However, recent developments have shown that not all tax preparation firms handle your sensitive data with the same degree of care and security.

An uncomfortable revelation: US taxpayer data at risk

A recent investigation published in The Markup unearthed disturbing news: several online tax filing services that were once considered safe havens for personal data have been sharing their clients’ private information with Big Tech companies, including Meta.

This operation isn’t a clumsy error or an accidental leak. Instead, it’s an orchestrated process facilitated by a deceptively small (and commonly used) piece of code known as the ‘Meta Pixel.’

What is the Meta Pixel?

The Meta Pixel is also known as the Facebook retargeting pixel that, as a baseline, helps companies track website visitor activity. It also plays a role in measuring advertising effectiveness. It is a small piece of code that, when used inappropriately, can operate as a courier to transmit your personal data straight into tech giants’ databases.

The information shared extends beyond simple identifiers like names and email addresses. More intimate details about income, filing status, refund amounts, the number of dependents, and even college scholarship information have been leaked. 

There are several ramifications here – and this isn’t just about data. It’s about lives, about the hard-working American individuals who entrusted their sensitive information to these tax filing services. It’s about the potential misuse of this information, the sense of feeling financially vulnerable, and the resulting emotional stress. In essence, this is a critical issue that demands attention and action.

A congressional investigation by Senators Elizabeth Warren, Ron Wyden, Richard Blumenthal, Tammy Duckworth, Bernie Sanders, Sheldon Whitehouse, and Representative Katie Porter has been formally opened. The initial report names several online tax filing services, such as H&R Block, TaxAct, and TaxSlayer.

Understanding the use of the Meta Pixel

As the investigation into the sharing of sensitive data with Big Tech companies unfolds, it’s natural to question why online tax filing services utilized the Meta Pixel in the first place. While its usage raises concerns about data privacy, there are reasons companies cite for implementing this controversial tool.

As mentioned previously, the primary purpose of the Meta Pixel is to enable targeted advertising and analytics. By embedding this pixel on their websites, companies can track user behavior and collect valuable data on website visitors. This information allows them to optimize marketing campaigns, tailor advertisements to specific audiences, and gain insights into user preferences.

Targeted advertising can be an effective strategy for tax filing service providers, helping them reach the right audience and deliver relevant content. It enables them to personalize their offerings, improving the overall user experience. Additionally, the data collected through the Meta Pixel can be used for analytics purposes, aiding in understanding user trends, identifying areas for improvement, and refining their services.

While these intentions may seem beneficial on the surface, it’s crucial to strike a balance between providing a tailored experience and safeguarding customer privacy. 

How to check if your data is safe: A step-by-step guide

Concerned about the security of your data with your chosen tax service provider? Fear not; determining whether your personal information is being kept secure is easier than you might think. 

Follow this simple, 3-step guide to put your mind at ease:

Step 1 – Inspect with a Right-Click

Begin by right-clicking on your tax service provider’s website and selecting ‘Inspect’. This action will open up the source code of the site, providing you with a behind-the-scenes glimpse of its inner workings.

Step 2 – Observe: Tracking the Data Flow

With the ‘Inspect’ panel now open, locate the ‘Network’ tab. Once found, give it a click.

From here, you’ll need to reload the webpage, letting the digital currents flow and enabling you to monitor the data’s journey through the site.

Step 3 – Search: Hunting for Clues

With the ‘Network’ tab open, it’s time to embark on a virtual hunt. Using the search function, you’ll scan for traces of the Meta Pixel, those elusive markers of potential data compromise. 

Enter the start of the pixel code into the search field exactly as follows:
https://www.facebook.com/tr?id= 

If this appears in the results, proceed with caution, as it could indicate the presence of the Meta Pixel and the potential compromise of your data.

Bright!Tax’s commitment to your privacy

In the midst of mounting concerns surrounding data privacy, Bright!Tax staunchly advocates for your confidentiality and security. And – we practice what we preach. We prioritize your privacy above all else, ensuring your personal information remains safeguarded throughout the tax preparation process.

We also work in “the cloud,” which allows us to securely store client data outside our physical laptops. In turn, client data is sequestered in what is effectively an Internet bunker, all of which is to assure that your data remains private and protected. 

Even further, we have implemented stringent measures to protect your data. Our commitment to privacy encompasses both technological and procedural safeguards. We utilize advanced encryption protocols, robust firewalls, and regularly updated security systems to fortify our digital infrastructure. Additionally, our team undergoes rigorous training to ensure compliance with industry-leading standards and regulations. We also closely follow the latest IRS guidelines around online privacy best practices.

All this to say, we take pride in our transparent approach, and we welcome questions regarding our privacy practices. By choosing Bright!Tax, you not only gain access to exceptional tax preparation services but also join a community of individuals who prioritize privacy and security. 

Need help securely navigating US taxes overseas?

We understand the concern around privacy and the need to protect yours. Our team is ready to provide professional and reassuring expat tax guidance on your expat journey.

Get Started

References

1. Creating a Written Information Security Plan for your Tax & Accounting Practice
2. H&R Block and other tax-prep firms shared consumer data with Meta, lawmakers say

The post Is Filing Taxes Online Safe? What US Expats Should Know appeared first on Bright!Tax Expat Tax Services.

While American citizens have not previously needed a visa to travel to the EU, beginning November 2023, you’ll need to apply to travel to the EU and the Schengen Area without a visa.

