Tax Yak Episode 36: US tax issues: an individual perspective

Automatic TRANSCRIPT

DOC and working to taxi hack attacks Bantu podcast. We Love yacking about tax so we invited Ranjit engined tax experts and practitioners to have a chat with us. We hope you enjoyed this episode of Tax Yak. I'm Robin Jacobsson. Senior Tax China with text Banta and your host of today's podcast in this offense. Step aside for twenty twenty. I'm very excited to be joined by international guests. I'm joined by Marsha Lay AH DONG-GOOK Director of private client services international at Addison colleague. Al Nina's who has mentioned director at Anson's but from San Francisco Enciso in United States masters in international tax lawyer providing cross border tax advisory tax complaints and controversy services behind with individuals Joel's businesses and US citizens living abroad. She has extensive experience in. US International Federal State and local tax matters with with over twenty years of private practice in the US and Canada. She's a member of the California a Michigan Baas the US techs coach and US Supreme Court. She's also so a barrister and solicitor in Canada public. Arbitration of the United States Financial Industry Regulatory Authority and an instructor for the American Institute Huge Certified Public Accountants Mashghara is a prolific author and fragrance Baker on international tax issues. She's published technical papers which have been presented into the tax writing committees of the US Congress the Treasury Department and International Conferences in the US Canada and Australia of the taxation in a foreign. Pensions and retirement cross-border estates and trusts US international beholding and compliance enforcement initiatives and you as state and local taxes taxes farm businesses. My goodness come back to you. The sigma and L. Your background. Managing Directors Emerson's in San Francisco L.. Specializes in tax reporting for multinational public and private corporations tax accounting uncertain tax positions transfer pricing compliance and planning planning. And just before I fully welcome you also want to invite some collaborate to the microphone and Simon is director. WHITMARSH and consulting will be joining joining us for this discussion on. US Texas and a lot of experience not just indirect taxes and GM. You're in the international space as well so basically welcome mash up the bulk. Mail all right to have you on the country. Thank you in. We're very happy to be here and we'll thank you. Welcome terrific so this has got to be a bit of a following ride off suspect. Nick looks navigating through the tax system and sheets so the webbing to structure this for actually van to be doing to podcasts and for listeners of the fist episode is kind of individual tax issues and superannuation and how this relates with the US tax system and then in a second and following episode als particularly gotTa be chiming in and we're going to have a chat about business at Texas US issues on transfer pricing emotional discussions all all that stuff or just has to sit the same. I think it's important to observe that the world has moved on and if we go back to the status of residents in Australia and the definition of resident tax-load which was put that back in the nineteen thirties we've got concepts like domicile and place of abode and reside and. This was back in the days where it was very clear way. Lived where you lived. And we certainly didn't have this contemporary mobility. That is not happening in the world. We've got families that live in one country of a member of the family WHO's working and living in another country and increasingly we've got judicial guidance tend to speak with the NGO way out. We're trying to understand whether someone is or is not a tax resident. Now I think it's also important to observe that moisture and businesses doing in business overseas and with the US and it's important to understand how coal supplies of its Australian Textiles and compiled a non-exhaustive list of the provisions in tax at that depend on whether you're resident or nonresident now. I'm just going through because I just think it gives people inside his exactly. How many deep provisions we have to deal with his practitioner? Strata obviously the national tax rights. We've got temporary resident rules. The Working Holiday Maker volts the seasonal Labour live up my -bility program wither causing counter arrived. Overseas is exempt taxable in Australia. The treatment of foreign losses whether you're subject to the Medicare Levy feet. We've got nonresident withholding taxes the treatment of foreign income tax offsets double tax agreements. CGT event. I Wan A-to-z aside deemed disposals of assets. When you become a a nonresident costs about dame declaration of a forest? It's become a resident of Australia. We've got CJ that applies to foreign assets. If you're a resident of Australia we've got the whole issue of franking credits which we seem to be quite unique in the world and still having an invitation in system and we can talk about this later the access to the city discount and recently the mine residents exemption is now denied to non-residents. We've got Farkas. Art is a capital gains withholding rules because too many non residents but not paying taxes Australia and combing their responsibilities them with Gosh issues on the status of companies trust and superannuation funds and who controls them and of course if they control by moment died in can become residents norcross companies Inc. the stranger and superannuation superannuation payments. Oh dear that's such a long list. It's a lot to deal with. It's very long just basically the the same for the Australian techsystems about the US. Well let me tell you made the US sound so simple now. Having second thoughts we might be country but Gee we do thinks complicated delighted super loaded. Well it's very simple from ahrq respective On the US tax system really. It's either you'RE A. US tots resident resident. In which case