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Welcome to the Wiesenberg & Co. Certified Public Accountants foreign property owner tax update.

Becoming a United States tax resident is an extremely easy process that visitors to the US rarely think about. There are significant tax consequences when this happens. This newsletter discusses the pitfall of becoming a US tax resident and how to avoid this outcome.

Gaining US tax residency status can have severe consequences because United States law assesses taxes on residents' worldwide income. An overseas investor, considered by the Internal Revenue Service to be a United States resident, will be taxed on income that he or she generates anywhere in the world. A retired couple, for example, who earns dividend and interest income in England, could be liable for taxes in the United States on this income. If a large income-realizing event occurs, such as a sale of an asset in the UK, significant US taxes may result.

A non-resident visitor to the US does not need to worry about becoming a resident if he or she will be in the United States for less than a quarter of a calendar year. If a person is in the US between half and a quarter of a calendar year, care needs to taken to avoid gaining residency status. It is necessary to investigate the relevant laws and how they relate to the specific travel situation. If an individual is in the US for more than 183 days in a calendar year, becoming a resident is unavoidable in almost all situations.

It is important to keep careful track of the length of time one stays in the US. A change in travel dates, sometimes by just a few days, can save a person from acquiring US residency status. On the other hand a delayed departure caused by a flight cancellation could result in inadvertent U.S. tax residence status.

Sometimes becoming a resident may be unavoidable. In these situations planning strategies can keep taxes at a minimum.

Reminder: The tax deadline for residents of the United States is April 15th. The deadline for non-residents is June 15th.

Tax tip of the day

If an overseas resident has assets in the United States, such as real estate, it is easy for the American tax authorities to place a lien on the property to ensure collection of outstanding taxes.

Please contact us with any comments or questions you may have.

(This newsletter is designed to be of general interest. The specific techniques and information discussed may not apply to you. Before acting on any matter contained herein, consult with your professional advisor.)