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US Tax Changes in the Year 2019


Happy New Year! 

As 2019 is now here and a new tax year begins, it’s time for our annual letter about tax changes affecting American expats and potential new tax pitfalls. However, I’d first like to personally thank everyone for helping us to grow so significantly in 2018, not just within Thailand but across Southeast Asia. Our primary source of this growth was due to the significant number of client referrals, which is the way we want to continue to grow in the future. 

There’s some good news going into the new tax year: changes to the
tax law have both lowered tax rates and increased the standard
deduction. The Additional Child Tax Credit has also increased from
$1,000 per child to $1,400 per child. Not only will these changes raise
the threshold for US tax liability, the potential tax refund for
American taxpayers with children has increased significantly.

However, keep in mind that the IRS is still processing the most
substantial changes to the US tax system in more than 20 years. Between
the current government shutdown and the extent of the changes, I suspect
that the start date for electronic filing for the new tax year may be
delayed. If you’re expecting a refund, these changes may also result in

Tax Scams

I’d like to briefly mention a major problem we saw a lot more of over
the last year. There was quite a noticeable increase in the number of
scamming attempts using the guise of the IRS to trick people into
transferring money. Many of these have moved beyond email phishing
scams, and are now sophisticated scams involving online dating or a
supposed American investor. The scams may run for months, and typically
end up with a supposed transfer of money from America to a Thai account,
only to be held up by the “IRS” who then request a withholding tax paid
into a specific account.

IRS contact procedures are very strict and very regimented.  Notices
are sent through the mail if those are not answered they will send a new
notice by certified mail.  E-mail contact is never used, and phone
contact is rarely attempted, and only done so after all other contact
methods have been exhausted.

As a standard rule the IRS will never:

      • Send an e-mail asking you to verify account information

      • Send e-mail notices for taxes or penalties owed

      • Stop a bank transfer in order to ask for taxes

      • Call to demand payment over the phone

      • Threaten to immediately contact local law enforcement if taxes are not paid

      • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe

      • Ask for credit or debit card numbers over the phone

    If you’re contacted by the IRS for any reason, especially if you’re
    unsure if it’s really the IRS trying to get in touch, please feel free
    to give us a call. We will not only help verify the authenticity of the
    e-mail/letter/call, but can assist in responding to actual IRS
    correspondence as well.

    One more important note regarding real notifications: DON’T PANIC! Most
    notices are simply looking for additional information or clarification
    and as such any questions are generally easy to resolve.

    Social Media and the IRS

    News reports are suggesting that the IRS will start more formal
    programs designed to scan social media for signs of tax evasion. The
    practicality of how this will be done is a complex issue, as IRS
    employees are barred from using their personal accounts in work
    situations and they are also prohibited from using false flag identities
    to gain access to information.  I assume that this will essentially
    become an audit tool, where the IRS may eventually consider an audited
    individual’s social media account information. For example, an
    individual claiming poverty but frequently posting photos of yacht
    charters on the French Riviera may have some explaining to do. I don’t
    think that the IRS will be actively monitoring social media, however it
    may mean that if questions arise the IRS will be able to check.

    Foreign Earned Income Exclusion

    The Foreign Earned Income Exclusion has increased to $104,100 for the
    2018 tax year. However, the ability to claim has become slightly more
    limited due to the IRS now including the following line:

    “You are not considered to have a tax home in a foreign country for any
    period during which your abode is in the United States. For tax years
    beginning after December 31, 2017, you are not considered to have a tax
    home in a foreign country for any period during which your abode is in
    the United States”

    Essentially, the IRS is getting a bit tougher on those who attempt to
    reside in the United States while claiming some of the benefits of the
    Foreign Earned Income Exclusion. This does not really affect the
    physical presence test, but does have a bit of a detrimental effect on
    those with homes in the United States when they want to claim the bona
    fide residence test.  This is a rare case but the definition of abode
    will become more important when claiming the exclusion going forward.
    Again, if in doubt call us.

    Standard Deduction
    For 2018 taxes filed in April of 2019, the standard deductions are as follows:

      Personal exemptions are suspended until 2025.

      2018 Income Tax Rates

      Rate    Individuals         Married Filing Jointly
      10%    Up to $9,525         Up to $19,050
      12%    $9,526 to $38,700         $19,051 to $77,400
       22%    38,701 to $82,500         $77,401 to $165,000
      24%    $82,501 to $157,500         $165,001 to $315,000
      32%    $157,501 to $200,000         $315,001 to $400,000
      35%    $200,001 to $500,000         $400,001 to $600,000
      37%    over $500,000         Over $600,000

      Again, if you have any questions or need any clarification about any
      aspect of the new tax changes, just give us a call to discuss the issue.
      An ounce towards prevention is far less expensive and worrying than a
      pound of tax problems.

      Thomas M Carden E.A. JSM