you're subject to worldwide taxation or you're not a U. At saks residents. In which case we're just GONNA tax you on every kind of US source income that we think you you should be paying you a synopsis. On enhance withholding taxes will apply. There's a fundamental difference between. US in Australia we have residency rules which are not necessarily linked to citizenship. This ship that is true. You beat me to it because people say how do I know from you is tax resident. It's not such a fudgy concept for us. I mean it's plain clear you're reader. US citizen you're either born in the US or your warranty us parents outside of the United States or of course that's a given. Then you should know. You're a citizen of naturalized allies or you're a US resident because you're a green card holder or the last one is one hundred eighty three day test over the three years period of what we call will a substantial presence test. It's not one of these three days in a given three exactly. I know Canada and Australia. Make the simple by making it. Just in one year I think the Commonwealth countries please have this running trend. I'd like to know but without one hundred eighty three day from the UK. Probably did the you know the great old. They're not to say the great old common-law but you know we all have a common history free like in the US so if you are you a citizen you're subject to worldwide talks given so you never have been born in never stepped foot in the country and you happen to be born to you as parents Absolute and therefore you'll have us obligations yet what you all circled destroyed the message through strengthening com. Yes yes and this is the surprising thing because they think is only one of to countries in the world I have to talk about China. They have changed. US talks less. But I don't have not changed tacts x ray but you. Richard are the only two countries in the world to date have worldwide taxation of their citizens do think puts us out of step with the rest of the world or more progressive. Well that's arguable isn't it. We make we're were looking towards a future role. Maybe we thought you know when the founders and the legislators at the US really really early on thinking about worldwide taxation maybe they saw the Internet and global all mobility and cross-border is an incomes. Usually it's usually either are super psychic. And so one hundred years forward in two hundred and said you know we'll just do worldwide. Taxation will be everyone to the punch or it could be very very old and on archival saying well it was based on old type of world where the US thought it was the big brother. They're of everybody and taking care of all the countries because we're all friends and you said combine around the Campfire and you know the US allocating resources you know like military military to different parts of the world. It space in Old World Political Gio power source that maybe that's what it reflects. Mushroomed favorite a sense of how many people people around the world will not be aware a have US tax obligations because for example the born to you as parents but neither made themselves. Well that's the difficulty Robin is that there's no official sial senses. That's available to figure out. Exactly how many. US people around the world. I'm calling people. Because citizens and cardholders be subject would be subject. Look to potential in this taxation now and we don't even know how many are being born every second but there was an unofficial census taken by different organizations around there about two million in about two thousand twelve. And now it's more than that right. So it's it's definitely growing and then I also asked the you know whether the Australian the government also took immigration report every time it doesn't seem to focus on that of course so so let's say I was born tears. Parents have never been. Ah Yes. whipple product holiday and I stepped foot on your input of entering customs right and I am. I gotta gotTa have a someone made me the basics I welcome to the US Robo. He's him aggression inexpensively Quarantaine Apostle control and by the way in to visually. Because you are as a whole bunch of Texas they going to be able to pick that up at the air force well you know in a in an ideal world that would happen along. I'm coming out with a bad MARSHA. Laugh but now you've tech under under the Louis Law if you're a US citizen you're supposed to travel under a US passport when you're traveling to the United United States so there is a there is a provision. That says you're supposed to have a US passport when you're coming in coming out of the US citizen so whether or not subject subject to U s income taxes though the presumption is you are because you're a US citizen worldwide but then you know that is sincere pointed to us parents right so if your parents are both US citizen but if only one of your parents is us. Then there's there's a slicing and dicing that we determine whether or not you are a US citizen invite your reservation of your Oli US parents. So that's when you know we're splitting hairs but it's very important. This is where we get. Well how old was your mother when she left the United States. It's you know when we were you born because the test differ okay so set the same about Joel citizenship. What are the implications? Parma citizen of a strategy. Can I hope to do with the US. What does that mean for taxpayers missiles? Well that makes like very complicated. You have two citizenships. I mean Canadian stewed unusual citizens but that means that you would be filing to tax returns you'd be filing for Australian filing the US and potentially subject to double taxation but that's where you have the. US Australia Income Tax Treaty that became effective in nineteen eighty three. By the way. Come into play because it's supposed to help you to rough out those edges us or you're potentially subject to taxation and I said nineteen eighty-three because nineteen eighty-three. It's been a long time right. And the last protocol