We reminded Americans in June 2008 that the foreign bank account disclosure form (FBAR) is due each June 30 to the US Treasury Department for the prior calendar year. The form is required if you had one or more foreign financial accounts having an aggregate balance of $10,000 or more any time during 2007 and will list all foreign accounts – even those that might have individually not have surpassed the $10,000 limit. The accounts covered by this report includes also employer company accounts over which a filer has sole- or co-signature authority.

Tax Rate on Net Capital Gain and Qualified Dividends

• Maximum tax rate on net capital gain and qualified dividends is reduced from 5% to 0% for taxpayers in the lowest two tax brackets for tax years after 2007.
• The 15% rate remains unchanged.
• New 0% rate applies for both regular tax and AMT.

IRA Contribution Limit
The contribution limit for traditional and Roth IRAs has increased to the lesser of:

• $5,000 ($6,000 for taxpayers age 50 or older at the end of the year), or
• Taxable compensation.

If modified AGI exceeds the applicable limit, the maximum traditional IRA deduction and maximum Roth IRA contribution may be limited.

Rollovers to Roth IRAs
After 2007, rollovers from the following plans can be made to a Roth IRA (in addition to a traditional, SEP, or SIMPLE IRA):

• • A qualified pension, profit-sharing or stock bonus plan (including a 401(k) plan),
• • An annuity plan,
• • A tax shelter annuity plan (section 403(b) plan), or
• • A deferred compensation plan of a state or local government (section 457 plan).

The rollover is subject to the same rules that apply for converting a traditional IRA into a Roth IRA.

Phase-Out of Reductions of Personal Exemptions and Itemized Deductions
For 2008, the amount by which these amounts can be reduced is only 1/3 of the amount that would otherwise apply. Example: The maximum reduction for the $3,500 personal exemption for 2008 is $1,167. The minimum exemption allowed after the phase-out is $2,333.

First-Time Homebuyer Credit
First-time homebuyers can claim a refundable tax credit of up to $7,500 ($3,750 if married filing separately) for homes purchased after April 8, 2008, and before July 1, 2009.

• Can elect to treat a 2009 purchase as a 2008 purchase and claim the credit in 2008.
• Credit is phased out ratably over a $20,000 range for taxpayers with AGI over $75,000 ($150,000 if married filing jointly).
• Functions as a 15-year interest-free loan, with 1/15th of credit recaptured annually beginning 2 years after year of purchase.
• Credit will be claimed on new Form 5405.

Exclusion on Sale of Main Home
For sales after 2007, the maximum exclusion on the sale of a main home by an unmarried surviving spouse is $500,000 if:

• The sale occurs no later than 2 years after the date of the other spouse’s death,
• The ownership and use requirements for joint filers were met immediately before the date of such death, and
• During the 2-year period ending on the date of such death, there was no sale or exchange of a main home by either spouse which qualified for the exclusion.

Recovery Rebate Credit
For tax years beginning in 2008, taxpayers can claim a refundable credit figured in the same manner as the economic stimulus payment, except that the amounts are based on tax year 2008 instead of tax year 2007.

• The amount of the credit is reduced by any economic stimulus payment received in 2008.
• If the credit is less than the payment received, the difference does not have to be repaid.

Special Depreciation Allowance

• New 50% additional first-year special depreciation allowance applies to most new property purchased and placed in service after 2007.
• To be eligible, the property must be property with a recovery period of 20 years or less, off-the-shelf computer software, qualified leasehold property, or water utility property. The special allowance does not apply if the ADS method is required.
• The taxpayer may elect out for any class of property.
• The allowance is figured after the section 179 deduction and before regular depreciation.
• If the special allowance applies, the limit on depreciation and the section 179 deduction for automobiles is increased by $8,000.

Section 179 Expense Deduction

• Maximum increases to $250,000 (higher in some cases)
• Phase-out begins when section 179 property exceeds $800,000 (higher in some cases)

Tax on Nonresident Aliens

• The exemption from tax on certain interest-related dividends and short-term capital gain dividends paid to a nonresident alien by a regulated investment company does not apply to any tax year of the company beginning after 2007.
• U.S. citizens who relinquish their citizenship after June 16, 2008, are treated as having sold all of their property at fair market value on the day before the expatriation date. An election to defer the tax owed on the deemed sale of the property may be made if adequate security is provided.

