IRS Tax Compliance Campaigns Expats Need to Know

Expats and Taxes: IRS Compliance Campaigns

In 2019, the Large Business and International Division (LB&I) of the IRS added six new compliance campaigns, and these are targeting expats and taxes specifically. Though not a lot of information is known about how the IRS plans to conduct these campaigns, expats will want to take a look at our summary below so that they aren’t caught off guard.

What Are the Compliance Campaigns?

The IRS compliance campaigns that affect expats are:

  • S Corporations Built in Gains Tax – This campaign would only affect expat entrepreneurs. The built in gains tax (BIG) occurs when C Corporations transition into S Corporations, and they have net unrealized built in gains.
  • Post OVDP Compliance – This compliance campaign will likely have an impact on expats and taxes. The IRS is enacting this campaign to help address tax noncompliance related to foreign income and asset reporting requirements.
  • Expatriation – The expatriation section says that US citizens and long-term residents who expatriated after June 17, 2008, and are tax non-compliant can expect to have their situation addressed in the form of soft letters and examinations. Expats and taxes will certainly be affected by this new initiative.
  • High Income Non-filer – This compliance campaign is targeted toward expats and taxes, as well. This campaign will seek to find expats who have high income and bring them into compliance through an examination treatment stream.
  • US Territories – Erroneous Refundable Credits – This campaign will seek those who live in US territories who are wrongfully claiming tax credits on their Form 1040 through outreach and traditional examinations.
  • Section 457A Deferred Compensation Attributable to Services Performed before January 1, 2009 – This would affect expats who received deferred compensation, as the IRS will seek those who are not compliant with IRC Section 457A through issue-based examinations.

How Do IRS Compliance Campaigns Affect Expats and Taxes?

Overall, it seems that the IRS’ goal is to crack down on tax noncompliance – whether the noncompliance was willful or due to unfamiliarity with the tax requirements. These campaigns signal that the IRS has actionable goals around continued tax noncompliance, and that they will focus on eradicating it.

The IRS’ plans to resolve noncompliance seem to naturally follow the path they’ve been on for a while now. Since they sunsetted the OVDP (Offshore Voluntary Disclosure Program), they did roll out a new program. But the new program has significantly increased fees. So, while the good news is that expats who do not qualify to use the Streamlined Filing Procedures (a way that expats who are behind on their taxes non-willfully can catch up penalty-free!) have another option to get caught up, it seems that the IRS is generally moving in a more punitive direction. Though there has been some international pushback on FATCA recently, the IRS appears to be doubling down. You can expect to see more headlines about expats who were unaware of their filing requirements facing massive financial penalties – and, in some cases, even losing their passports – when these proposals begin to take effect.

Get Compliant Today!

With new initiatives looming, there’s no reason to wait another moment to become tax compliant. We’ll take the stress out of filing; all you need to do is get started with Greenback today.