was in two thousand one and many important provisions of that treaty. That now have come into play more. Recently I have not been amended. So we need to amend these other countries are amending where the United States dates and getting more current with pensions in Australia like a superannuation a 401k's in the US when they come back to Australia and they have these foreign case. Okay so unless a treaty specifically covers it than you are at risk for potential double-taxation but then again that's where we the foreign tax credit system kinda kicks in which should Austrailia because he has a higher taxes right now the US yes yes off the majority of the listeners strategy practitioners are not willing to Looney with seasons in as well as the citizens that it's more likely to be straightened citizen. who was a pulsing expression working in the US for a temporary period of time? So aw what can I expect when they enter the US what are their obligations and while you know a a US An Australian citizen. That's going into the United States on on what's eighty four. No temporary period depends on whether it's an H.. One Visa or an e three which is a special visa just for Australians to work in late at sates or maybe they've Tena Green Card. Let's say they're not as a citizen yet but they're wearing the process. That's the difference between a Green Card on a visa okay. The Green Card is lawful permanent resident status which means it's an immigrant visa. The other reasons are not immigrant shows an intent to not stay in the United States. Just work it's an immigration but that the it has tax implications because if you're a green card you're treated like a US you're subject to worldwide tax. Now if you have a nonimmigrant these unless you're subject to that one hundred eighty three day substantial presence test you you would still be likely treated as not a resident you would be able to leave the United States. See Thank you. I really enjoyed my less than one hundred eighty three day state. I'm home non pay pay taxes in Australia and only thing you have to pay tax on would be anything that's US source which will be subject to withholding regime but for a new for nausea ex-pat back in the US they'd be subject to yes federal taxes income taxes at whatever. The rates are for compensation. And then they'd be subject to state where they're living at taxes. Because you know we allocated more seats in Australia does just about what forty five more or so I've lost count so we have a state income taxes for them to deal with and then we also have property taxes. And you know we have sales a new starts as we don't have GST so that's unique and then we have excise taxes. I'm you know we have what. How many jurisdictions fiction salad we have lost time you counted sylvie sacks just all the different types of taxing jurisdictions I think so we're eight taxes or seven thousand jurisdictions and still bill news tax payers four three years depending on how you count? You're saying Marshall is just one person living in one state but yet this dates dates or have different types in regimes to. Yes so if you derive you live in one state but you're having input from another state you would be subject to what we call a portion of income for sane and local income taxes so it doesn't end there so it's really good for Australian coming to the United States to really get good advice about where you're living you know not just from a hey in California's great. We'd like to live there but where you're deriving your income and knowing and understanding exactly what states might be coming after you for potential income taxes. We certainly they have state and federal taxes too. Yeah we had a review done back in twenty team called the Henry reviewed and can Henry identified that. We've got something like one hundred and twenty-five taxes in this country help of which ten of them a generated ninety percent of the revenue so we got one hundred fifteen tuxes delivering about ten percent of the revenue. The new now and I'll state level we've got things like payroll tax got stingy Scotland tax. And I do differ across the states but move on then got seven states compared to do with got fifty two and and I think the last time I checked I was in a discussion with Co Leagues at step that The federal treaties are recognized by the states here in Australia so if the US Australia tax-free would be recognized. Would slow through New South Wales and Victoria and Queensland well that doesn't work for the states in the US. If you say. I'm not as I was talking about Simon off air. If you are you know subject to one hundred eighty three day tasks and your potentially tax. You could go to the article. Four of the Treaty and invoke that treaty tiebreaking myself back to be an Australian resident. And therefore I am not paying income tax on worldwide income. And you're in California California's essentially nice. We like that. I've were that's good for view but pay up. You're still subject you to California income tax because you're California resident and so they don't have to recognize the US Australia income tax extre- which is a really big difference that a lot of people don't know about climate so that concept a state by state income tax is just not something thing that happens in Australia. The state tax talking about taxes on businesses pyro tech strategy. You're probably the so that concept that I got a treaty the only applause to US between US federal tax and strain federal tax issue We don't have any other liar of income tax the US impose stifle income taxes for which you get the tree protection that's spat and then the other thing we were talking about the US despite feel despite entering into the treaty with Estrella has the signings provision which effectively means millions like in the domestic rules to override. What will nearly the intrigued so that it went on talking to clients that the concepts of our literally foreign to us? Yes and I sent somebody to do some work on a project realize that as