This change is because of a new screening tool the European Union approved. It’s known as the European Travel Information and Authorisation System (ETIAS).

Here’s what you should know about ETIAS.

What is the European Travel Information and Authorisation System (ETIAS)?

ETIAS is an electronic EU-approved visa waiver program that will apply to citizens of certain countries who currently don’t need a visa to travel to the EU or the Schengen Area. 

According to information from its website, the online approval system will complete background checks on applicants “to identify potential security risks.”

Is ETIAS a visa?

No. ETIAS is not a visa. It is a part of the EU’s visa waiver program for short-term stays. 

Those granted ETIAS approval will not be issued a visa. Even their status will remain “visa-exempt.”

Here’s how to understand this. 

Picture the EU as a sports arena. You hold a ticket (i.e., your US passport) to a sporting event in the arena. 

You’re automatically allowed in the stadium with your ticket (i.e., passport), but ETIAS is the metal detector. You’ll need to pass through the metal detector before entering the arena.   

What is the difference between ETIAS and ESTA?

ESTA, or Electronic System for Travel Authorization, is an online security screening system for those entering the United States. 

Considered the American equivalent of the EU-based ETIAS, ESTA derives its legal mandate from the Implementing Recommendations of the 9/11 Commission Act of 2007. 

The Act was part of a broad set of measures the federal government enacted after 9/11.

Who needs an ETIAS?

Visitors to the EU or a Schengen Area country will require an ETIAS visa waiver if: 

• You’re traveling to the EU or a Schengen Area country from a country the EU categorizes as “a third country.” This includes the US and 58 other countries, including Canada
• Your visit is for tourism, business, transit, or medical purposes
• You’re going to any EU country except Ireland
• Your stay will be for 90 days or less.

When does the requirement for an ETIAS visa waiver go into effect?

The requirements for an ETIAS visa waiver will go into effect beginning in November 2023.

How to apply for an ETIAS?

To apply for an ETIAS when it’s finally rolled out in November, you must complete an online application on the ETIAS website. 

You should do this at least 96 days before your scheduled departure. 

You’ll need to include personal details such as your:

• Full name, address, email, and telephone number
• Date and place of birth
• Educational and occupational background
• Final destination member state
• Passport
• Citizenship status

The entire process of applying for an ETIAS should take only 10 minutes.

How long does ETIAS approval take?

After completing and submitting your application, within minutes the system will send an approval to your email in PDF format. 

How much does an ETIAS cost?

An ETIAS application will cost €7, or around $7.50. 

How long is an ETIAS valid?

An ETIAS will be valid for three years from the approval date or when your passport expires, whichever comes first.

ETIAS FAQs

Will I need an ETIAS to travel to France in 2023?

Yes. France is among the Schengen countries that will require ETIAS approval.

Will I need an ETIAS to enter France in 2023?

You’ll need an ETIAS to travel to France. Entering will eventually depend on clearance by the border officers. ETIAS is a travel authorization, not a right of entry.

What countries do not require an ETIAS visa waiver?

Because Ireland is not a part of the Schengen zone, it does not require an ETIAS visa. And, of course, the UK does not require an ETIAS because it is no longer part of the EU.

What countries will require an ETIAS visa waiver?

The following countries are in the Schengen zone and will require an ETIAS visa waiver to travel to.

In addition to countries in the Schengen zone, future Schengen member countries will also require an ETIAS authorization. 

• Croatia
• Bulgaria
• Cyprus
• Romania

Finally, the following European microstates with open borders will also require ETIAS authorization.

• Andorra
• Monaco
• San Marino
• Vatican City

Who is exempt from needing an ETIAS visa waiver before entering the EU?

All travelers to the EU member countries in the Schengen zone — including infants and elders — will require an ETIAS. However, travelers under 18 will be exempt from paying the €7 application fee.

If you’re not an American citizen and wish to visit the EU, you may need a Schengen Visa, not an ETIAS. 

Why did the EU create ETIAS?

ETIAS aims “to improve border security of EU member states.” It’s a preemptive model where individuals who pose security threats related to terrorism are denied the right to travel to the EU. 

Of course, some feel that ETIAS is just a tit-for-tat for the United States’s ESTA and Canada’s eTA, among other “travel inconveniences” they have subjected European citizens to for decades.

What does ETIAS have to do with US expats?

For American citizens and Green Card holders already residing abroad and holding resident cards in their host countries, the ETIAS visa waiver requirement will likely not affect your travel plans in and out of the EU. However, US citizens and Green Card holders who are considering a move to an EU country will likely also plan to visit the country or countries under consideration. In this case, an ETIAS visa waiver will be necessary if you are planning to visit from November 2023 onward. 

Connect with Bright!Tax today to set yourself up for international tax-filing success

Our firm specializes in US expat taxes and we love nothing more than relieving our clients of the burden associated with filing US taxes from abroad. What’s more, we’re also developing a global network of partners specializing in filing foreign taxes, including in the EU! Reach out to a Bright!Tax team member today to learn more about how a professional tax filing service specializing in US tax can benefit you.

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Below, we summarize key updates for the 2024 tax year, which will impact your tax filing for the 2025 season. We also review tax brackets and rates from the 2023 tax year, which inform how you file taxes for the 2024 filing season. All of this information, and more, is broken out for clarity. Let’s dive in! 

IRS changes 2024: What do tax updates mean for US expats? 

