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Taxation of Persian-Americans Living in Iran

Disclaimer: The following is intended for general information only and not legal or tax advice.

Zaher Fallahi, Attorney At Law and Certified Public Accountant (CPA), focuses on Office of Foreign Assets Control (OFAC) Regulations regarding Iran, U.S. International Tax, Undisclosed Offshore Accounts and Foreign Gifts, and represents OFAC and Tax clients nationwide. Toll Free 1-(877) 687-7558 telephone appointments are available.

Taxation of Persian-Americans Living in Iran

If you are a U.S. green card holder or citizen of the United States (a US person under the Internal Revenue Code 7701(b)) and live in Iran, you are taxed on your worldwide income regardless where you earned it. Additionally, you are subject to U.S. international tax laws, including Report of Foreign Bank and Financial Accounts (FBAR), Foreign Account Tax Compliance Act (FATCA). In case of violations, may consider OFAC VSD and IRS (OVDP).  

The good news is that you may be able exclude up to an amount of your earned (compensation) income earned in Iran which is adjusted annually for inflation ($97,600 for 2013, and $99,200 for 2014, and $100,800 for 2015, and $101,300 for 2016 and $102,100 for 2017, and $103,900 for 2018, and $105,900 for 2019), if you otherwise qualify. For example not stay in the US 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 prudent to ask your potential employer to ensure that your employment in Iran is otherwise authorized by OFAC. Also, your self-employment income in Iran, even if were authorized by OFAC is excluded only for income tax purposes and not for Social Security or Medicare purposes. Furthermore, you may not take a foreign income tax credit for taxes paid in Iran, due to the economic sanctions against Iran, but may deducted it as an expense. Under the ITSR, a US person is not allowed to open a bank account in Iran.

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, including our firm. See (VSD)

Zaher Fallahi, Attorney At Law, CPA has assisted Persian-Americans living in Iran in filing their U.S. Income Tax Returns and OFAC licenses.

Zaher Fallahi, Attorney, has been rated 10 out of 10 by Avvo, and a TOP Tax Attorney.(877) 687-7558 Nationwide Toll Free, (310) 719-1040, (714) 546-4272, E-mail taxattorney@zfcpa.com