little as thirty one dies in the. US Kuhn trio. I'd much much ruled out texts compulsion allegation than I would expect to call is the reverse was happening in stride right because if you're thirty one days in the US. This year that I was telling. Simon you're you're you're you're in the game for one hundred eight hundred eighty test you have to start asking. How many days were you last year? And the year before right but with respect to the saving closet is a very unique feature of the US model tax treaties. It's an every version of model tax treaty and by the way it only applies to US citizens so it's part of our worldwide taxation we love our citizens uh-huh and therefore regardless of what we agree to here. We might just say we didn't really agree to that because this is a citizen all bets are off and I think this applies to the renunciation. The those who renounced as well. That's that's the second part where we questions where you've got some of you talked to accidentally knowing not knowing that you might not your accident citizen Citizen that you might have stayed for a you might have not been aware of your obligation and suddenly. You're not your own income. Incoming Estrada and then subtly loves provision basically a full blown new as tax returns and for blunders dry and tax returns and have the other who gets it's priority on foreign tax credits and the time and the timing told me a and then there's a much bigger much bigger guide apply. It tends to be quite ridiculous really putting myself in the shoes of an accidental. You know not that. I'm Occidental always intentional. But if I were acting an accidental incidental loss at American Aussie living here and have finding I have. US stocks obligations. I have to get a social security number. I apply to be able to file tax return. That will allow allow me and eventually let's say I'm going to give it up so that I can give up my citizenship because partied requirements of renouncing and not being subject you exit taxes. I be current on my US tax filings. So a lot of our clients in folks have come across have to have to get current. I get the social security number get in the system the US tax system to get out of it and the compliance costs can be phenomenal talking. Well it depends depending on you know as I said. There are lots of unique Australian concepts and and that don't exist in the US tax world if got superannuation while we don't really know what a superannuation is. We don't have a specific tax code for superannuation. So we've got got to file it as different ways and then parts of that. Depending on itself managed to be reported income parts of that arguably would not be and then you've got Australia's fresh trust. We were talking about. If someone's just a beneficiary still have. We have a lot of stuff defile discretionary trust the calls comes out of the common law system and then came at war of Equity Rape Right. And it's something that is more relevant to Commonwealth countries but Australia I believe with exception of Zealand has more discretionary trusts population. I think actually has more pressure trust to hit a population than wait really gives. He sounds like strawberry to you. I was going to say having practiced in Canada Canadians. Agents love their trust me wrong but almost every Australian of come across has some sort of trust. I always ask you sure you're not a beneficiary of a discretionary trust what what about unit trump's because there's so many different types of trump's here in the US only has really one set of a one statute on when the concentration of a trust it's arguably foreign unless you prove its domestic and then we have to go through a second layer of if it's foreign than what kind of trust is it right so and then we hear splice so when going going back to your question how can be can be thousands of dollars tens of thousands. Yeah it's always like someone said you go to somebody the US citizens that I walk a P.. Three hundred bucks you want. Good luck if you are A. US person living outside the United States in Australia. And you have to to taxation systems. It's never going to be three hundred dollars so will you. It's very costly. There's a recent case which has been doing the rounds on throughout appeal system through the courts and the twitter commenting on because it does have dealings with the US. Oh how lovely and it's a case called vision The background is that version is the beneficiary of a discretionary trust in Australia and the trust itself self was investing in various arrangements. sinuous into the data all of those of the purposes of this discussion. The short was that the investments were realized for about twenty five million dollars at the time the US Dolor Dolla. Pretty much on parachute. So I'm just going to ignore an extreme differences so there was in capital gains made as a result of realizing as investments that capital guy was made by these trust and disputed downto- vision as the benificiary but meanwhile us tax system had taxed him out of the ground tow trust arrangements and so he was the trustee of the trust. You is actually text. He pissing late yet been asked his number. He knows that as being taxed in his capacity as state so what happened is tax evasion pain in the US the the tax payable in Australia. It was about five point. Four million dollars so he went to claim his foreign income tax offset for the taxi. Page of how it's supposed to wear. Let's talk to us about three point. Eight million so he goes depends five point four replant his credit for the trading day. And the Commissioner says night you only get it to climb half of the three point eight million as an offset. Because in Australia we have a discount which have capital gains to Canada Adda Canada. US He was subject to a fifteen percent reduce tax ride on the entire game instead of thirty percent into mismatch. It's it's a question of Texas exactly so you peel this. To the Federal Court and lost he appealed to the full federal court and whilst again and now