2024 tax changes for US expats include adjusted income tax brackets and rates for single filers, married couples filing separately, heads of households, and married couples filing jointly. 

This annual update, in response to inflation adjustments and the Consumer Price Index, includes changes to the 22%, 24%, 32%, 35%, and 37% tax brackets. These adjustments aim to counteract bracket creep and reflect the 2017 Tax Cuts and Jobs Act’s long-term impact. 

US expats should review their tax strategy to ensure theirs is optimized for their situation. Below, we look at common aspects of US taxation that comprise a useful baseline from which to craft your expat tax strategy.

Minimum filing thresholds and standard deductions: Do you need to file?

While the figures are often the same, the standard deduction and minimum income thresholds required to file a tax return are two different things.

Generally, when your annual income is lower than the lowest standard deduction, a tax return does not need to be filed. However, there is one major exception.

If you earn at least $5 and are married but filing separately, you’ll need to file your tax return. 

However, for individuals fitting this profile and under 65, the standard deduction differs from the $5 filing threshold, being $14,600 for the 2024 tax year.

Related: Citizenship Based Taxation – What US Expats Need to Know

Tax filing can be financially beneficial, even if you’re technically exempt

While some may interpret their financial situation to avoid filing, there are instances where filing a tax return can be beneficial.

Retroactively claiming US stimulus checks 

Consider a hypothetical US citizen, Emma, for example. Say Emma is a 45-year-old single taxpayer working in Sri Lanka. She has not filed US tax returns for the past several years, including tax years 2020-2022. 

Let’s also assume that Emma’s annual income for 2022 was $10,000, and she has not claimed any of the three IRS stimulus payments that she has a right to claim as a US citizen living overseas. For the 2024 tax year (tax returns filed in 2023), the standard deduction is $13,850, exceeding her total income.

Technically, Emma doesn’t need to file, but if she doesn’t, she effectively leaves $3,200 on the table, plus any refundable childcare credits for which she’s eligible. In Emma’s particular case, it’s strongly in her financial favor to file a US tax return. (Note, we cover 2024 tax changes to the standard deduction in more depth below.)

Key 2024 tax changes 

The 2024 tax changes include adjustments to the Foreign Earned Income Exclusion (FEIE) and an increase in the standard deduction.

The gift exclusion is increasing and remains notably high for gifts to non-US spouses.

Retirement contribution limits remain largely unchanged.

Foreign Earned Income Exclusion is increasing to $126,500

The Foreign Earned Income Exclusion (FEIE) allows expats to exclude a certain amount of their foreign-earned income from taxable income. This exclusion applies to “earned income,” such as salaries and self-employment earnings. Unfortunately, it does not apply to passive income such as interest and dividends.

Every year, the IRS adjusts the FEIE to account for inflation. 

Foreign Earned Income Exclusion Amounts

The standard deduction is increasing

The standard deduction is the amount of your income that is tax-free. Due to inflation, the IRS typically adjusts the standard deduction amount annually.

For tax returns you’ll file in 2025 related to the 2024 tax year, US taxpayers benefit from increased standard deduction amounts. 

Of course, the amount you can claim depends on certain factors. These include your marital status, age, and whether you file jointly or individually.

Standard Deduction Amounts for Taxpayers Younger Than 65

A note on claiming itemized deductions as a US expat

Before the Tax Cuts and Jobs Act of 2017, many expats preferred the itemized deductions route. At that time, the standard deduction for single filers was a mere $6,350. However, this amount doubled to $13,000 (for single filers) with the passing of the Tax Cuts and Jobs Act.

This change made the standard deduction far and away the most popular choice for US taxpayers. If you have questions about your situation or the best strategy for you, reach out to a Bright!Tax expert.

The income thresholds within each tax bracket are going up

There are seven income tax rates in the US. These rates have income bands adjusted yearly to account for inflation. It’s important to review these bands annually to understand which income tax bracket corresponds with your income.

If your income remains unchanged, it’s unlikely you’ll move to a higher tax bracket. Adjusting the income bands to neutralize the impact of inflation is almost always financially beneficial to the taxpayer.

Here’s how the income bands look for single filers for the tax year 2023 (the return you’ll file in 2024) and the tax year 2024 (the return you’ll file in 2025).

Income Tax Rates, Single Filers

The example we’ve highlighted here is for single filers. Notably, for the 2023 tax year (the tax return you will file in 2024), the federal income tax brackets are the same as the corresponding year for single filers. (Except for the top two (35% and 37% tax brackets.) 

Check out the IRS website for the 2024 tax changes in the tax bands for other filers, notably, those married filing jointly.  

What is the annual gift tax exclusion for 2024?

The gift tax exclusion amount for the 2024 tax year is increasing to $18,000. This means you can make a tax-free gift of up to $18,000 to anyone in 2024.

Here’s how this amount has been changing over the years:

Annual Gift Tax Exclusion

Gifting to a non-US spouse

The annual amount that one may give to a spouse who is not a US citizen will increase to $185,000 in 2024.

Read more: Gifting Property To a Foreign Spouse and US Expat Taxes

The maximum amount you can contribute to a retirement plan is increasing

As an expat, your retirement account options may look different than for your family and friends in the US. It’s important to be aware of the vehicles available to you, as well as stay abreast of the maximum contribution limits.

