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Navigating US Tax Laws for Expats: Options and Compliance

Dr. Guillaume Grisel guides US citizens living abroad on US tax regulations and compliance, highlighting options like OVDP and Streamlined Filing. Learn about tax liabilities, penalties, and professional fees to ensure a smooth return into the US tax system.

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Navigating US Tax Laws for Expats: Options and Compliance

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  1. "Did I reallyhavetodeclarethattothe IRS???" How to Come Back into the US Tax System Town Hall EveningDr Guillaume Grisel “Changes in the US Tax Laws:LL.M. (Cambridge), Ph.D., T.E.P. How it impacts US Citizens Abroad”Attorney-at-law, Bonnard Lawson

  2. Swiss-US Estate Planning in a Nutshell Pre-NuptialAgreements, Wills, Powers of Attorney, Etc. For US Citizens Living in Switzerland

  3. "Did I really have to declare that to the IRS???" How to Come Back into the US Tax System

  4. The available options What the IRS wantsyou to do: • "OVDP" Offshore VoluntaryDisclosure Program (2009  11  12) Or • "Streamlinedfiling" New StreamlinedFilingComplianceProcedures for Non-Resident U.S. Taxpayers(Sept. 2012) Whatmany people do… • "Quiet" or "Silent" Disclosure

  5. The available options What the IRS wantsyou to do: • "OVDP" Offshore VoluntaryDisclosure Program (2009  11  12) Whatmany people do…

  6. OVDP: What you have to pay • 8 years income tax + interests • Tax penalties • Accuracy-related penalties (20% of tax due) • Failure to file/pay penalties (up to 25% of tax due each) • FBAR penalty! • 27.5% of highest value of each offshore account during the 8 last years (!!!) Can be reduced to 12.5% or even 5% in some (rare) cases • Your lawyer and your CPA…

  7. OVDP: Up & down sides Upsides • Quasi-assurance of no criminal prosecution • Predictability of tax and penalties due Downsides • High penalties (in particular FBAR penalty) • Thorough audit by the IRS • High professional fees (CPA, lawyer)

  8. The available options What the IRS wantsyou to do: • "OVDP" Offshore VoluntaryDisclosure Program (2009  11  12) Or • "Streamlinedfiling" New FilingComplianceProcedures for Non-Resident U.S. Taxpayers(Sept. 2012) 8

  9. Streamlined filing: Up & down sides Upsides • Cheap and simple • 3 yearstaxonly (+ 6 years FBAR) • No penalties (onlyinterests) • Lowerprofessionalfees Downsides • Very restrictive eligibility conditions • Non-residentsince 1st January 2009 • No return filedsince 2009 • Max. $1500 /year due to the IRS • Lowlevel of compliancerisk • Lack of predictability: no assurance about criminalprosecution and penalties • All submissionsreviewed by the IRS 9

  10. The available options What the IRS wants you to do: • "OVDP" Offshore Voluntary Disclosure Program (2009  11  12) Or • "Streamlined filing" New Filing Compliance Procedures for Non-Resident U.S. Taxpayers (Sept. 2012) What many people do… • "Quiet" or "Silent" Disclosure 10

  11. « Quiet disclosure »: Up & down sides Upsides • Relatively cheap and simple (if accepted by the IRS…) • 6 yearstaxreturns and FBARs • Failure to file/pay penalties but no FBAR penalty • Lowerprofessionalfees • Generally no review by the IRS (but…) Downsides • Not consistent with IRS rules no assurance about criminalprosecution and FBAR penalties 11

  12. Which way to pick? If you are in this situation…  Considerthisway… • Eligible for Streamlinedfiling Streamlinedfiling • US resident OVDP • Sophisticated offshore tax planning  OVDP • Very important tax due  OVDP • Risk of exchange of information  OVDP • Other « high risk » situation  OVDP • Only FBAR are missing  File missing FBAR and explain • Other cases  ? 12

  13. Swiss-US Estate Planning in a Nutshell Pre-NuptialAgreements, Wills, Powers of Attorney, Etc. For US Citizens Living in Switzerland Dr. Guillaume Grisel LL.M. (Cambridge), Ph.D., T.E.P. Attorney-at-law, Bonnard Lawson

