For most U.S. taxpayers the 31st December is the last day you can make any changes that will impact on your 2016 tax returns. Gillian Everall from Everfair Tax recommends that you give yourself plenty of time to consider options for maximising your tax position and has put together some pointers to help you get the ball rolling.
Start with your Capital Gains Tax and decide whether you can sell assets to realise a capital gain or loss to ensure you minimise any capital gains tax payable. This allowance cannot be carried forward to subsequent years, so we would advise clients to use this tax-free allowance and reduce the risk of incurring significant Capital Gains Tax bills in subsequent years.
The one that is often forgotten is charitable contributions and any made during 2016 must be included, as they are counted as deductible for the year they were made.
Pensions are next. By paying money into your pension, you can help minimise your tax bill. However, there are set allowances in place and unclaimed allowances from previous years may be carried forward, until the value equals the current year’s income.
Have you moved house in the last year? Check that the US Postal Service, your employers and the IRS have been advised using the Form 8822 which should then be posted to the address shown on the form.
Has your Individual Taxpayer Identification Number’s lapsed, if so you must renew it immediately using the W-& form. As from 1st January 2017 ITIN’s that have not been used at least once in the past three years on a tax return will be invalid. In addition, any ITIN’s with the middle digits of 78 or 79 will have expired in January 2017. Should you fail to renew before filing a tax return, your refunds may be delayed and you may not be entitled to some tax credits.
Remember to check your W-8BEN as it also expires every three years. Known as the ‘Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding’, this form confirms that you are not a U.S. taxpayer and that taxes should not be withheld from your earnings.
And lastly, a federal foreign tax credit is granted for foreign income taxes. Those living outside the U.S. are eligible for foreign earned income exclusion, which will again reduce your taxable income.
Gillian Everall is Managing Director and Head of Private Client Tax Services for Everfair Tax based in Weybridge.
Everfar Tax specialises in UK, US and Expatriate Tax and provide a unique tax advisory and compliance service to help you manage your personal or international complexities and the changing of family or business circumstances.
Telephone: 01932 428536