The following individual tax benefits have expired:

• Allowance of certain personal tax credits against AMT.
• Deduction for educator expenses in figuring AGI.
• Tuition and fees deduction.
• Deduction for state and local general sales taxes.
• Nonbusiness energy property credit.
• The exclusion from income for certain IRA distributions made directly to a charity.

Please consult the IRS website at www.irs.gov to research specific tax issues. You can find draft 2008 forms here and final 2008 forms here. If you send an email to the address below we will be pleased to send you the original IRS presentation in MS PowerPoint.

CFO2GO specializes in providing outsourced accounting services to Czech-based SMEs and entrepreneurs. It also assists Czech-based businesses and individuals to fulfill Czech and U.S. tax and accounting reporting obligations. CFO2GO provides extensive interim financial management and statutory governance to small and medium-sized businesses.

The comments in this article are not intended to constitute an opinion regarding any specific tax issues because additional tax issues may exist that could affect the tax treatment of the tax issues addressed in this memo. This memorandum does not consider or reach a conclusion with respect to those additional issues and was not written and cannot be used for the purpose of avoiding penalties under US code section 6662(d).

For further information, please refer to our web site at www.cfo2go.eu or contact John Mohr on at john.mohr@cfo2go.eu

Filers must also be sure to check the box in part III of Schedule B on their form 1040 to ensure that they file a complete return. The failure to file a complete return extends the statute of limitations for your entire tax return.

A willful failure to file the form is subject to penalties of up to $500,000 and five years in prison. A non-willful failure to file the form is subject to a penalty of up to $10,000. Therefore, if the government concludes that you should have filed the form and you didn't, it could cost you at least $10,000 for each calendar year that it isn't filed.

American owners and directors of a corporation or partnership, a grantor, trustee or trust protector or a beneficiary of a foreign trust, all may be required to file the FBAR if they have a direct or indirect financial interest in a foreign financial account or direct or indirect signature authority over a foreign financial account or accounts that in aggregate exceed the $10,000 threshold. These persons might inquire of their corporate accounting or legal departments whether the company has been reporting these accounts or not – boh for their own protection as well as the benefit of those corporations.

The pressure on tax preparers and preparers subject to the reporting requirements of the US Treasury and the Internal Revenue Service is increasing. At a recent AICPA meeting of various tax committees, technical resource panels and task force groups reportedly discussed the FBAR and is preparing to advise Congress to amend the rules and regulations. The Chair of the FBAR task force is reported to have commented that a high ranking IRS manager informed his field agents that they should demand at least 6 years of penalties from taxpayers that fail to report their foreign accounts, as well as any other reports required for foreign corporations, partnerships, trusts, etc.

The non-willful filing penalty can be waived by the IRS in the case of a reasonable cause for non-willful failure to file the form. But an IRS representative who is involved with administration of this form told our task force that not knowing about this form is no longer considered to be a reasonable cause for non filing and that not being informed by a tax preparer is no longer going to be considered a reasonable cause.

The most distrurbing fact is that there is no safe harbor for making a voluntary late filing. For those who still have any foreign financial accounts that they have not reported, they might rather review their options with an attorney rather than with an accountant or other non-lawyer. If the attorney isn't familiar with the issues he might want to order and to review a report by Vernon Jacobs, CPA, "Guide to Reporting Offshore Financial Accounts" -- which is the most extensive source of non-governmental information that I know of regarding this form. Information on ordering copies of the report is available at http://www.offshorepress.com/fbar.htm

Ironically, only the government is an authoritative source of information on this subject and reliance on this information can't be used to avoid various penalties that might be imposed. Some limited instructions are provided with the form that is available at the IRS web site The IRS also has a page of Answers to questions about this form.

CFO2GO is a specialist in outsourced accounting services. It also assists executives and entrepreneurs and their businesses to fulfill their US and Czech tax and accounting reporting obligations. CFO2GO also provides extensive interim financial management and statutory governance to small and medium-sized businesses.

The comments in this article are not intended to constitute an opinion regarding any specific tax issues because additional tax issues may exist that could affect the tax treatment of the tax issues addressed in this memo. This memorandum does not consider or reach a conclusion with respect to those additional issues and was not written and cannot be used for the purpose of avoiding penalties under US code section 6662(d).

