The Office of the National Taxpayer Advocate, an independent organization within the IRS that works to safeguard taxpayer rights, submits semiannual reports to Congress, and the 2019 National Taxpayer Advocate Midyear Objectives Report to Congress is now available. This is one piece of news you don’t want to skip because, historically, the National Taxpayer Advocate has addressed issues of unfairness for all American taxpayers. But the report also addresses expat tax issues like whether or not you can get a passport when you’re behind on taxes. Since expat tax issues don’t often get a lot of traction, these reports are essential to keep up on. So, skip the hundreds-of-pages-long report and read our summary for expats instead.
What Does the Recent Report Focus On?
The National Taxpayer Advocate Midyear Objectives Report starts off by talking about how American taxpayers’ trust has been eroded by poor service from the IRS, and worse yet, there are no current plans to fix this issue. So, the Taxpayer Advocate Service (TAS) is developing an electronic tool to help guide taxpayers through the complicated American tax process.
Other areas of current focus include:
- Counseling the IRS to reconsider its position on how the Religious Freedom Restoration Act is currently being applied (short version: it excludes the Amish and other religions from using child tax credits),
- Helping identify at-risk taxpayers experiencing economic hardship so that they may receive more assistance throughout the taxpaying process,
- Advocating for ways to strengthen Earned Income Tax Credits, and
- Designing sample notices for the IRS to make American taxpayers more aware of their rights and help reduce the burden that paying taxes causes some Americans.
The 2019 National Taxpayer Advocate Midyear Objectives Report: Does It Tackle Expat Tax Issues?
The National Taxpayer Advocate mentions a newly created concept, the Taxpayer Anxiety Index, to help the IRS structure its taxpayer interactions. Of all American taxpayers, expats may be the best acquainted with taxpayer anxiety. But, that aside, there are only two areas that concern the majority of expats this time.
Area of Focus #10 in the report is geared toward helping taxpayers whose passports are affected by their tax liability understand their rights. According to the National Taxpayer Advocate Midyear Objectives Report, the four rights currently being impacted by the seizure of passports are the right to be informed, the right to challenge the IRS’s position and be heard, the right to retain representation, and the right to a fair and just tax system. An important takeaway for expats from this part of the report: if your passport has been seized due to your tax liability, contacting the TAS is a good idea. They might be able to help. In addition to helping taxpayers on a case-by-case basis, the TAS has other initiatives to address the negative impact of passport revocation, like meeting with the Department of State to discuss ways to alleviate the burden this puts on expats.
Area of Focus #12 in the report seeks more clarity and certainty from the IRS’s voluntary disclosure program. You may recall that, in 2018, the IRS terminated the Offshore Voluntary Disclosure Program and recently developed a new kind of disclosure program. Currently, the definition of willfulness – a big factor for which disclosure program you are allowed to use – is somewhat in the eye of the beholder, and that beholder is the IRS. If expats were unaware of their tax-filing requirements but still believe their behavior could be misconstrued as willful, they may choose to use a voluntary disclosure program to avoid the risk of further scrutiny by the IRS. When they do disclose, they must choose between paying penalties meant for tax-evading delinquents and trying to demonstrate their innocence without the typical safeguards. The TAS is hoping to get a firm explanation of which taxpayers should use which disclosure program and why.
What Does This Mean for Expats?
Expats will be hoping for a narrower application of the passport revocation process and more clarity on the voluntary disclosure programs, but that will only happen if the IRS heeds the latest TAS report. For broader changes to occur, Congress would need to take up these issues and enact some tax laws that are fairer for expats. Luckily, some Congress members have been listening, and slowly, they are taking action.
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