Avoiding Taxes

Avoiding Taxes

Introduction

In order to avoid taxes, majority of the taxpayer are using different form of tax avoidance techniques. However, there is vast difference between the tax avoidance and tax mitigation or evasion. Recently, people have adopted planning scheme in order to avoid taxes and this is much difficult to achieve. This paper will answer few questions regarding tax education.

Discussion

1. Consequences of Renounce Tax Liability

Renouncing U.S. citizenship is conceive to be a serious and irrevocable action and such decision are not made suddenly. Renunciation is basically an intention to relinquish U.S. citizenship. Before taking such decision, an individual should consider the consequence for renouncing U.S. citizenship on their tax liability and make sure that the decision taken is right (Renunciation of Citizenship, 2012).

Tax and military obligation

An individual who is renouncing U.S. citizenship should be alert of this fact that though he has renounced U.S. citizenship, this would not be having any impact on any of its U.S. Taxes. Moreover, this renouncing will also not allow an individual to avoid any action for crimes might be committed by them in US or get away with any settlement of the financial obligation formerly incurred in US or incurred as US citizen overseas.

Limits Renouncing My US Citizenship

According to the IRS, an asset worth for less than $2,000,000 or annual income has cross the amount exceeds $147,000 over past five years, then an individual has to pay expatriation tax. Though the amount of assets or income is below from this amount, still an individual has to file expatriation tax with IRS.

Tax-Deferred Accounts

For instance if a person has Tax-Deferred Accounts or any type of retirement plans, according to the IRS come of the penalties will be waived on this but individual has to pay income tax level on the amount that will be distributed from such accounts.

Deferral of Tax

Even for deferral Tax, IRS does not offer any extension. Any property or assets that individual is holding and they're not liquidating before their expatriation, taxes on this are deferred through signing a bond equivalent to possible tax liability. Moreover, interest will also be charged on outstanding balance of tax (Renunciation of Citizenship, 2012).

2. Consequences of Establishing Dual Citizenship on Tax Liability

When an individual having or maintaining citizenship of two countries, this has been termed that this person is holding dual citizenship. This dual citizenship comprise of many taxation problem. According to the US taxation law, a person living in US or foreign resident or any US resident living outside US, this person is required to file tax return. Moreover, US tax law also state this that any US residents earning in other country, a certain amount of tax is exempt from the US tax liability. For instance, an individual who is a Canadian Residents and also US citizens has to file tax on its worldwide income in Canada as well as in US. This has been mentioned in Internal Revenue Service -IRS that tax US resident where ever ...