Below we detail contributions by investment vehicle, including IRS 401(k) changes. The following table applies to US taxpayers who are younger than 50. If you’re 50 or older, you may put up to $30,500 into all of the vehicles in the table below, excluding IRAs. 

Note: There are certain changes coming into effect for US taxpayers with Roth 401(k)s as a result of the Secure 2.0 Act, signed into law in late 2022. These should be carefully reviewed with an accountant familiar with your circumstances. 

Catch-up contributions also get their yearly update

Catch-up contributions refer to the allowance for those 50 and older who continue to use IRS retirement vehicles such as the IRA to save more money. 

For 401(k), 403(b), and most 457 plans, the IRS increased the maximum catch-up amount to $7,500 in 2023. This means that if you’re 50 and older, you could save up to $30,000 last year. This is the regular contribution limit plus the catch-up contribution limit. These figures remain unchanged for the 2024 tax year.

The limit for catch-up contributions remains unchanged for IRAs at $1,000.

Electric vehicle (EV) tax credit 2024 changes

As part of the Inflation Reduction Act of 2022, Americans filing for the 2023 tax year benefitted from clean vehicle tax credits of up to $7,500 if they purchased qualifying electric vehicles. The 2024 Electric Vehicle Tax Credit is claimed using Form 8936. 

Do expats qualify for the EV tax credit in 2024? 

The legislation stipulates that the qualifying electric vehicle must be used in the United States. Unfortunately, this aspect of the provision prevents most Americans living abroad from taking advantage of the change. However, you can speak to your tax advisor if you have questions about how purchasing an electric vehicle in North America may benefit you from a tax perspective.

Were there COVID stimulus payments in 2022? 

US taxpayers were eligible to claim three stimulus payments in total. Two of them require taxpayers to have filed their 2020 tax returns. One requires filing a tax return for 2021. Typically, if you are up-to-date on your US taxes and did not claim the stimulus payments, you will not be able to claim them post-2021. However, if you have not filed for certain tax years, including 2020-2022, you may still be eligible to claim stimulus payments.

If you would like to claim your stimulus payments but are concerned about your eligibility because you are behind in your taxes, you may still be able to retroactively claim your stimulus payments. (This, as well as any additional credits you might qualify for.)

Two birds with one (penalty-free!) stone:

Many US expats who need to file late may be able to catch up on US taxes in 2024 and claim stimulus payments.

For US taxpayers living abroad who are not currently tax-compliant i.e., they have not filed US tax returns for one or (perhaps many) more years, the IRS created a specifically designed amnesty program.

This program is called the Streamlined Compliance Procedure (SLP). The SLP requires certain eligibility criteria, which can typically be obtained by working with a specialist in US expat tax services. If you are a US expat taxpayer who has fallen behind on US tax filing and, by extension, has not claimed any or all of the available stimulus payments, you could become tax compliant and receive all tax refunds for which you are eligible in one fell swoop.

Child Tax Credit in 2024

The Child Tax Credit (CTC) is available to US citizens based both in the US and abroad, and the 2024 CTC is up to $1,700 per child. This is an increase of $100 from 2023 when the refundable portion of the CTC was $1,600 per qualifying child.

Note that there are income limits and other criteria associated with successfully claiming the CTC. Understanding the basic expat provisions is an important start, and yet working with experts in expat tax will ensure tax strategy is integrated into your compliance.

File your most US tax-efficient overseas return yet with Bright!Tax.

Bright!Tax was founded by expats, for expats. If you’re looking for professional help from expert US tax providers who care about their expat clients, you’ve come to the right place.

Get Started

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In 2022, the IRS collected over $4.9 trillion in gross revenue to fund much of the federal government. These funds go to supporting federal infrastructures, including our national parks, air traffic control, and space exploration.

But with over 90,000 employees, an organization the size of the IRS doesn’t operate like a well-oiled machine. It has squeaks, hiccups, and worn-out parts that need replacing. Moreover, there are carry-over impacts from the COVID-19 pandemic still affecting the IRS and legacy issues that persist.

Without further ado, let’s get into the takeaways from this report that are most relevant to Americans living abroad.

IRS has a backlog of unprocessed returns

According to the IRS, as of August 2022, it had nearly 7.6 million individual paper returns to process. It slashed this backlog to approximately 1 million as of mid-December 2022.

Most of these unprocessed returns were paper filed. However, millions of e-filed individual returns were not processed immediately, either. For taxpayers, this backlog created high levels of frustration in 2022. 

The IRS failed to pay timely refunds to millions of taxpayers for the third year in a row. Because of paper processing delays, it delayed refunds for these taxpayers generally by six months or longer. 

The backlog caused millions of automatically generated notices (known within the industry as “IRS nasty grams”) to be sent to taxpayers in error; the information the IRS was asking for was often buried in the unprocessed mail pile. 

Filing paper returns has long been the IRS’s kryptonite

Although e-filing options abound these days, certain processes must still be undertaken via paper filing. Prominent among these is the Streamlined Filing Compliance Procedures (SLP), one of the filing procedures Bright!Tax specializes in due to the high volume of need expressed by Americans living abroad to catch up with previously missed tax return filings.  

Learn more about the Streamlined Filing Compliance Procedures

While the Streamlined Compliance Procedures is an excellent way for American expats to become and remain tax compliant, the gratification of being all caught up can sometimes be delayed due to the IRS’ dogmatically bureaucratic problems. The forms associated with the SLP are not permitted to be e-filed; they must be submitted on paper. Along with slower refunds, the CPAs at Bright!Tax are seeing six months or more wait times for streamlined process returns to be processed.  

