As I write this, I am hearing of a possible second round of tax cuts being prepared for consideration by Congress next September. I’m sure that has *nothing* to do with the elections a tad further down the road. What are the likely items in the bill? Perhaps making many of the changes in the 2018 Tax Act permanent; maybe more reductions in the corporate rate, and a few other “Manhattan island” type trinkets. My favorite: allowing gym memberships to be paid from tax-free Health Savings Accounts. We’ll follow this as it develops. But you know that all these things have to be paid for somehow, and the easiest “pay-fors” come from people or segments where there will be the least blowback. Expats and their income may be on the crosshairs.
So what else happened while I was away? The Supreme Court ruled in the Wayfair case that states have the right to require out of state sellers to register for and collect sales tax from those jurisdictions, even if sellers have no physical presence in them. This is huge. If you or your company sells widgets (or even services) from one state to another, it would be wise to watch these laws, as states may move to take advantage of the Wayfair decision and collect more revenue. In theory, even the occasional Ebay seller could be required to fall in line where sales are made. So, you may watch more online sellers charging sales tax on remote sales. Amazon already does for its own sales, but not yet on third-party vendors, it hosts on its website. You know the merciful thing about this? Foreign commerce is not affected by Wayfair. So if you are having an item delivered direct to Mexico, your purchase is exempt from sales taxes because it is in “foreign commerce”. You will pay Mexican VAT, hardly a consolation. At least you are not going to get “whipsawed” on both.
Switching to income tax, I still get questions about “is it legal to have over $10,000 in a foreign bank account? Yes, but there is a reporting requirement if you are a “U.S. person”. If you have own or have signature authority over foreign financial accounts, and the aggregate (the sum, if you will) of the balances at any point in the year exceed $10,000, you have to file a Foreign Bank Account Report with the U.S. Treasury. Just the friendly reminder!
Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies. His love of things Mexican has led him to devote part of his practice to federal and state tax matters of U.S. expats in Mexico. He can be reached at email@example.com or Facebook: GotayTaxLawyer. This is just a most general outline. It is informational only and not meant as legal advice.