the potential applications for Australia. Now what the court supposedly savings yes system and we've got a domestic tax provision which is Sentencing deep dish for the raiders. Is Talking about you get an offset to the taxi driver seats to the at. It doesn't use the word. TV extent but it Says for all poverty manhood in your assessable income. Now what's including assessable. Income is on the game guy even in us. He paid the reduced rate of tax on the full game. So look I would say countries pretty much divided on this evening. In Tech Spanta soap about China's. Those are the view that this is unfair. He should get all credits and other society. Now this is this is so this is tax planning failure system system and if the US had said yes we will also give you a discount and this would be aligned but only half of its included seventy talking about double-taxation. We're GONNA get a reduction or credit or offish. The beat that is made subject to the whole tax. Write off of the game was not subject to any tax area so even though there was techs paid in the US on it. It hasn't been double taxed right. Where's the beat that he's assessable? Destroyed fifty percents than is taxable has been subject to tax in the US and subject Taksin Australia hence why is an offset for that half so throughout many countries in the world that do a discount so that the US doesn't now because from our perspective respective that's a US source gain really right so the US has the first right to tax it unless we look at the treaty again for capital gains which usually punts to the residents of the tax payer unless there's certain type of game right real estate will always GonNa make that US source so let's because it's physically textile strike. We're very very. We have very strong feelings about real estate and Land We love Orlando. I think every everyone loves their land and feel strongly that all real saves always exemption but yes and this is a big conundrum. Really mentioned Canada always also has this mismatch when it comes to the fifty percent of the for the capital gains tax too so this is a big problem and unfortunately it's the only area that has you know we're we're Australians could be potentially as updated as the ironic or dull tax. I mean superannuation just going through the different bits and pieces of it. You could be subject to triple talks and this is why it's such a passionate era. I know Ozzy's love their super. Yeah I think I love your super too but I can't have a super unless I have a super ear so The way that we analyze super Sue a super right now. Is You know Very much all over the board because the IRS has not come out with a definitive guidance on it but clearly it's not one case it won't be subject to our usual good tax provision divisions. It's not an IRA has so many different legs so you already pay tax on it going in the preconception also the country fifteen percent. The girls are fifteen percent I and then theoretically in distribution right. It should not have any more toxin. I know that there's so many different lives. Sixteen you you play the game. I'm talking stick by the rules than yes but you know if you'RE A. US citizen that is turned topsy turvy because yes we'll say yes. It was already talks in Australia. But guess what that's not covered right now under article eighteen of the treaty so the Treaty only covers contributions. It was negotiated and effective nineteen eighty-three superannuation came out in nineteen ninety two. Do we need to revise the treaty because right now a lot of US citizens and US Green Card holders are being subject to having to report the super and it's a curls on it as in calm Tom and so you already talked to know fifty percent Australia and your coxed again in the US on your ordinary income rate but then the question is can you get a credit on the fifteen percent that was paid by the answer after is likely not because unless it's treated as a grant or trust it's treated as a separate entity in there. It's not yet personally. It's not you personally. It wasn't your liability so boom. It's like it it happens a lot more often and it's very misleading. When you say there's a tax solves everything it's all some met? Some tax treaties need updating now issues of US estate and gift taxes on strike assets. Oh dear he's still use estate and gift tax as you were talking about domicile. I'm like well okay. Robin already knows what I'm talking about them. So unlike your income tax residency the US estate tax is based on the concept of Donald Domicile. Is Our fudgy concept because unless you're a citizen by deemed to be domiciled in the US if you're a green card holder or you're just an Aussie that property the US you will be. Subject took a state tax on your assets that are in the United States and green card holders arguably. Let's shelve that for a while. But let's say you're just an Aussie in the US you bought real estate and then you died in Australia that it will be subject to you as a state tax and this was again discovered recently is the. US Tax Tax Treaty with Australia hasn't been amended since nineteen fifty. Three and apparently Australia already invalidated the domestic legislation that actually recognize the treaty. And I have that. I'm I'm going to thirty from the last step national conference when I was speaking about the. US Australia tracks treaty. Estate Tax Treaty last year May Twenty Twenty one eight one thousand nine hundred so oh it's up in the air but under the Australia's see tax because we still see it from the US side. It's still there you would be able to get a pro rata exemption amount that's entitled the US citizen but only a bit right. So we do your worldwide assets nominee every worldwide assets over your assets that percentage multiply against whatever the current a unified state tax amount is which at this point unified state. Credit amount is eleven point five million ironically thank you to the existing trump government. We did they. Don't get enough credit for this. So it actually increases