The IRS is understaffed

If it feels like you have to channel a lot of patience and energy into reaching an IRS agent when you call their taxpayer helpline, you’re not alone.

No matter the time of day, in 2022, only about 28% of callers could speak with an agent on the phone. While this is an improvement from 2021’s level of service, it falls dramatically short of the IRS’s goal of 85%. 

On the service side of things, tax professionals fared no better. Bright!Tax team members often incurred over two-hour wait times before speaking with an agent on behalf of their clients.

Don’t have time to sit on the phone all afternoon waiting to be connected to an IRS agent? Connect with a Bright!Tax CPA today to discuss the particulars of your tax project, and we’ll take it from there.  

Unfortunately, it does not look like the situation will improve in the near future. The IRS Taxpayer Advocate, the independent group within the IRS that seeks to protect taxpayers’ rights, expects the IRS to lose 50,000 employees through attrition in the next six years.  

This means getting answers to questions, guidance on tax law changes, and help responding to (and often, correcting) “nasty grams” will remain challenging. 

IRS uses outdated technology 

The user experience of using the IRS website leaves a lot to be desired, to be frank. The interface is cumbersome to navigate and their digital communication tools are minimal. This forces a surplus of taxpayers to contact the IRS by phone, perpetuating the problem of clogged phone lines.

Pro tip: Expats should also be aware of 1099-K for the 2023 filing season. 

But the IRS’s technology lacks digital communication capabilities. There is no option to live chat with an agent or email, even though the National Taxpayer Advocate Service estimates over 80% of taxpayers support the implementation of such a feature. What’s more, connecting with an IRS agent is often just the first hurdle of many. 

Agents are often unable to provide callers with complete and concrete answers to very specific questions, such as the real reason behind a notice or an “amount due” letter. Sometimes, agents will refer the caller to another department that does not have direct phone access, or put the caller on hold while attempting to transfer the call to a different department. 

The experience of contacting the IRS can be very frustrating, particularly for an expat caller. The IRS’s ongoing challenge to provide sufficient service jeopardizes tax compliance, frustrates taxpayers, and impacts their right to quality service. 

Expats in particular face challenges filing US taxes from abroad

There isn’t much that folks agree on across-the-board these days, but there is one thing: Expats face serious burdens when attempting to file their taxes from abroad, and the federal resources available to assist are paltry. The IRS has just eleven full-service Volunteer Income Tax Assistance (VITA) sites overseas, all on US military bases. Additionally, as the name implies, the amount of help available at these sites is contingent on the time of the volunteers. 

Fortunately, there has been some relief as of late. The IRS has taken some steps to help service international taxpayers by allowing them to gain online access to their taxpayer account online. 

Being able to access one’s US taxpayer account online is vital for Americans living abroad in order to access transcripts, retrieve an IP PIN, get updates on Stimulus payments, have easy access to Direct Pay, and set up installment agreements with the IRS, among other things. 

Working alongside the Taxpayer Advocacy Panel, a Federal Advisory Committee established on behalf of American taxpayers, Bright!Tax was able to come up with a guide offering tips for expats to successfully access their online IRS records, using the “video call with an agent” option. More broadly, our Bright!Tax Client Services Team is here to assist our clients should they require a hand in setting up their online account.

Increasing international US tax compliance requirements

In spite of the increased complexities when filing US taxes from abroad, US citizens and permanent residents can only expect scrutiny over their filing (or lack of filing) to increase in the coming years. 

Expats are required to report and pay applicable taxes on worldwide income to the IRS, including income from offshore accounts and other assets. While taxpayers can hold offshore accounts for several legitimate reasons, some taxpayers have used such accounts to hide income and evade taxes. 

A key piece of legislation went into effect in 2010. This legislation, the Foreign Account Tax Compliance Act (FATCA), was intended to reduce tax evasion by requiring greater transparency from foreign financial institutions on the financial holdings of their American clients. This, in theory, would lead to increased tax compliance, and make it easier for tax evaders to be held accountable. Unfortunately, a byproduct of this logical-seeming approach to mitigating tax evasion is that it increased the burden of tax compliance on expats without increasing expat tax filing support. 

Save for later: The Top 8 Things You Need To Know About FATCA

To file just their annual 1040, an individual taxpayer can expect to spend 13 hours preparing and filing the information. That’s one and a half work days, or, put another way, an entire season of The Walking Dead. And that doesn’t take into account the hours of research that go into learning about and filing additional forms that may need to be filed.  

While we’re talking about forms and FATCA, we can’t leave out the FBAR

The Foreign Bank Account Report (FBAR) is a filing requirement that was introduced through the Bank Secrecy Act (BSA) of 1970. In a similar vein to FATCA, it was created in the spirit of identifying and deterring money laundering. The requirement is simple in principle: Americans living abroad with $10,000 or more in foreign-registered financial accounts at any point during the calendar year must file an FBAR. This rule applies even if the $10,000 is distributed between multiple accounts. Fortunately, this form is only accepted via online filing. Unfortunately, with the increased availability of online banking options to facilitate cross-border money transfers, complex questions often arise. 

Need to learn how to file your FBAR in 2023? We’ve got you covered. 

