IRS. In fact, penalties can include jail time.

Our income in foreign country is mostly interest income plus pension of my spouse. We have been regularly filing income tax returns in the foreign country separately on individual basis. We have no income in the US. For the current year 2013, we had resided in the foreign country till July 20. I wish to know the following for 2013 tax year in US:

1. Whether the interest and pension received abroad is taxable in US?======>> 

Yes; as said above, as a US person, you need to pay taxes on your US source and world wide income, however, if you paid or accrued foreign taxes to a foreign country on your foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit , form 1116 or an itemized deduction on sch a of 1040 for those taxes. Taken as a deduction, foreign income taxes reduce your U.S. taxable income. Taken as a credit, foreign income taxes reduce your U.S. tax liability. In most cases, it is to your advantage to take foreign income taxes as a tax credit.

2. Is it sufficient if we declare the value of deposits to the treasury.=====>>>>>>>>> as mentioned above.yo need to file form tdf 90-22.1 with the the Treasury Department. You must report accounts you hold in foreign banks and other financial institutions..Read more..

 

Pulling out of contributions from Roth IRA

I have a need for about $22,000 urgently.

My Roth IRA has a balance of $126K. Of this, $24K is my original contributions made between 1999 & 2009, the rest is gains. My understanding is that I can withdraw my contributions with no tax consequences which in my case, could is $24K.
Is there anything that I need to watch out for before I make the withdrawal?

Answer :

As you can see, you made your R-IRA contributions on an after-tax basis. The benefit of a R-IRA, as opposed to a traditional IRA, is that you do not owe taxes on withdrawals in most instances. In a few cases, however, you would owe regular taxes on a portion of your withdrawal at a rate determined by your income bracket and a 10-percent penalty tax. You will never owe regular federal or state taxes on R-IRA withdrawals of money you have had in your account for at least five calendar years. Five "calendar years" means that if you put money in your account at the end of 2007, you may withdraw it at any time in 2011 since that is the fifth calendar year. At that point, all withdrawals become "qualified distributions," which are not taxable. Likewise, any withdrawal you make after turning 59 1/2 is not subject to taxes. For withdrawals that do not meet either of those two criteria, a withdrawal is not taxable if you need the money to purchase a first home, have suffered a disability or have died and bequeathed your Roth IRA to a beneficiary. Even if your circumstances dictate that your R-IRA withdrawal is taxable, you can avoid paying tax by limiting the amount of your withdrawal. You would not owe tax on the amounts you contributed, only on the earnings your contributions generated, according to the IRS. If you have contributed $24K and the value of your account has grown to $126K, for example, you can withdraw $24K at any time and under any circumstances without owing taxes after tax dollars. However, a portion of the funds you have converted or rolled over from a 401k or traditional IRA are taxable if the money has not been in your account for five calendar years. In addition to regular taxes, you should consider…Readmore…

Advice on amended tax returns

We had to amend our 2011 and 2012 LLC tax returns due to errors committed by our original CPA. Since I was listed as the TMP (Tax matters person) in the LLC operating agreement will I be responsible for these errors? My partner is mad at me because of this and am scared he may take any legal action against me. The errors were discovered when my partner sought a second opinion from another CPA. I immediately agreed to amend both 2011 and 2012 LLC tax returns to rectify these errors.
Amending of LLC tax returns triggered amending of our personal tax returns.
Since the difference in taxable income is huge (40K for 2011 and 80 K for 2012) we had to pay taxes, penalty and interest.
I just amended my personal tax return this week. My CPA (not the original CPA who did the LLC return or the CPA that amended the LLC tax returns) filed the amended return for me and requested for abatement of penalty and interest.
Would IRS accept this? Would IRS impose additional penalty due to the huge tax bill (about $18K for 2011 and $25K for 2012)?
Will I be in trouble if my partner files a complaint with IRS or goes for litigation?

Answer :

1 : In general, LLCs are very flexible as to how the business is managed. This means that some partners can have more responsibilities than others. A partnership may only designate a general partner as its tax matters partner. LLCs with at least 10 members are subject to the unified audit procedure and must have "tax matters" partners in accordance with the TEFRA rules. A tax matters partner is designated by a partnership to represent the partnership before the IRS in all tax matters for a specific taxable year. some partnerships/ mmllc, must have a tax matters partner .you, as a general partner, are the person who among the LLC owners is the person responsible for tax matters of the LLC; having an LLC may shield you from some personal liability on creditors, but most states and the IRS have legal recourse to assess tax penalties against "responsible persons" if the LLC does not pay tax due. LLC partners, limited partnersm, are only responsible for the debt that they personally guarantee, and are not responsible for the debts held by the company. This means that if the company goes into debt, the partners do not have to pay for it with their personal money.On the contrary , a general partner in a partnership takes part in the daily operations of the partnership and is personally responsible for the liabilities of the partnership.

2 : I guess most taxpayers believe it is easy to get abatement of IRS penalties and interest however you should be aware that it is a very difficult process. Reviewers at the IRS are very picky and do not easily accept the requests to abate penalties;it is a lot easier for them to deny the penalty abatement than to accept it because of the hoops they must go through in the process to get your tax abated. To get your penalty request abated requires manager signatures. Therefore all abatement of penalty cases must be fully documented, well thought out and have substantial documentation to prove a reasonable cause abatement exists. I guess it makes sense if you want an IRS abatement of penalties to call former IRS agents and managers who know the system and the inside techniques used by the IRS. However, as long as you believe the IRS has charged penalties and interest in error based on the incorrect returns, or due to circumstances not your fault but your CPA’s fault, you may qualify for an abatement. With an abatement, you may be able to eliminate part or all of your penalties and interest, but not the initial base tax amount that caused the penalties and interest. Most of the time with an abatement, you will be able to eliminate the majority if not all of the penalties, but not the interest. Eliminating these penalties may lift a huge financial burden off of you, most of the time the penalties make up 25% of the total tax debt amount owed. A penalty abatement can be right for you if you can pay the tax liability owed, but you believe you should not be held liable for the penalties incurred. If you apply for an abatement and it is accepted, it is expected that you then pay your tax liability in full. In order to qualify, you must be very convincing that you should not be responsible for the penalties.
SO, even if the IRS grants your request, you will still have to pay the interest, penalties on taxes you owe. If the IRS does not grant your abatement request, the interest you owe will continue to accrue during the time they are considering your request. Guidance for Amended Partnership Returns

3 : Possibly Unless you pay the penalties/interests accrued. You may contact experts in penalty abatement in your local area. Also, you may contact your former CPA; Give him a copy of the notice from the IRS. Since there are any penalties, it's highly likely that the CPA will get the IRS to waive them. If they don't and it was his error, his Errors & Omissions insurance should cover them, or he'll…Read more…