Saddle River Capital Management recently launched a service to help clients with assets in multiple countries comply with the various tax laws they’re subject to.
“The issue for many expatriates, whether they be Australians like me or foreigners living in the United States on an H-1B visa or visiting executives, is that often they don’t realize they need to comply and provide information for the U.S. tax return,” John Kimber, an advisor with Saddle River, told ThinkAdvisor.
Saddle River is not a tax advisor, but helps facilitate the process of filing taxes in multiple jurisdictions.
The firm begins by taking account of all of a client’s international assets “so we can do the asset allocation study, whether it be for property, securities, cash or bonds in more than one jurisdiction,” Kimber said. “Often if a client if dealing only with a U.S. advisor, many of those international assets get lost in the mix.”
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He referred to one of his clients who is filing taxes in three or four different tax domiciles. “He worked in three or four countries during that year. Nobody wanted to coordinate this and he was in a situation where his home-base accountant in the United States could not do his foreign tax returns, and his foreign accountant could not do his U.S. tax returns,” Kimber said. “Worse than that, none of them seemed to be able to know what the ramifications were of dealing in more than one jurisdiction.”
That’s an extreme case, he acknowledged, but it’s not uncommon for people to be unaware of where they’re paying taxes.
“Generally speaking, if you’ve been in a country for more than six months, that’s where you’re going to file your tax return, but you got to avoid also paying taxes in your home country,” he said.
Even working between just two tax domiciles can be difficult. “The differences between countries can be quite distinct,” Kimber said. There are many tax concessions in the United States that aren’t available in the other countries. “For example, anybody coming from England and working in the United States would not be familiar with things like the 401(k). They would not be familiar with the tax deductibility of interest on a family home. They would not be conversant with 529 plans or Coverdell plans. They would not be familiar with estate taxes in the United States. There are a number of differences and unless they are made aware of these, they can make some terrible mistakes when they start work.”