Filing your taxes with the IRS has only ever been trivial in the simplest of cases, such as is possible with a 1040EZ. However, for U.S. citizens and green card holders living overseas especially those with undisclosed income and assets, the task has become onerous since FATCA (the Foreign Account Tax Compliance Act) was enacted by the U.S. congress more than four years ago.
Some of the situations expats or non-compliant filers find themselves in can be resolved relatively easily, but even in a middle-income bracket the difference between the various options the IRS offers can be considerable (see our Three Cases & Options for Tax Minimization worksheet). There are a number of reasons why hiring tax planning advisors is not only advisable, but can save taxpayers considerable sums depending on their particular case.
Please consider the following reasons for seeking professional advise, be this from a Kovel CPA or an attorney under attorney-client privilege (both of which you’ll find under one roof at Five Stone).
Not only is coming into compliance very complex, the IRS also offers a number of options that can have significant consequences. Some of these, if hindsight shows them as having been chosen incorrectly, cannot be rescinded and may lead to highly undesirable outcomes.
The main aspect of the inherent complexity that needs to be considered by taxpayers is what the different steps are in each option and what the ultimate outcome might be. For the OVDP option (Overseas Voluntary Disclosure Program), see our in-depth article on this subject.
The span in financial terms can be very significant and pay for professional services many times over.
2. Informational Aspects
Often issues of income and assets are not the main point of concern, but the informational aspects of what the IRS demands can be overwhelming and very in-depth. Yet navigating this aspect of disclosure is an important element of coming clear with the authorities and needs to be done correctly in order to satisfy their extensive informational demands.
Keeping to the exact timing and filing deadlines the IRS has set forth is critical for coming into compliance. In addition, it is important that filers follow the timing the IRS has set forth, no matter what the filing requirements or cycles in a given country might be.
For example the Australian filing cycle is out of sync with U.S. requirements. Their informational material may not be available at the time required by the IRS. Nevertheless, a way needs to be found to navigate this correctly and not set up any red flags on your return.
4. Monitoring Your Return with the IRS
It is one thing to file your forms on time and correctly, but another to keep track of how the IRS deals with it. The onus is on the taxpayer to ensure that filings are timely, reliable, and accurate regardless of the inner workings of the tax authorities.
Five Stone Tax Advisers monitors all returns with the help of a client PoA (Power of Attorney), which is a cost-effective way to ensure filings reach the IRS on time and are processed and signed off expediently giving filers the peace of mind they require as quickly as possible.
Some foreign banks have already started sharing customer information directly with the IRS. By the end of this year, many more countries will begin the process of turning over account names, addresses, and balance details to the U.S. government. For those needing to come into full compliance, it is critical that they begin the process BEFORE the IRS gets a list with their name on it. After that, it will be too late to take advantage of one of the special programs put in place to voluntarily disclose. The accountholder will lose the ability to control the process, and the IRS may apply civil and criminal penalties.
About Five Stone Tax Advisers
Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome for you. Our International Tax Advisory and Compliance unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact that will provide services for all the legal, compliance and financial reconstruction aspects of offshore account cases.