Individual Strategies

In Part I of this 3-part series, we discussed the tax ramifications of living abroad, becoming an expat. In Part II, we go to the extreme by leaving America and renouncing our citizenship. And as you would guess, there are tax consequences to such an action. Before we step into renouncing our U.S. citizenship, we need to address how we can lose our citizenship.

There are a few tax rules new for 2025 that may catch some individuals and their tax advisers by surprise. These changes have not received lots of attention either because they are overshadowed by related changes that are more significant, or they were enacted a few years back with a future effective date that arrives in 2025. This article covers changes for 2025 that you will want to be sure to share with clients to avoid surprises at a later date.

When Americans speak of leaving America, they generally are expressing a desire to live elsewhere in the world for cultural reasons or due to cost of living. These people are called expatriates, aka expats. For clarity, a mere visit to another country does not make you an expat. To be an expat, the move needs to be long-term and often includes working or retiring in the new country. Expats live somewhere outside the U.S., but still have a tax obligation to the U.S. and possibly the country they move to. That will be the focus of this article.

As summer turns to fall, the leaves turn and houses start being decorated, the air becomes crisper and the internet fills with year-end tax tip pieces. I call them tip sheets. I just love reading tip sheets, but I’m retired from active practice. Somebody who doesn’t have time on their hands might look at two or three and figure they have seen it all and didn’t learn anything they didn’t know already. I’m here to tell you that if you keep hunting, you might find some gems. But better than that, I will share what I have found in the event you don’t have the time or inclination to look at another twenty or thirty tip sheets.

To have and to hold and happily ever after is a nice dream, but into every married life a little reality about money must fall. Enter the prenuptial agreement, aka the prenup. This contract between prospective spouses clarifies the rights and obligations of the parties during their marriage – and during the sometimes-ugly aftermath should they separate, divorce, annul the marriage, or die. Prenups can help couples set financial expectations for the marriage, including whether they’ll have a joint bank account and file taxes together, among many other matters. Given the sensitive nature of these conversations, it’s important to know how to advise on such an important document. What do your clients need to know?

A penalty specifically for taxpayers who have made a mistake on their return. That's how I explain the accuracy related penalty to taxpayers. This penalty carries a punch as well, with 20% of the tax the IRS didn't receive due to the taxpayer making a mistake. This seems harsh out of context. The reason for this harshness is because the IRS considers these "mistakes" to be intentional due to taxpayer negligence. This is one of the reasons at my firm that we encourage our clients to take their time when filling out the intake form and gathering their documents. Omitting an income document can be costly in the end to both you and your client. The IRS will hit your client with penalties that they could have avoided, and you may compromise the integrity of your firm.

Clients who recently graduated college brim with enthusiasm for adult life. If they’re like most other adults, they’re less enthusiastic about tax strategies and probably don’t know much about grown ups’ taxes. Some might not even know filing deadlines and may never have filed a 1040. Withholding, deductions and dependency, saving for retirement and lowering taxable income: It’s always difficult to realize all that others don’t know about taxes, and here’s how to continue these young clients’ education.

Yes, the IRS does forgive some tax penalties. The IRS refers to this forgiveness as penalty abatement. Abatement is the act or process of reducing or removing something. In this case it is removing or reducing a penalty. But penalty forgiveness is not a blanket offer that everyone qualifies for the way the radio ads make it seem. There is a process that the IRS has for requesting and granting abatement. It is up to the taxpayer to prove that they qualify for abatement. That’s where you come in.