Recently, the 2019 National Taxpayer Advocate Annual Report to Congress and the 2020 Purple Book were released. The Taxpayer Advocate Service (TAS) is an independent organization that works inside of the IRS to ensure fairness and that taxpayers understand their rights. The reports from the Taxpayer Advocate Service show what concerns and focus areas this internal “watchdog”-like organization has in mind for the IRS. Find out what expats need to know about the latest report!
2019 National Taxpayer Advocate Report
The National Taxpayer Advocate Report to Congress always includes sections on the most serious problems facing taxpayers, the most litigated issues, and research and analysis of issues and trends. This year, the 380-page report focused on many of the ongoing problems the TAS has brought up in the past, but some are noteworthy for expats.
Funding constraints were a primary concern in the 2019 National Taxpayer Advocate Report. The report noted that with the severely limited funding that the IRS has, focusing on both customer service and compliance is difficult and somewhat contradictory. In July of 2019, Congress signed the Taxpayer First Act (TFA) into law to address the difficulties American taxpayers have with the IRS’ customer service. On page 30, the TAS mentions that, when trying to encourage taxpayers to become compliant, often, the best route is offering more services rather than initiating more compliance campaigns. And yet, the direction that the IRS has currently chosen is to allocate its minimal resources toward compliance campaigns—and the latest campaigns target expats specifically.
One of the more pressing topics for expats listed under the most litigated issues was the summons enforcement. Of the 60 federal court cases that included summons enforcement subject matter, the taxpayer won in only two cases. Two were split, and the IRS won the other 56. As for expats, the courts rejected all three taxpayers’ requests to eliminate third-party summons that had to do with international treaty obligations. The taxpayers had argued that the request for information in the summons was done in bad faith, and in each case, they lost. This presents an issue to Americans living abroad and gives credence to those who are worried FATCA can erode their right to privacy away.
The 2020 Purple Book
The Purple Book is a collection of legislative proposals that the TAS believes should be enacted by Congress. The goal of the proposals is to bolster taxpayer rights and improve tax administration. #11 on the list this year is the suggestion to synchronize the requirements for FBAR (Foreign Bank Account Reporting) and FATCA Form 8938 and eliminate the duplicative nature of this reporting process. Also, the TAS recommended excluding foreign accounts from reporting requirements that are held where the expat is a bona fide resident. If enacted, this would be one less thing on every expat’s tax-filing to-do list! With any luck, this will be a priority for Congress in the upcoming year.
Though it referenced the trouble every American taxpayer has with getting answers from the IRS, getting timely information, and navigating the thorny maze of American tax law, the 2019 National Taxpayer Advocate Report didn’t specifically draw attention to the problematic nature of citizenship-based taxation. The TAS is aware that people in the US have trouble filing taxes, and that the resources for those living abroad are even more scarce, but the focus in this report was customer service across the board.
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