that exemption if the US real estate is a ten percent of that exemption right so one point one point five million is exempt in your real estate fair market value on your date of death in the US was one million. You're in luck you don't have to pay the tax of forty percent want to forty percent. It's taxamnesty tax. Yes and we're not even talking about the state where you may have died or we're not. We're the property was located. When you died what is the the public's perception or view on taxes because I've got a sinus strategy has always been a very hot potato governments? Don't want to go to New York Rush. Well that's very interesting 'cause Allen I was just looking at the recent poll Al will can we say about the the status of our state death taxes right now. Intends tends to come and go with the government whoever is in power at the time so now the Republicans so you have a very dramatically high state tax exemption highest ever S. A. North of eleven point five million. Yes but with the November election. All bets are off. Could go down to zero right so we have actually actually are. So what is it the value of your estate when you pass. Yes that could end up being tax decreases. Strange Morbid windows of opportunity were folks. Yes you know either. Try to pass over gifts or you know. pull the plug on some advantage of the higher rates right. So ironically remember the last time there was no estate tax was a one of our President Bush's the son had took off. I think twenty seven twenty twelve round. The we had a zero estate tax I serve. It fluctuates. Very guard systems. He now we don't have consistency where it's like a roller coaster right now but if we're looking at the democratic platforms This this is this estate. Tax Exemption is go down depending on who gets into power. The rules on the system always stay constant exemption that they play with right. Okay right like how how much exemption is GonNa get if you're looking at the current slate of candidates. It's not going to get this high so with these tied Texas. Is that old ripped up with gift tax will if someone can give something prod them passing. That could still get caught up in in SITEX when you pass someone to some when you pass the gift. It's outside of your estate tax already. But you know you're up to a certain exemption amount so the gift left is you know your gift. Some Property to anybody in the United States for an annual exclusion of fifteen thousand anything above that US Gift Tax but now you could use carbon to your unified gift and estate tax credit lifetime one so anything in excess you take away from the eleven point five eight. That's yeah exactly you work at tandem until you use it up so right now with Alsace. Because we're not sure what's going to happen. There's a lot of proactive tax. Planning running around making sure you maximizes eleven point five eight while it's still here so that might be considered quite generous person involved. Yeah come mortar. Kenny yes imagine and if you're both in US citizens and you're married and your even in Australia you've got twenty two twenty eight of the twenty three just eleven point five eight together and so you can basically do a really good gifting strategy for everybody and get rid of this problem which should include a little. Got Some questions that we're aware that we're going to strategize looking to invest in property in the US and other the of these opportunities to do that right way. Yeah I do get that. They certainly who had structures is moving away from individuals and arguments the individuals not wanting to get hit by state taxes. Something only we don't really have had an Australia Day for its Malalaia on the US question. Jake Lisa go to go through with a try to have structures where it's not norcal tech's right and it's actually motivated transactions because Australia's not the only one without NCA tax. Canada also. And one thing you know I'm all for love. It's February fourteen coming up people. So let's talk about taxing love. Okay so let's talk about the. US citizen and a hot Aussie wife could the US citizen. I get me in trouble here. Usually you give a gift to your wife and it's not possible not taxable in Canada taxable in Australia. But guess what because your wife is not a US citizen your US person as we call it green card they cannot get sat exemption so all bets are off and and now we have to file a gift tax report tax return to report that gift to your wife now area that silly is different between the US and Australia and BACKGROUND DIDN'T NGO statement. It was introduced in Australia. And one of the things that the government was adamant fash and this is in falsify our consumer huma watchdog. which is the triple safe? Is the old. Prices must be displayed in cautious. Jesus inclusive which means wake up to the register in a retail tally environment. When you're ordering from your supply although I do tend to find basis this exclusive because I think he gets credit but sending the retail environment? You must quite art. Jeez tink Lucy prices said the price on the tag is the price that you pay now. I went to the state to this time last year I went to Honolulu. Oh congratulations yeah and I can't that as this. But I was not prepared for what I would go and buy something at. Even if the chemist moccasins sunscreen and the prostate says nine ninety nine out of ten dollars much right and then you got to try and then by the time we'll be Texas get outta them it's quite differential and it took me to get used to this idea that what you are saying on a menu. What you're saying on a prospect is not what you're paying? How do people live this? Yeah well I guess with ice closed the bell the end of Big Restaurant Bill. But you know there's a requirement to get things separately stated because of just nature or sales and use tax systems work and you call these layers of state Texas built into that with one tax to know that you know you separately state the sales tax also from the gross stuff. What you're being charged