For further information, please refer to our web site at www.cfo2go.eu or contact John Mohr on at john.mohr@cfo2go.eu

Personal Tax Returns

If you are an American expatriate you are no doubt already asking yourself how much longer you can put off your preparing your local and US tax returns … Americans (and foreigners if they have a resident status or income sources in the US) are obligated to file in both places each year. In the Czech Republic, your local personal tax return will be due 31. March 2008 unless you empower a licensed tax advisor to represent you before the Financial Authority. US filers outside the US have until 15 June to file their form 1040 with the IRS, extendable to 15 October with form 4868.

Tax is nonetheless due locally by 31 March for most payers and in the US by 15 April. Interest and penalties begin to accrue after these dates.

There are a number of changes this year, although relatively few will affect US expats earning under the foreign earned income exclusion and/or not having adjusted gross income. Some of these changes include:

• Tax rebates. As part of a US 170 billion economic stimulus plan, Congress will mail checks directly to tax payers this Spring. To obtain a full rebate, single tax filers must have 2007 adjusted gross income (AGI) below $75,000 and joint filers must have AGI below $150,000. Tax payers who file before 15 April 2007 will be first in line.
• Foreign Earned Income Exclusion. The exclusion in 2007 is US 85,700
• Alternative Minimum Tax. The exemption decreased in 2007 to US 33,750 for single filers; US 45,000 married filing jointly; US 22,500 married filing separately. This could be a significant item for those cashing in company stock or exercising options.
• IRA. Deductions for an IRA expanded for those covered by a retirement plan and having a modified adjusted gross income was less than US 62,000 for single filers, US 103,000 for married filing jointly.
• Standard Mileage Rate. The SMR for unreimbursed business use of your car rose to US 48.5 cents/mile, and for medical care US 20 cents/mile.

American director or shareholder of a foreign company?

American directors and shareholders of most foreign limited liability companies and partnerships that are more than 50% American controlled or owned are obligated to report significant information on those foreign entities to the IRS. The penalty for not filing starts at US 10.000 and late filing can reduce the amount of foreign tax credit available. Also, the statute of limitations only starts after the information is submitted, so not filing can only compound the cost. The information return is filed with and due at the same time as the taxpayer’s 1040, including extensions.

Self-employed? Have you heard about Social Insurance penalty?
Many expatriate, self-employed do not realize that they are obligated to pay social insurance to the US government in the form of the Self Employment Tax. In the second year of self-employment, the taxpayer is obligated to make quarterly advanced payments of the SE Tax. These entrepreneurs are obligated to pay into the Czech system, too. This results in a large effective tax bill to the entrepreneur. Last August the US and Czech governments announced progress on a totalization agreement for social security that, among other things, will require payment into only one system and will make benefits transferable between the two countries. However, regulations have not been released and it remains to be seen if the benefits will be made retroactive to 1.1.2008 or will come into effect later.

CONCLUSION

If you are a US citizen or a foreign national who received income from employment, investments, rentals or other sources within the United States in 2007, then you almost definitely have a US personal income tax reporting obligation. American citizens or non-resident aliens who were a director or shareholder of a foreign corporation (s.r.o., LLC, etc.) have significant, complicated additional reporting obligations.

If you have questions about whether you have an obligation or not, by all means peruse the IRS website at www.irs.gov or the Czech MF website at www.mfcr.cz, or contact a professional who is comfortable with both the local and US jurisdictions.

CFO2GO assists executives and entrepreneurs and their businesses to fulfill their US and Czech tax and accounting reporting obligations. CFO2GO also provides extensive interim financial management and statutory governance to small and medium-sized businesses.

The comments in this article are not intended to constitute an opinion regarding any specific tax issues because additional tax issues may exist that could affect the tax treatment of the tax issues addressed in this memo. This memorandum does not consider or reach a conclusion with respect to those additional issues and was not written and cannot be used for the purpose of avoiding penalties under US code section 6662(d).

For further information, please refer to our web site at www.cfo2go.eu or contact John Mohr on at john.mohr@cfo2go.eu

The most onerous forms and attached schedules, so-called information returns, are used to satisfy the reporting requirements under Sections 6038 and 6046 of the Internal Revenue Code – primarily, to provide the IRS the information necessary to tax income to US taxpayers on a current basis. Its primary result is to negate the “off-shoring” of earnings to avoid or defer income taxation. The forms capture information on reportable transactions with related parties; subpart F income subject to current taxation (including income from property in the US); and whether the place of business of your foreign operation is really foreign.

