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MOST U.S. EXPATS DO NOT FILE CORRECT U.S. TAX RETURNS

January 26, 2016

By Ephraim Moss, Esq. & Joshua Ashman, CPA

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MOST U.S. EXPATS DO NOT FILE CORRECT U.S. TAX RETURNS

For most U.S. citizens living abroad, life is pretty good – at least that’s what the latest statistics are telling us.  In a 2015 survey of thousands of expats worldwide, a whopping 81% responded that they are generally happy with life overseas.

At the risk of spoiling this picture of expat bliss, further statistics show, however, that most U.S. expats are failing quite miserably in the area of tax compliance.

The reason is basically two-fold. First, there are millions of U.S. citizens living abroad that simply don’t file returns despite their continuing obligation to do so.  Many of these expats are uninformed, misinformed, or just don’t care enough to file their returns.  With the advent of the now prominent FATCA law, it will become increasingly harder for the non-compliant to escape the ever-extending reach of the IRS, which is becoming increasingly impatient with taxpayer excuses.

Second, statistics further show that tax returns in general are more often than not filed incorrectly.  A recent study by the Government Accountability Office found that preparer-filed returns showed an error rate of 60 percent, while self-prepared returns showed a 50 percent error rate.  The high rate of preparer-filed returns was significantly influenced by the study’s inclusion of non-qualified return preparers.

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.  For example, U.S taxpayers that have an interest in specified foreign financial assets and meet the reporting threshold, must report their foreign financial assets under FATCA. Furthermore, all U.S. persons that have an aggregate interest of $10,000 or more in foreign financial accounts must file FinCEN Form 114 (FBAR).  A number of other forms may be required depending on the circumstances.  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.

If you are a U.S. expat who is behind on your taxes and are looking to catch up with the IRS, we are here to help.  The qualified return preparers at Expat Tax Professionals have helped hundreds of non-compliant expats come clean through the IRS Streamlined amnesty program, as well as other IRS programs. In many cases, we’ve helped minimize or even eliminate potential penalties altogether.  We have also reviewed numerous previously prepared returns to ensure that all of the reporting obligations have been met and all of the available beneficial tax provisions have been utilized and maximized.

Once the past is cleaned up, it’s time to move forward with your yearly returns. Our international experience and professional service are the main reasons your returns will be timely and accurately filed with little to no hassle.  When it comes to filing taxes in the U.S., your best bet is enlisting the help of an Expat Tax Professional.

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