because we want to see that your career adding stating it transparency? Right and knowing you know there's so so many sales tax audits going on that they have no choice. They have to untangle that what you would have. As a consolidated purchase price with our components are different. We liked. Break it out so we made it easier because we've just got one. GST and it's Kim percent so one of the press is the pay yes not difficult dot com or as light as interactions of state and federal. I can understand why the transparency but it makes it hard to wake up. But you're actually going to be paying for just it's close Your Eyes Robin. Close Your eyes when you're paying. That's what I do Stein. Texas is another animal to get. That's a concert and so he started talking to businesses he. It's one thing to be dual or as tourist you go. That's a frustrating element you know. You just want to say the price you want to know what you pie you WANNA protect against. And then it's completely different than what you some sites where there aren't any state silos Texas and it is almost is what you what you get but that creates as I understand in the. US Disproportional people buying different sites. Now I've got I've got Nexus Stipe Vice Nixon jurisdiction talk issues such as this thing about with Internet with a Thailand. If you think about bovine cross-border states you think cross-border Australia us one of their cross-border within starts and that's a completely clearly different too. So that is the console on by right at this cross phone the style without the retail sales tax. And you've got from the the company and he saw it will the entity so with is this. I had one with Stein. Biased compliance because delivering into a state. All this is this is is just wedding the appetite for episode two. Because yes we did come out with a big supreme court case in June two thousand eighteen called wayfair and wayfair. Will I know Alan you. Simul probably get into on episode two but yes. That's a very good point. There are concepts of geography and boundaries and sales taxes have changed already Freddie and the Supreme Court even on did their own decision in wayfair which was very presidential check my world and as everyone could be doing sales tax collection for you know the state tax agency's even from Australia Don. That's where the Thunder Rolls Capacity Back The irs which is the Internal Revenue Service. We know IRS aid. It could be possibly listening to this podcast. The relationship attacks has heavy Asia. It's become increasingly digital and electronic and Australia where introducing always new platforms got things like my God which is the way you access your your professional line. Mugabe dis being rolled out at the moment for people able to directors as tax agencies businesses. With the what is the relationship like electrically and particularly with the advent of technology between taxpayers. The IRS. Yeah well you know what. Honestly this is a really good development I mean the IRS has gotten a fresh budget from the current administration in the massive they just implemented a massive overhaul of offer so there are easier ways to access your account online so it's very similar to what Australians are going through with Ato uh-huh and Canada Revenue Agency but it still limited into say in terms of is building brown loyalty. Is it making the more touchy feely. You know more accessible that is definitely the game the game but I think it's taking a little more to get there because you know it just takes a long time to get an answer that or to get a tax transcript back Unless you've got you know you're one of the super simple taxpayers can get the answer back. It's not as simple. You know you can create an account and you can pay online you can do an installment but it's still hard to file that tax return on your own because it's gotten more complicated. The form ten forty form used to be really simple and they was revamped in two thousand eighteen twenty nineteen with a tax reform. And it's now getting more many many more pages file away this the eggs in a strata To moved to a system called self assessment. And what this means is that day you would send order information to and people call. The citizens would sit there and sit through it all how much tax you had to pay in. Nineteen Ninety two. The burden was legally shift back to the taxpayer. So the self assessment we look for Chan's and wait till the ACO what event and what Oba legally allowed to clan and then we pay tax on the taxable income. The issue has the right to check this. And we have these periods of review the lead to come back and have a look what we've done to say whether it's correct but in order to enable us to lobster turns that we believe to be correct. They have to give us information. So this is where all the interpretation. The rulings guidance comes out so in other words you've got to feed redhawks taxi co pay but we have complicated system say here we will assist you with all this guidance audits and that is why we is business tax Fanta and consulting exist because people need help waiting they wade through a navigating right through the volume of information that comes out every year so compeer into the US. Do you have a system. Where the United States on the tax payer all the Harris and similar desires provide a huge amount of information to enable them to never get there? I throw it. It's very similar to hear the Self Assessment System. The interesting thing is the. IRS could very easily set up a website where you could go in and enter the information if you had a very simple return but the tax software industry has wonderful lobby in the US. And so what happened is people have to go in. They buy a forty fifty dollar program if they want to try to do the tax return it home mm Orioles. It had a complicated situation. Normal business return might be anywhere from a couple of thousand up to ten thousand dollars to have it done by. CPA in the states. And and I think that's what most people want