The penalties for not filing an information return when due begin at USD 10.000 and can rise to USD 100.000 per filing, regardless of whether tax is due. Also, due to the complexity of the forms and the requirement that they be reported in US GAAP, the cost of compliance can be higher than expected. Local accountants are unlikely to have the skill-set necessary to fulfill your US obligations.

That said, you might still have the option to elect how your investment will be treated for tax purposes in the US, which can reduce the complexity or cost of the reporting or both. Depending on several factors, you may elect to have your investment in the LLC treated as a corporation, partnership or as an entity indivisible from yourself (disregarded).

The three main information returns requested of US taxpayers each year by the IRS are:

5471 Information Return of US Persons With Respect to Certain Foreign Corporations
8865 Return of U.S. Persons With Respect to Certain Foreign Partnerships
8858 Information Reporting With Respect to Foreign Disregarded Entities

There are numerous other forms that may be required. I list just a few of them here:

SS-4 Application for Employer Identification Number
8832 Entity Classification Election
TD-90 22.1 Report of Foreign Bank and Financial Accounts
926 Return by a US Transferor of Property to a Foreign Corporation, Foreign Estate, or Foreign Partnership
1040x Amended U.S. Individual Income Tax Return
8621 Return by a Shareholder in a Passive Foreign Investment Company

CONCLUSION

If you are a US taxpayer, before investing 10% or more into a foreign LLC or assuming a director’s role in an LLC with US shareholders that individually own 10% or more, take the time to understand what your legal and tax obligations will be – not only vis a vis the Czech Republic, but also the United States. Consider the cost, risk and other burdens of keeping accounts in local and US GAAP and preparing information for local and US tax offices. Most of my clients do very little with their LLC (usually, a Czech s.r.o.) that cannot be efficiently captured and reported to the IRS and local authorities with a little foresight.

Well, take the time to haul out those tax documents – if one of you is an American citizen (or otherwise obligated to file taxes in the US), then you will now have to prepare taxes for not just one, but two people – and getting familiar with each other’s financial situation – if you have not done it already – cannot begin too early. For recently married taxpayers, the tax consequences begin when the couple makes their vows. At the end of that first calendar year, taxpayers will be considered to be married – for the entire year.

Individual Taxpayer Identification Number

If you will be claiming exemptions for your spouse or dependents on your return, you will need to furnish either a social security number (SSN) or an individual taxpayer identification number (ITIN) for them. Generally speaking, the SSN is available only to those intending to work in the U.S. who also obtain authorization from Homeland Security. More likely, if you live in the Czech Republic and are simply intending to claim exemptions for your spouse or other dependents (a foreign-born child, for example, or your new spouse’s aging parent, who lives with you) on your returns, seek to make certain retirement investments on their behalf (say, US Government savings bonds), you will need to obtain an ITIN by filing Form W-7 with a current tax return.

The tax payer will submit form W-7 for their dependent together with a notarized copy of a current passport, or certified copies of two other documents such as a driver’s license, voter’s card, etc, providing evidence of identity and foreign status. In the Czech Republic notaries will not legally certify your passport; the American consulate in Malá Strana will certify a Czech passport for US 30. And note that you will send your return containing a W-7 to the ITIN Unit at the IRS – not the normal address. If you will qualify as a foreign-based taxpayer, you will have until 15 June to submit your documents on time. If this is still not enough for you, you will need to file for an additional 4-month extension.

Children

When you submit a W-7 for a child, you will need to demonstrate they are your dependent – usually using a certified copy of a birth or adoption certificate or court papers (with certified translation!) showing legal guardianship. Be sure not to file the similar form called the W-7A, which is filed by parents adopting a US resident child and who are awaiting a US SSN for that child. To obtain an ITIN for foreign children, you must use the W-7 and you should file it with a current tax return, just as for your new spouse.

Another word about dependent children: While you will usually be able to claim a personal exemption for your spouse on your joint return regardless of when you got married during the tax year, the rules for children are different. If your new spouse has a son or daughter from a prior marriage, they need to qualify as dependents before you can apply for their ITIN. As a rule, they need to be adopted by you by the end of the current tax year and living with you the entire year.

Assets and Documentation

When you join in marriage you are usually also bringing your assets together; start collecting together the documents supporting those assets now. One of the first decisions will be whether to file married filing separately or jointly. You actually need to file an election statement the first time you file a joint return with a non-resident alien (your Czech spouse!). This election has nothing to do with love – it is all about how much tax you will pay. Especially if your new spouse is self-employed or has significant financial investments, it may be better to not make the election to file a joint return. Try to identify bank accounts, investments, self-employed business assets and the like as soon as possible.