Let Bright!Tax help you avoid increased scrutiny by the IRS by filing your return correctly

Tax compliance for US expats is burdensome and enforcement is highly imperfectly administered by the IRS. What’s more, Americans living abroad trying to file even a relatively simple return often find the US tax code to be Complex – with a capital “C.” 

Our Bright!Tax CPAs completely empathize and understand – many of us live abroad too! We understand that international tax filing is something that requires time, patience, and a commitment to ongoing learning. Of course, a nose for numbers and a degree (or two!) in accounting don’t hurt either! 

If you’ve missed filing tax returns for a year or two, are concerned about complying with FATCA, or simply want to ensure that your expat tax return is filing to your utmost advantage, we would love to speak with you. Get started today by contacting our expert team – no tax situation is too complex! Furthermore, it truly is our passion as an organization to help expats like you become and remain tax compliant.

The post The IRS Agency 2022 Annual Report: Implications for Expats appeared first on Bright!Tax Expat Tax Services.

Accidental Americans are Americans who have spent little to no time living in the US, but who hold American citizenship because they were born in the US, on US soil (such as a military base) to an American parent, or registered at an American Embassy abroad by an American parent when they were a child. 

The basics: American citizens abroad are required to file yearly US taxes

The United States taxes American citizens and green card holders on their worldwide income and requires them to file with the IRS every year. For accidental Americans and many others, TINs were developed to enable Americans living abroad and without a social security number  to file their required tax return with the IRS. 

In 2010, President Barack Obama signed into law the HIRE Act. The Foreign Account Tax Compliance Act, commonly referred to as FATCA, is embedded in this piece of legislation and came into effect on July 1, 2014.

The intent: FATCA was designed to ensure wealth overseas was being (fairly) taxed

The legislation achieves this, to some degree, with reporting requirements. All international banks are, in theory, required to comply with FATCA by registering with the IRS and sharing their American clients’ financial assets and holdings information. To date, 113 countries have FATCA agreements in place. 

There are two models through which the U.S. collaborates with countries to enforce FATCA – most commonly referred to as Model 1 and Model 2.

Model 1 FATCA enforcement

Most countries fall under Model 1, in which case the international financial institution automatically reports its clients’ information to the tax authority partner country, which in turn automatically shares that information with the US tax authority (the IRS). 

Model 2 FATCA enforcement

Switzerland, on the other hand, is part of the very small minority of countries (just 13 to date, or 11%) that do not have Model 1 agreements. For its part, Switzerland forged an agreement via the FATCA Qualification Committee. This agreement is reflected in Model 2, under which clients can choose not to consent to the forwarding of their data. In these cases, the IRS must submit a standard administrative request to obtain the financial information with which FATCA is concerned.

From the onset, FATCA has been controversial legislation. When it went into effect, it had several immediate and serious implications for American taxpayers living overseas, many of whom were simply unaware of their requirement to file US taxes from abroad. 

Read more: Do you need to file US taxes even though you’ve been living abroad for years?

Unintended consequences: FATCA’s negative impact on US expats’ day-to-day life has been controversial

For one, it’s now extremely challenging for Americans to open bank accounts abroad, as foreign financial institutions are hesitant to take on the extra, yearly paperwork. This particularly affects long-term American expats, accidental expats, and green card holders. 

Steep penalties also await banks that refuse to register with the IRS and/or enforce FATCA. From the perspective of a foreign financial institution (FFI), it’s often simply not worth the trouble to open an account for any American, regardless of their level of income or expatriate status.

There are no exemptions for accidental Americans within FATCA legislation. For these Americans, their ability to open a bank account is even more restricted. This because, by virtue of holding American citizenship, they are technically eligible to apply for a social security number (SSN), so simply not having one is not a valid excuse in the government’s eyes. Moreover, FATCA requires them to have one. However, the process to apply for an SSN is arduous and complex. This results in high levels of frustration by legal American citizens who are, quite simply, unfairly ensnared by legislation. 

The introduction of TIN numbers was a highly imperfect solution that fails to serve accidental Americans who need to be in compliance with bank standards. To date, thousands of foreign accounts held by Americans have been needlessly frozen due to perceived compliance issues.

A recap: what does the delay in TIN requirement actually mean for accidental Americans?  

The IRS is now offering temporary relief for banks of accidental Americans who don’t have TINs until 2024. And yet, the IRS announcement that delays the TIN requirement only concerns those already with Model 1 agreements in place. The announcement also places the onus of responsibility on FFIs to be proactive in their understanding of the announcement, which is only valid through 2024.

“Although this is not a permanent solution, it is a relief for hundreds of thousands of European citizens, and a great victory for [our organization], which has brought this subject to the fore in the public debate over the past five years,” said the Founder and President of the Association of Accidental Americans (AAA), Fabien Lehagre.

The post IRS Announces Delay in TIN Requirement – Largely Implicates Accidental Americans appeared first on Bright!Tax Expat Tax Services.

In an effort to reduce Americans’ financial burden (especially as the US is still experiencing high inflation), the Biden administration announced its student loan forgiveness program. Our immediate thought… how might this impact expats?

We’ll answer this and other critical questions in today’s article, including:

• What’s included in Biden’s Student Loan Forgiveness Plan? 
• What does the Student Loan Forgiveness Plan mean for expats? 
• Will debt forgiveness under the Student Loan Forgiveness Plan be taxable? 

What’s included in Biden’s Student Loan Forgiveness Plan? 

