London Mayor Boris Johnson is being pursued by U.S. tax officials while his former New York counterpart Michael Bloomberg was given an honorary knighthood by Queen Elizabeth last month.
Beware As The U.S. Tax Net Closes On Thousands Of U.S. Citizens Living Abroad.
The Conservative mayor of London – who was born in New York and holds an American passport – just revealed he is being pursued by the U.S. authorities for an unpaid tax demand. The demand reportedly relates to his first home in the UK, which he said was not subject to capital gains tax in England. According to U.S. tax law all citizens are required to file a tax return and pay U.S. taxes, even those with dual citizenship and those who earned income abroad.
The British Newspaper “The Telegraph” reports the home, in Islington, north London, was bought by Mr. Johnson and his barrister wife in 1999 for £470,000. They sold the house for £1.2million in 2009. As mayor of London, Mr. Johnson earns a salary of £144,000 and on top of that he is paid £250,000 a year for his column in the Telegraph. While in the U.K. he would not have been liable for capital gains tax as residents do not pay it on the sale of their first home, Mr. Johnson could be facing a bill of over £100,000 to the U.S.
U.S. tax laws which are administered by the Internal Revenue Service mandate that if you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad.
Quite simply: Your worldwide income is subject to U.S. income tax, regardless of where you reside.
When questioned in a recent interview on NPR, Mayor Johnson complained that he had been hit with an IRS demand for capital gains tax. He said the U.S. demand related to his first home in the U.K., even though it is not subject to capital gains tax in England. Mr. Johnson thinks it is outrageous to tax U.S. citizens everywhere no matter what. He exclaimed that he hasn’t lived in the U.S. since he was five years old!
Still, U.S. tax law is what it is and the IRS demands its money. Asked whether he would pay the bill, Johnson replied: “No is the answer. I think it’s absolutely outrageous. Why should I? I pay the lion’s share of my tax, I pay my taxes to the full in the U.K. where I live and work.”
Renouncing U.S. Citizenship Is Not The Cure.
A foreign-based person looking to renounce U.S. citizenship is treated as “exiting the U.S.” To exit, you generally must prove five years of U.S. tax compliance, and in some cases you pay an exit tax which is equal to 15% of the value of all your assets! Long-term residents giving up a Green Card can be required to pay the tax too.
Will The IRS Chase Mayor Johnson Down?
Yes and if you are in the same situation the IRS should be coming after you too. We encourage taxpayers who are concerned about their undisclosed offshore accounts to come in voluntarily before learning that the U.S. is investigating the bank or banks where they hold accounts. By then, it will be too late to avoid the new higher penalties under the OVDP of 50% percent – nearly double the regular maximum rate of 27.5%.
Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed or in 2012 OVDI, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.
Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDP.
Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.