Tax return preparation, accounting, and bookkeeping services for US expats who value their security and piece of mind

The IRS is currently understaffed. But is this a good thing?

The IRS is at about half of their effective strength they had in 2009. Now having an IRS that can't audit taxpayers as much sure seems like a good thing, but it can backfire. Here's why:

The IRS’s ability to audit international returns is improving, but it currently lacks the manpower to adequately examine and process international returns. Meaning, it is currently quite easy to get away with a real bad return.
Competent international tax preparation is the exception, not the rule. We’ve reviewed thousands of returns from hundreds of firms and are very dismayed by what have seen. Most Americans living overseas have no clue what a good tax return should look like.

Big firms, small firms, expensive consultants, cheap firms, tax specialists, CPAs, accountants, enrolled agents, volume providers — all have something in common: Each one of them are all qualified to submit a truly awful tax return on your behalf.

This is not to say we don’t encounter great international tax returns prepared by others. Of course we do. But it happens so infrequently we typically call the person who prepared them and thank them for their work and to put their name in our rolodex as someone to potentially refer work to or to perhaps hire.

The tax industry that thinks they are all that, really isn’t

So the conventional wisdom is all wrong. The tax industry looks at themselves as doing a pretty good job, which may be true domestically, but internationally? Far from it. The reason is that both the tax industry and international taxpayers have been lulled into a false sense of security. International audits simply do not happen at the rate they used to simply because the IRS does not have the staff.

But for us, in the last ten years, we’ve had incredible international audit experience and success. We've watched in real time, the IRS unfurl its new audit policies and watch it hit the growing pains of getting up to speed with the complicated foreign reporting requirements and little-known tax traps. We've watched the IRS create their training guides and can tell you the unhelpful things (for them) they left out. We've learned how to win cases because we know what the expect from IRS international agents. Being a few steps ahead is always helpful, isn't it?

Our intense international audit experience the last ten years

But you might be wondering, if international exams aren’t happening at the rate they used to, then how did we get this experience and continue to do so?

The answer is that we are actually a tax law firm. We are a tax law firm that became the industry leader in offshore disclosures. Now for part of these types of cases, original and amended tax returns needed to be prepared – a lot of them. And in certain cases, in order to prevail on the lowest possible penalty, we actually would have to ask the IRS to audit our clients.

This is called an Opt-Out exam and is becoming less common as the IRS claims to be moving its resources to auditing more international taxpayers… who didn’t ask to be audited.

By the way, it was during our disclosure work that we discovered how bad typical tax preparation is for the American overseas. And it is why we built our in-house tax preparation department — because we needed quality tax returns and it was impossible for us to find any decent provider who was reasonably priced.

This is why we don’t need to guess if our work will withstand scrutiny. We know it will withstand scrutiny.

Have you’ve been lead to believe that everything is fine when it is not fine? Are you given more rope each year?

So what happens as the IRS gets more and more competent with international examination?
What happens if the IRS goes back to its original staffing level? Do you think your returns can stand up to scrutiny right now?

Maybe you’re not worried about that as you think this year will be ancient history by the time the IRS ever gets around to you. But the IRS has a secret weapon. As this is the other trick to international tax return: Expat tax returns often require additional schedules and forms. Additional schedules and forms that if not filed or filed incorrectly keep the entire tax return open for audits and penalties indefinitely.

That's right, the IRS might not be limited with a three-year or six-year look-back to assess you more in taxes and penalties

Another big difference with tax returns prepared for expats is that if any required foreign information returns are not properly filed, the IRS can keep your entire return open for exam forever! This is much different than domestic returns which usually have a three-year look back period that is sometimes, but rarely extended to six years.

We know of a instance last year when the IRS assessed a taxpayer a penalty of $10,000. A penalty of $10,00 for tax year 2000. That’s 18 years after the fact! Talk about a time bomb.

For comparison, this as if the IRS can wait until 2036 to penalize you for something on this year’s return!

That seems like an awful long time to live with a tax worry.

You do not need a tax due to be assessed a massive international penalty – does your tax firm know this?

Now maybe you don't think this is such a big deal. But here is another key difference though with expat returns: you can be penalized even if you don’t owe any taxes. As mentioned above, you can be penalized simply because you didn’t file a foreign informational return.

Do you see how this is totally unlike domestic US taxation? With domestic taxes, nearly 99% of penalties are realated to an unpaid or late tax bill. But with US expat returns, penalties can lurk anywhere — even if no tax is due!

These penalties are significant – $10,000, and some can be automatically assessed. All of these following forms have $10,000 penalties and expat tax returns have a very high frequency of requiring them:

Form 8398 (FATCA)
Form 3520: for inheritances and gifts received from a non-US person along with certain foreign pension benefits
Form 3520-A required for certain foreign pension plans and other foreign trusts
Form 5471: Required not just foreign subsidiaries of mega US corporation but also for say a self-employed real estate agent in Berlin.
Form 8865: Required for certain foreign business partnership. It too comes with a $10,000 penalty if not filed or not filed correctly.
The FBAR, FinCEN Form 114: FBAR penalizes are never automatically assessed, but can be the worst of all. They can approach 50% of the highest account value.

This penalty exposure is real and it is one reason why we perform our work to a higher standard.

Is your tax firm really on your side?

We have taken a leadership position in seeking real tax reform for our US clients overseas. Regardless of whether you hire our firm for your compliance, we recommend you learn more about our advocacy to repeal FATCA and to push for a the Tax Fairness For American Aboard Act. We recommend starting off with the video below – from one of our clients, Ryan Socash:

Does your current tax firm even want you?

If you've gotten an indication from your current firm that they don't value you, it could be because they don't. Many accounting firms make far more money off their large publicly traded corporate clients, who are not terribly price sensitive. So much so that these tax firms can look at their individual clients, even fairly wealthy individuals, as a nuisance. So much so, they started outsourcing work to lower cost centers like India, yet have not passed on the savings to their clients.

Expert expat tax preparation – what does it cost for the highest level of service?

We make no claims of being the cheapest provider, but we also know that we are not the most expensive. We are for taxpayers who see the value in having experts do things methodically and correctly.

We are happy to give you an estimate before you are liable for any costs.

Contact us with no obligation

If you would like us to take a look at your current situation, please feel free to contact us online or email info@irsmedic.com or 888-477-4258 or initiate a Skype chat with the icon above.

The US tax system is beyond complicated

We acknowledge that international tax returns are insanely complicated, even for middle class taxpayers. You shouldn't need to hire the top international tax law firm to prepare your US income tax returns.

But you can if you wish.

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Our clients come from around the globe, including:

Australia