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WHY YOU SHOULDN’T SELF-FILE YOUR U.S. EXPAT TAX RETURN

October 14, 2016

By Ephraim Moss, Esq. & Joshua Ashman, CPA

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WHY YOU SHOULDN’T SELF-FILE YOUR U.S. EXPAT TAX RETURN

As this year’s tax season heads towards its end, we continue to see more and more self-filers who have received notices from the IRS reassessing their tax liabilities due to mistakes or miscalculations on their original returns. In many cases, the filers should have no tax liability, but a missing form or incorrect information triggers a hefty IRS tax bill.

The best way to avoid the IRS’s attention, of course, is to make sure you’ve filed correctly. In the case of an expat tax return, which often involves tricky international tax aspects, the smart way to ensure an accurate return is to enlist the help of an expat tax return expert.

THE RISK OF INACCURACY

In a previous blog, we demonstrated how tax returns in general, are more often than not filed incorrectly. We included a study by the Government Accountability Office, which found that self-prepared returns showed a whopping 50-percent error rate.

Expat taxpayers are particularly susceptible to errors because of the complex international issues and additional reporting requirements that can significantly affect the tax return of a U.S. citizen living abroad and that penalties for non-compliance can be severe. On the flipside, there may be a number of unused provisions available to expat taxpayers that can reduce the tax burden or even generate a refund from the IRS.

CLIENT FACT PATTERN

Case in point – just this past week, a U.S. expat who self-prepares his returns approached us because he had received a notice from the IRS. The taxpayer, now a client, earned income outside of the United States during 2015 that was greater than the Foreign Earned Income Exclusion, so he needed to utilize both the FEIE and foreign tax credit to eliminate his U.S. taxable liability.

Due to a misfiling of the forms associated with the FEIE and foreign tax credit, the IRS reassessed the taxpayer’s tax liability, resulting in a $5,000 tax bill, with penalties and interest. After contacting us, we were able to resolve the matter with the IRS with no tax due.

More from our experts:

US EXPAT TAXATION OF ALIMONY PAYMENTS

In this week’s blog, we review the U.S. tax rules relating to the payment of alimony, both from a domestic law and a treaty law perspective.

CASE REVIEW – COURT CONSIDERS IF TREATY NONRESIDENT HAS FBAR REQUIREMENT

The U.S. District Court for the Southern District of California tackled the issue of whether a taxpayer is required to file an FBAR if he has the status of a non-US tax resident by virtue of the tie-breaker provisions of a tax treaty.

CORPORATE RESTRUCTURING – A TRAP FOR THE UNWARY EXPAT

In this week’s blog, we focus on corporate restructurings, which are ripe for misunderstanding and complacency, given that the foreign company rules in the US and in your country of residence can be significantly at odds.

OUR APPROACH TO AN EFFECTIVE RENUNCIATION

In this blog, we review the tax and reporting implications of renouncing one’s citizenship and abandoning one’s green card. We then describe how our firm can help you navigate the process. We include a case study involving real facts, so that you can fully understand our approach and the services we offer.

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