The nuts and bolts: Americans can cancel up to $10,000 of their federal student debt. Those who received Federal Pell Grants for their education can claim up to $20,000 in debt relief. 

To qualify for relief under the Student Loan Forgiveness Plan, you must have earned under a certain income threshold in either 2020 or 2021. Here’s the breakdown based on your US tax filing status: 

How do these thresholds define ‘income’? 

The IRS has various tax relief programs, such as the Foreign Earned Income Exclusion (FEIE) to help US expats avoid double taxation. More specifically, the FEIE allows you to exclude around $100,000 ($107,600 for 2020, $108,700 for 2021) from your income. This amount is adjusted each year for inflation. 

So, hypothetically speaking… if the FEIE allows American expats to exclude some of their foreign earned income from their US taxable income, can someone earning more than the outlined income thresholds technically be eligible to receive Student Loan Forgiveness? 

Let’s bring this to life with an example. Say you’re an expat living in Singapore, and you made $150,000 in 2020 and 2021. Technically with the FEIE, you can exclude approximately $100,000 of your foreign earned income from US taxes. So if your taxable income is $50,000… are you able to apply for Student Loan Forgiveness? 

The answer is yes! Because the plan’s income thresholds are based on your adjusted gross income (which is your taxable income after accounting for any deductions and adjustments). 

What actions do I need to take if I’m eligible? 

To claim the debt cancellation, federal student loan borrowers must apply for relief and report their income. Though the application will be available in several weeks (starting in October 2022), you can sign up for updates on the Department of Education subscription page. 

The deadline for applying will be December 23rd, 2023. And according to the White House, “nearly 8 million borrowers may be eligible to receive relief automatically because their relevant income data is already available to the Department.”

While the Department of Education may already have your income information on file (and you may receive the relief automatically), it’s encouraged to file an application regardless if you’re eligible – just to be sure.  

Will the Student Loan Forgiveness Plan be taxable? 

Typically, when a lender forgives or cancels a debt, the borrower has to pay taxes on the canceled balance. It’s treated as if the loan were some form of income. However, the Biden administration reassured Americans that the student debt cancellation wouldn’t be taxable at a federal level. 

When Congress passed the American Rescue Plan in 2021, they included a bill that provided tax exemption to all federal student loan forgiveness through the end of 2025. That said, there’s a possibility that some states will treat student loan forgiveness as a form of taxable income. 

That’s because US states don’t always mimic federal laws regarding taxes. According to the Tax Foundation, the following states might apply taxes on student debt cancellation:

• Arkansas
• Minnesota
• Mississippi
• North Carolina
• South Carolina
• Wisconsin
• New York
• Kentucky
• West Virginia
• Virginia
• Massachusetts
• Hawaii
• Idaho

Stay Up to Date With All the Latest Tax News

If you’re a US expat living abroad, keeping track of new US regulations and how they impact you can be challenging. 

To catch up, feel free to read some of our latest articles focused on tax news:

• The Inflation Reduction Act of 2022 (And How It Might Affect Expat Taxes)
• IRS Eliminating $1.2 Billion in Penalties: The Latest Round of COVID Relief (Announced August 2022)
• Earn More Than $600 as an Expat Gig Worker? Introduction, Form 1099-K

The post Biden’s Student Loan Debt Forgiveness: A Huge Opportunity for Expats appeared first on Bright!Tax Expat Tax Services.

In response, lawmakers have championed a new law called the Inflation Reduction Act aimed at not only addressing inflation but also touching on areas such as healthcare, climate, etc.

One portion of the bill, in particular, has sparked a flurry of concern, however – specifically how it might negatively impact US taxpayers and lead to more IRS audits. 

Today’s article is aimed at walking you through the essentials: 

• – What’s in the Inflation Reduction Act? 
• – What’s behind the $80 billion in IRS funding? 
• – How might the Inflation Reduction Act impact US expats and their taxes? 

What’s in the Inflation Reduction Act? 

The Inflation Reduction Act promises changes in various sectors that directly impact everyday Americans: the environment, healthcare, and taxes. 

Currently, many major companies (such as Amazon) pay very little federal tax. Under the Inflation Reduction Act, there will be a minimum 15% corporate tax rate for companies that make at least $1 billion per year. Stock buybacks by corporations will also face a 1% excise tax. 

The Act also comes with policies that work towards adopting a more environmentally friendly future. The bill includes a 10-year extension of the homeowner credit for taxpayers to install solar panels on their homes. Taxpayers also benefit from an extension of electric vehicle tax credits until 2032 if they plan on purchasing an electric car. 

An aspect of the Inflation Reduction Act that has left some fearful is how much the IRS will receive in new funding – $80 billion over the next ten years, to be specific.

The goal is to help the IRS implement new systems and processes to better track taxpayers that don’t file accurate returns. More specifically, the official senate document on the Inflation Reduction Act states the IRS will receive:

• – $45.6 billion in funding for enforcement
• – $25.3 billion in funding for operations support

The IRS also expects to hire 87,000 new employees to its agency with the funding. These new job positions will vary from customer service representatives to auditors. 

What’s behind the $80 billion in IRS funding? 

The agency desperately needs an upgrade, and the new funding is an opportunity for the IRS to support the resources it needs to fulfill its responsibilities.  

