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Hi this is Clinton Donnelly from Valley tax law let's talk about for 720 excise tax most people have never heard of this form most people don't know what an excise taxes for Americans abroad the reason this form is of interest is that there is an excise tax on foreign insurance policies that you have signed an excise tax is basically a sales tax at the federal level the tax is 1% on policies that involve risks to living like life insurance policies sickness accidents health insurance policies annuity contracts it is a 4% tax on the premiums for all other foreign insurance policies casualty and indemnification policies this tax is paid on Form 720 this is a totally separate form it does not go in with your 1040 it is mailed to a different location the most irksome thing about this form is that it requires an EIN you cannot use your social security number the IRS requires an EIN I recommend the first time you mail this in you do not include a payment you do not put down your social security number the IRS seeing the absence of an EIN will create an EIN and bill your account for the amount due, and they will send you a letter when you get that letter you call up the IRS pay the bill and from then forward you can always use the number now and send your payment in at the same time the best way to put your handle around why this tax exists is to realize that the U.S. it uses the tax code to protect the US financial industry and to keep it strong the three legs of the financial industry stool are banks brokerage firms and insurance companies these are the three arms of the financial industry and if they're all protected by the tax loss the banks are protected by FATWA the bank secrecy act the brokerage houses likewise are protected by FATWA and the Bank Secrecy Act as well as a 30% withholding tax on dividends to foreigners and the insurance industry is protected by this excise tax a lot of people would say hey how on earth would the IRS ever know I had a foreign insurance policy well you have to voluntarily report it but if you don't volunteer it they may never know it has been said that audits of people renouncing their citizenship have involved significant queries into outstanding foreign insurance policies this is a point of interest if you look to read now, so you might want to make sure you're clean here I do expect as FATWA gets rolled out more and more fully that foreign insurance policies will start to have a reporting obligation, and they'll become visible to the IRS however as you can tell this is a very small tax typical person with a health insurance policy it may be a car policy you know so say health insurance policy of three thousand one percent tax on the premium that's 30 dollars a car insurance policy say a thousand dollars four percent tax that's forty dollars that's a ×70 a year tax we're not talking big money if you are in the eyes of the IRS have decided to intentionally fail to pay this in other words that's fraud the penalty is...
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