  14. Estate planning: what for? • Makesure yourassetswillbetransferred to the people youwant • Minimizethe taxburden • Makeyour relatives’ life easier by simplifying the estateprocedures

  15. Whatwillhappen to myassetsaftermydeath? • 1. Division of the marital property • Betweenthe survivingspouse and the estate • 2. Division of the estate Between the heirs (and the legatees) • + Taxes and expenses …

  16. Division of marital property • Whatwillhappenif no planning isdone? • Whichlawwillapply? Swiss or US Law? • Law of the (last) common place of residence of the spouses. •  Swisslaw • How ispropertydividedunder the Swiss«default» regime? • Acquests sharing (Errungenschaftsbeteiligung, participation aux acquêts) • Assetsearnedduringthe marriage : split 50-50 «Acquests» • Assetsacquiredbeforethe marriage: not split • Gifts / bequestsreceivedduring the marriage: not split «Ownassets» 16

  17. Division of marital property • What are youralternative planning options? By making a prenup / postnup, youcanchoosebetween: • Modifiedacquests sharing: The 50%-50% rulecanbechanged • Communityproperty(freedomas to whichassets are in or out of the community) • Separationof assets • US law if at least one spouseisUS

  18. Inheritance • Whatwillhappenif no planning isdone? • Whichlawwillapply? Swiss or US Law? Law of the last place of residence of the deceased.  Swisslaw • How isthe estatedividedunder the Swisslaw «intestacy» rules:

  19. Inheritance • Whatare your alternative planning options? By making a will or an inheritance agreement, youcanchoose to: • Modify the legalshares • Appoint new heirsForcedheirshiprights must berespected • Appoint legatees • Make an inheritance agreement • Give a usufruct to the survivingspouseOptions to « getaround » the forcedheirshiprights • Subjectyourestate to US law Pay attention to the conditions and consequences! • Appointment of an executor! • Trusts are recognized in Switzerland

  20. Inheritance Legalshares of the heirsatlaw: Forcedheirshiprights:

  21. Estate / inheritance taxes • US citizens living in Switzerland are potentiallyexposed to: • US federalestatetaxIf estate and previous gifts exceed $ 5.25 millions • Swiss cantonal inheritancetaxThe Canton in which the deceasedhadtheir last place of residence • No inheritancetax in Schwyz • US state estatetax?Possibly ,if US domicile not lost (e.g. US lawwill) • Swissfederalinheritancetax? Maybe in the (near) future …

  22. In case of incapacity… the new Swissrules Whatwillhappenif no planning isdone? • Whocanact on mybehalf in the daily life? • Guardianisappointed by the Court if: - Individualcannotsafeguardhis/herinterests - An urgent matter must besettled • Spouse or civil partnerhas limitedpowerswith respect to: • Legalacts: only if «usuallynecessary» to satisfy the needs • Assets:limited to «ordinary» management • Mail : only if «necessary» • Health care

  23. In case of incapacity… the new Swissrules Whatwillhappenif no planning isdone? • Whocanmakehealth-care decisions on mybehalf? In order: • Guardian if he/shespecificallyreceivedthis power • Spouse or civil partner if they live in the samehousehold or if he/sheprovidespersonal assistance • Descendants • Parents if theyprovidepersonal assistance • Siblings

  24. In case of incapacity… the new Swissrules What are your alternative planning options? • Daily life  Power of attorney in case of incapacity • Freedom to appoint the attorney youwant • Freedom to define the scope of theirpowersin 3 possible fields • Personal assistance • Management of the assets • Representationtowardsthirdparties • Possibility to appoint different attorneys in differentfields • Health care  Advanced medical directives • Early instructions for physicians • Appointmentof a representative for health-care purposes

  25. Thank you very much for your attention Shouldyou have any questions… • Bonnard Lawson – International Law Firm Me Guillaume GRISEL Rue du Grand-Chêne 8 CP 5463 CH-1002 Lausanne • gg@ilf.ch • +41(0)21/348’11’88

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