One of the most challenging aspects of tax compliance after marriage is updating identification doucuments – mostly because of the time it takes as the various levels of identification are updated by a myriad of government agencies. Following a change in name, for example, your Czech bride will need to obtain a new Czech passport. That means a new US visa (Available from the US embassy for CZK 2.500). To get that document she will first need to change her citizen identification document. (Remember, you need to get a notarized copy of the passport in order to apply for the W-7!). If you will be adopting a Czech child, be aware that this will change his birth certificate, necessitating a change in his or her passport, too ...

CONCLUSION

In conclusion, saying those two magic words marks the beginning of a whole new relationship with the IRS, as well as your new spouse. If you have not yet taken the plunge, consult a tax advisor about the consequences and prepare yourselves. You will be thankful you did!

CFO2GO is an independent consultancy focused on assisting SMEs and their owners and executives to achieve their operating and strategic objectives when internal or alternative means of doing so are inadequate to the task. We seek to advance your corporate objectives by meeting your short-term needs and positioning you to take advantage of future opportunities. We are specialists in international personal taxation and would be pleased to speak with you.

For further information, please refer to our web site at www.cfo2go.eu or contact John Mohr on at john.mohr@cfo2go.eu

This article is the second in a series directed at helping American expatriates cope with their personal tax reporting obligation to the IRS.

Do Expats need to file taxes in the US?

Probably, Yes! Some expats are not aware that they are required to file a tax return each year that their income exceeds the minimum filing requirements (USD 8.200 for a single person in 2005). If your income exceeds this threshold, you are still required to file a tax return - even if all of your foreign earned income can be excluded on form 2555. And if your total foreign earned income exceeds the foreign earned income exclusion limits (USD 80.000 for tax year 2005), it is especially important that you file form 2555 within one year of the due date of your return or as soon as possible. If you have failed to file your return and have not claimed the foreign earned income exclusion on form 2555 (in the last few years) by the filing deadline and the IRS discovers this before you get caught up, the IRS can deny you the exclusion and you may well pay double. There are still other procedures that you can follow to obtain the exclusion in this case, but they are more complicated and only add stress to an unhappy situation.

A brief note here for your further research: If you have net income from self employment of more than US 400, you will also owe self-employment tax (SE tax). This is different from the federal income tax. Even if your net earnings are below the foreign earned income thresholds, unless they are negative you will still be obligated to pay the SE Tax. The rules for paying self-employment tax are generally the same whether you are living in the United States or abroad.

Penalties and Interest

Penalties and interest are charged on taxes not paid by the due date of the return. If you have unfiled tax returns, the sooner you have them prepared, the sooner you will know what if any balance is due. You can then file the returns and protect your right to take the foreign earned income exclusion and have the peace of mind that comes with knowing that your tax situation is up to date. If you can not pay your balances in full you can enter into an installment agreement with the IRS once you have filed the past due returns. However, the interest rates are high and therefore other financing options should be explored.

U.S. income tax returns are generally due on April 15 for calendar year taxpayers. If you are a U.S. citizen or resident and both your tax home and your abode are outside the United States on the regular due date, an automatic extension is granted to June 15 for filing the return.

Interest is charged on any unpaid tax from April 15 until the date of payment. The interest rate is determined every three months and is the federal short-term rate plus 3 percent. Interest is compounded daily.

If you file on time but don't pay all amounts due on time, you'll generally have to pay a late payment penalty of one-half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full or the 25% maximum penalty is applied. The one-half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. For individuals, who file by the return due date, the one-half of one percent rate decreases to one-quarter percent for any month in which an installment agreement is in effect.

If you owe tax and don't file on time, the total late-filing penalty is usually four and one-half percent of the tax owed for each month, or part of a month, that your return is late up to five months. If your return is over 60 days late, the minimum penalty for late filing is the smaller of $100 or 100 percent of the tax owed.

Reasonable Cause

The IRS says that penalties (not interest) for filing and paying late may be abated if you have reasonable cause. If you are billed for a penalty and feel you have reasonable cause, send your explanation along with the bill to your service center, or call the IRS at 1-800-829-1040 for assistance. Generally, interest charges may not be abated; they continue to accrue until all assessed tax, penalties, and interest are paid in full. Generally, any reasonable cause exception to the penalty for failure to pay tax cannot be determined until the tax is paid in full.

