American Expat Tax News-IRS Denies Amnesty(!)

IRS Revokes Acceptance into Amnesty Program

A recent move by the IRS may be causing waves of anxiety for any US expat or resident who is considering the option to come forward and disclose their offshore accounts. Dozens of US taxpayers with accounts in Israeli banks were denied access to an amnesty program after they had been previously accepted. The taxpayers voluntarily disclosed their assets through this program in an effort to avoid high penalties yet the IRS gave no reason why their acceptance had been revoked.

In the last few years, the IRS began a crackdown on tax evaders by requiring those with offshore accounts to disclose their assets. With the introduction of FATCA, The Foreign Account Tax Compliance Act, they go even further, requiring foreign banks to report the account balances of their US clients. Programs such as the Streamlined Program for low-risk taxpayers and the Offshore Voluntary Disclosure Program (OVDP) for higher-risk taxpayers encourage those with offshore accounts to come forward and disclose their accounts—in return, penalties are substantially reduced or eliminated and criminal prosecution can be avoided.

According to a Reuters article, an IRS spokesman said in a statement: “There are a number of reasons why a taxpayer may be disqualified from participating in the IRS’ offshore disclosure program.” The spokesman said the IRS cannot comment on specific cases.

In this same article, Josh Ungerman, a partner with law firm Meadows, Collier, Reed, Cousins, Crouch & Ungerman LLP, who represents clients in the amnesty process, comments “This is a very disturbing development. The formal voluntary disclosure program is in danger of becoming extinct through non-use.”

Those being disqualified received brief, 2-sentence letters from the IRS, merely stating ‘upon further review it has been determined that your client is declined’ from the program, according to a letter obtained by Reuters.

While it’s still better to find the IRS before they find you, reports such as this hurt the IRS’ credibility, which may reduce the amnesty programs’ effectiveness in the long run.

Need a Transcript or Copy of a US Expat Tax Return?

With the obligation to file taxes in two countries, US expats have a lot of paper to keep track of. Maintaining accurate records, files and copies of all expat tax returns makes sense for many reasons. Perhaps the IRS has some questions about a prior return- you want to be able to easily access the information they require. Or if you plan to apply for a mortgage or a student loan, your tax return will surely be requested. What should you do if you can’t find your tax return? You can either contact your American expat tax preparer or the IRS. Here are the IRS options for obtaining your return:

1)      For most expats, a transcript is all you need. Transcripts list the majority of line items on the return you originally filed, including any accompanying forms or schedules. This is the easiest tax return documentation to obtain. And transcripts are free! You can request up to 3 years’ worth (in addition to the current year). Note: They do not include any changes you made to your return after it was filed.

2)      If you need a transcript that reflects changes you made post-filing, request a tax account transcript. This transcript shows your marital status, adjusted gross and taxable income and the type of your return you filed.

3)      Fortunately for US expats living around the world, you can get transcripts online! Simply visit IRS.gov and use the Order a Transcript tool.

4)      Requests for a 1040, 1040A or 1040EZ can also be made by completing Form 4506T-EZ (Short Form Request for Individual Tax Return Transcript) and sending via fax or mail.

5)      Orders placed online or by phone should arrive within 5-10 calendar days. Orders placed by mail will arrive in approximately 30 calendar days.

6)      In the event that you need an actual copy of your filed return, it will cost you $57 for each year you request. In general, copies are available for the current year and past 6 years. To order, fill out Form 4506 and mail it directly to the IRS. Plan accordingly, as these requests take about 60 days to process and receive.

Want to Learn More About the Streamlined Program and OVDP?

We have several blog posts that provide in-depth looks at programs for getting caught up on your US taxes. If you have questions about your American expat tax return or would like to know more about Greenback Expat Tax Services, please contact us.