Taxation of Persian Americans Living in Iran
If you are a U.S. green card holder or a U.S. citizen (a US person under the Internal Revenue Code 7701(b)) and live in Iran, you are taxed on your worldwide income regardless of where you earned it. Additionally, you are subject to U.S. international tax laws, including Report of Foreign Bank and Financial Accounts (FBAR), and Foreign Account Tax Compliance Act (FATCA). In case of violations, may consider OFAC VSD and IRS (VDP).
The good news (be sure to read the bad news below) is that you may be able exclude up to an amount of your earned income or compensation (Foreign Earned Income Exclusion) income earned in Iran which is adjusted annually for inflation.
- 2021 $108,700
- 2020 $107,600
- 2019 $105,900
- 2018 $103,900
- 2017 $102,100
- 2016 $101,300
- 2015 $100,800
if you otherwise qualify. For example, not stay in the U.S. more than 35 days in a calendar year, under the Foreign Earned Exclusion provided under the Section 911 of the Internal Revenue Code.
You may deduct certain foreign housing amounts. This exclusion can only be taken by timely filing the tax return. It is important to note that this exclusion does not apply to passive or un-earned income (see below). Neither does it waive the requirements of filing (FBAR) and (FATCA) (see above).
Generally, there are three categories of foreign income.
(I) Earned Income; (II) Un-earned Income; and (III) Variable Income.
(I)- Earned income includes: (1) Salaries & wages, (2) Commissions, (3) Bonuses.
(4) Professional fees and tips.
(II)- Unearned income includes: (1) Dividends, (2) Interest, (3) Capital gains, (4) Gambling winnings,
(5) Alimony, social security benefits, and (6) Annuities.
(III)- Variable income; may fall into either one of these categories: (1) Business income, (2) Royalties; and (3) Rents.
The bad news is that unfortunately your employment in Iran may violate the U.S. laws of sanctions against Iran also known as the Iranian Transactions and Sanctions Regulations (ITSR) administered and enforced by OFAC. There are certain exceptions to the ITSR. For instance, employment at the World Bank, International Monetary Fund (IMF) or other United Nations related organizations that may be authorized. It is urged to ask your potential employer to ensure that your employment in Iran is otherwise authorized by OFAC. Furthermore, you must seek advice from an OFAC Attorney and an International Tax Attorney to prevent unintended perils.
Unintended Iranian OFAC Violations
In case you have worked in Iran without the knowledge of the ITSR, and reading this article raises your curiosity as to whether you may have violated any U.S. laws, you may seek legal advice from an OFAC attorney and an International Tax Attorney, including our firm. See (VSD)
Zaher Fallahi, Attorney At Law, CPA, has assisted Persian Americans living in Iran in filing their US tax Returns, OFAC licenses, taxation of money transfer from Iranian, and has defended them before OFAC Enforcement Division, IRS, IRS Criminal Investigation and FBI.
Zaher Fallahi, Attorney At Law, has been rated 10 out of 10 by Avvo.
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