The IRS advises if you were unaware of your obligation to file US tax returns you should file the late returns as soon as possible, stating your reason for filing late. We agree. We find that in addition to limiting their potential liability, expat taxpayers for whom we have done 5,7,8 and even 12 years of back returns also get peace of mind - and that is worth a lot.

For advice on filing the returns yourself, you should contact either the Internal Revenue Service representative serving your area or the Internal Revenue official who travels through your area (details can be obtained from your nearest U.S. consulate or Embassy). You can also write to the Internal Revenue Service, International Section, P.O. Box 920, Bensalem, PA 19020-8518.

And if that isn't enough, feel free to call or email me. I would be happy to work through the issues and numbers with you. joyce.mohr@cfo2go.eu

Article originally published on Prague.tv on Thu 2nd Mar, 2006.

Taxation is a difficult subject in any jurisdiction if the taxpayer has taxable activities besides a basic wage. It is many times more complicated for expatriates who struggle not only with two sets of rules for compliance, but usually are challenged by unusual forms of compensation or have investments and do not speak the local language fluently. Please return to this site from time to time – this is the first of several addressing U.S. and Czech personal taxation for U.S. Expats based in the Czech Republic.

When Social Security / Medicare Taxes Apply Outside Of U.S.

In the course of business I have met many who subscribe to three philosophies of taxation: 1) Declare it all everywhere (rare!); 2) Hide it all (I run from these people!) 3) Declare in the CR what I earn here, and in the U.S. what I earn there. The third is the most common, but it is incorrect and opens the tax payer to potential liabilities down the road. Because the system is by and large set up to avoid double-taxation of income, Philosophy 1 does not necessarily need to cost the taxpayer more, but it can involve more administration. Unfortunately, Social Security and Medicare is not automatically excluded from double taxation unless there is a bi-national social security agreement (Totalization Agreement) in place between the U.S. and the second country. There is no such agreement between the U.S. and the Czech Republic.

U.S. social security and Medicare taxes continue to apply to wages for services you perform as an employee outside of the United States if you work:

1. For an American employer
2. On an American vessel or aircraft
3. In a country that has a Totalization Agreements with the U.S. and that agreement subjects your foreign employment to U.S. social security and Medicare taxes.
4. For a foreign affiliate of an American employer

Preventing Double Payment of Social Security Taxes

To establish that your pay in a foreign country is subject only to U.S. social security tax and is exempt from foreign social security tax, your employer in the United States should write to the U.S. Social Security Administration, Office of International Programs, P.O. Box 17741, Baltimore, MD 21235-7741. Your employer should include a large amount of specific information about you in the letter.

Do I Need to Pay Self-Employment Tax?

A self-employed U.S. citizen or resident working abroad is most likely subject to the self-employment tax. (SE Tax) This is a social security and Medicare tax on net earnings from self-employment of $400 or more in a year. Net self-employment income is used to figure your net earnings from self-employment. Net self-employment income includes all business income less all business deductions allowed for income tax purposes. Net earnings from self-employment is a portion of net self-employment income. This amount is figured on Schedule SE (Short Schedule SE (Section A), line 4, or Long Schedule SE (Section B), line 6). The actual self-employment tax is figured on net earnings from self-employment, regardless of whether it is exemption from personal income tax under the foreign earned income exclusion.

For example:
You are working in Prague as a consultant and qualify for the foreign earned income exclusion. Your foreign earned income is $100,000, your business deductions total $35,000, and your net profit is $65,000. You must pay social security tax and Medicare tax on all of your net profit, including the amount you can exclude from income, even though the foreign earned income exclusion excludes the first $80.000.

CONCLUSION

In conclusion, you will need to do a little research to identify whether you are liable to pay social security and Medicare in the U.S. and the Czech Republic. If you are a sole trader, the answer is almost definitely yes. If you are not a sole trader, you may need to chase a few documents from your employer in order to escape double taxation. Please contact us for more information. If you are based in the U.S., we will put you in contact with our office in Boston.

CFO2GO is an independent consultancy focused on assisting SMEs and their owners and executives to achieve their operating and strategic objectives when internal or alternative means of doing so are inadequate to the task. We seek to advance your corporate objectives by meeting your short-term needs and positioning you to take advantage of future opportunities. We are specialists in international personal taxation and would be pleased to speak with you.

For further information, please refer to our web site at www.cfo2go.eu or contact John Mohr on at john.mohr@cfo2go.eu.