to do to the extent. They haven't controversy of their uncertain about things they wanna get that petitioners malpractice insurance you know as a backstop. I'm always amazed at the. US full system really for the taxes. Forget it at a corporate level but just at an individual level I also liked while. US doesn't go heavily into trust is that they can fall. Individual pretends jointly so he and leaving common perceptions believing trusts in the US. You've got a couple like enjoy fall. Jointly I can affectively split. It could be one person. Who is the breadwinner split that income across to get the advantage of the effective tax rates across breath? He we don't have that concept but coming to the forms so there's a couple of those call tips that come in so I can see why it always makes sense following a consultant or practitioners the science practitioner give him the Hokey Lynch texture to there are a lot of tax return to destroy. You don't need to do that. It will be very simple salary. Weider's Poll Tax Return. Very simple done the idea as a system to every Thomas a US individual tax for fifty sixty pines. It's not just one foam. It starts with a ten forty and ten forty or waste of ten forty. An ounce right doing a return in the US then as a whole these deals guide ninety-three authorization radio something. You'll something else so to all these lies of documents which played the information multiple oems. So I imagine that's where the software supplies coming to L. D. from that point of view you know what's you buy one of these software packages I think the most popular one is turbo tax in the US. So he put it in all your data and they've got you because as you said next year you roll over the data data and now they've even taken to the point where you know it used to be years ago. You'd buy the disk and come home but now everything is just in the cloud and you can do it on your phone if you have a very simple return is said very playful because what they do now used to buy the software had the license and license was not renewed. You didn't feature update so support but you could still use a software software to read you. What they now during? Because it's so cloud-based if you don't keep paying subscriptions you get cut off and kind of access the data that will say historically yes. CBS This year. Now there's talk in Congress about it it will have income under a certain level that they're gonNA force the IRS to start putting some software on the irs website so that And that just wasn't wanting to anybody that uses google to do any research or tried to fire US never click on anything says dot COM. It's IRS DOT GOV. Everybody swoop down on these sites and they will try to pull you into their their checkout cinematic you'll you'll find his dot COM dot which is not wreckage dot com on a scale then in addition to those also disclosures. So one of the team that gets code. What is we stop? You've got the accident accidentally coal in the US system someone who's been he no real on. I've left the country for a long period of time on. Let's say the heads trolley. US has astrid sourced income. It should be reasonably simple. Thank yes I need Louis tax return but at the very least even as I've written enhanced I often still have to do financial reporting bank account importing so consensual Sundays. In addition to just tax there is actually an information gathering process. Yes yes there are certain. Is You know four for. US citizens living in Australia. Who Haven't renounced? There's a lot more information reporting if you've renounced it doesn't mean you're done with all the filings but you're done substantially less. Let's just make it simple that way after the next few minutes. Can you comment on Archie. Because I think that you wanted to discuss regarding got an ex exactly always get asked this question last year got asked about Harry and Megan. Megan was born. She is A. US citizen Archie was born in the in the UK to a US citizen mother. Who would definitely lived was born after nineteen eighty six in there for the? I'm going through. The citizenship. Brucie is a citizen. Just make a point now. Archie has got to be the first time that a member of the royal family is A. US citizen Yes. Yes so this is very interesting for us and I think there's been some articles out there what we would advice archie to do but definitely to say he would be if he were to renounce citizenship exit tax would be certain windfall upon him significant probably even was more th- more than two million from even before he was born. I suspect sorry. Yeah and now. He's GonNa go to live in Canada which will make him a Canadian resident and so complicated tax situation. Oh yes I mean. I can't wait until he moves to Australia. -cation here during the cold Canadian winters. Yeah and then Then we'll have an aussie resident Dunedin rather than how many tax treaties are gonNA. Look at. Where is he really a resident of just boiling down to where we started so Tom Assad is clearly uk because that's where he was born? And I think the system where interestingly they go with the domicile of the father of love Christian almost completely different but then again for the US drama software citizens always the so the plot pickings on that aside. He's absolutely lifeset. Thank you think he Masha. Any thanks for listening to this episode of toxic obey chatting with Masha. llah Don International tax lawyer and director product services. Addison in the US and also called an elman as insist managing director of the same theme. Also joining us in southern Calabria director. Ed National Consulting. If you'd like to connect with us on social media you could find tax Banta Olympian entries. Let us know your take on it. Besides all suggest feature topics all speakers you can also get onto the tax team on email. PODCAST KOST AT TECH'S SANTA DOT COM dot. AU and find a regular blog articles at TECH SANTA DOT COM dot. AU forward slash vantage anti hyphen block. 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