International Tax News

A dual-status tax year exists when you are treated as both a U.S. resident and a nonresident for tax purposes during the same calendar year. It usually occurs the year that you arrive or depart from the United States. Different tax rules apply to the part of the year in which you are the U.S. resident and the part of the year in which you are a nonresident.

Non-US Citizens who meet the conditions of the substantial presence test, are considered to be a U.S. resident for U.S. international tax purposes. However, even if you qualify as a U.S. resident under the substantial presence test, you may be able to be treated as a nonresident alien for tax purposes if you can establish that you have a closer connection to a foreign country.

On February 5, 2013, Canada and the United States announced that they had signed an intergovernmental agreement (“IGA”) implementing the Foreign Account Tax Compliance Act (“FACTA”), showing additional worldwide support for the United States’ initiative to prevent global tax evasion.

Offshore bank accounts have long been a path for US citizens to hide income and assets from creditors including the IRS. Recent actions by the US Department of Justice have given rise to exchange of banking information between foreign banks and the IRS, making it much more likely that the IRS will eventually find out about foreign bank accounts regardless of whether or not they are reported through the FBAR or tax returns.