The facts: 

• – The IRS has a backlog of over 10.2 million unprocessed tax returns. 
• – At present, the agency still utilizes a paper-based system of management.
• – The pandemic lockdowns worsened its already inefficient, slow-moving design. 
• – Technology-wise, the IRS is drastically behind. According to a Washington Post report, some of the technology used dates back to the 70s. The agency’s ‘latest software’ is from the early 2000s. 

On top of upgrading its operations, the IRS projects it will see an increase in revenue with the funding. According to The Congressional Budget Office (CBO), the new financing could raise $203 billion in gross revenue and $123 billion in net revenue for the IRS. 

How will the Inflation Reduction Act impact US expats and their taxes? 

Confirming the basics – because of citizenship-based taxation, US expats must still file a tax return and declare their worldwide income, regardless of where they live. Since Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010, countries must report US expats’ financial activities in their territory – making compliance that much more important. 

Read More: What is Citizenship-Based Taxation? 

With regard to the Inflation Reduction Act… Americans (both Stateside & abroad) worry they will undergo more (unwarranted) scrutiny from the IRS. However, the IRS wants to reassure that the goal of the act isn’t to bully taxpayers:

“[The Inflation Reduction Act] isn’t about increasing audit scrutiny on small businesses or middle-income Americans,” says Charles Rettig, IRS commissioner, in a letter sent to the Senate. “Audit rates will not rise relative to recent years for households making under $400,000 annually.”

Josh Koskinen, former IRS commissioner, in an interview with PBS Newshour, says that he believes with the upgraded technology and increased resources, “the IRS will be actually better able to target people who really should be audited. The vast majority of taxpayers are actually going to benefit from this because the level of taxpayer service is going to increase significantly.”

Net – In theory, the Act mainly targets large corporations and increases their tax obligations to pay their fair share. But if you’re a US expat who still works for an American company, you could indirectly see the new corporate tax affecting your wages:

“If a company is less profitable and less able to spend money on labor and less able to pay higher wages, then that will be felt by individuals throughout the economy,” Says Shai Akabas, director of economic policy at the Bipartisan Policy Center, in a discussion with NPR. 

The bottom line: Stay compliant & smart with your US filing!

The reality of this news… it’s that much more important to be confident & compliant! Bright!Tax would love to support you in filing your yearly tax returns, as needed. 

Or if you’re simply looking to learn more, the 2022 Inflation Reduction Act isn’t the only big news from the IRS this year. To catch up, feel free to read our previous blog posts on significant events that have happened from the IRS:

• – Breaking News: How the IRS Destroyed 30 Million Document Returns in 2021
• – Earn More Than $600 As An Expat Gig Worker? Introducing, Form 1099-K

The post The Inflation Reduction Act of 2022 (And How It Might Affect Expat Taxes) appeared first on Bright!Tax Expat Tax Services.

Wednesday, August 24th, the IRS announced the latest round of updates – focused on penalty relief for filers of 2019 & 2020 US tax returns, as well as filers of international information returns (IRRs) for 2019 and 2020. 

“Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways,” said IRS Commissioner Rettig yesterday. “The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time. This penalty relief will be automatic for people or businesses who qualify; there’s no need to call.” 

One critical caveat here: you must file your return by September 30, 2022.

Why is this so important for expats? 

While each round of COVID relief was available to American expat taxpayers, this round is particularly relevant to those residing overseas. 

Why? US taxpayers abroad often have foreign financial interests that require reporting each year to the IRS, including participation in a foreign company, trust, or receipt of a foreign gift. 

US expats must report these interests on international informational returns. While they do not always have taxes associated with them, they are, if not appropriately filed, associated with heavy penalties. 

What are the penalties for not filing international information returns?

The penalties start at $10,000 for each failure to file. Once taxpayers have been notified of the delinquency, however, additional fees accrue after the first 90 days. From there, each month adds an additional $10,000. 

How do I file international information returns?

While there are many types of informational returns, only a few are eligible for penalty relief:  

Form 5471 

US taxpayers file Form 5471 to report their ownership in a company registered outside of the US. 

Form 3520 

There are a few different scenarios in which Form 3520 might need to be filed. The first relates to ownership in a foreign trust. If you are a US person who is considered the owner of a foreign trust, you will need to file Form 3520 each year by April 15th, or whenever your US tax return is due (June 15th for taxpayers living abroad).

The other scenario in which 3520 is filed by US taxpayers is when they have received a gift valued at $100,000 or more from a foreign person (read: someone who is not a US taxpayer) during the year.

Form 5472 

Form 5472 is a return filed by US-based companies which are owned 25% or more by non-US taxpayers.

Can I get a refund on penalties I already paid?

The penalty relief here applies retroactively, so if the IRS already has applied penalties, it would come into play here. And the good news is that you do not need to take action in order to claim any penalties you’ve already paid back. Over the coming weeks, refunds will be distributed automatically. In total, the IRS expects to pay out $1.2 billion in refunds between now and the end of September 2022.

How do I know if I’m eligible?

Reiterating, in order to be eligible for this penalty relief, you must file your tax return or international information by September 30, 2022. So if you’ve already filed you won’t need to take any action. If you’ve not filed yet, it’s a great time to submit your tax return to the IRS.

“The notice also provides details on relief for filers of various international information returns, such as those reporting transactions with foreign trusts, receipt of foreign gifts, and ownership interests in foreign corporations. To qualify for this relief, any eligible tax return must be filed on or before September 30, 2022.”

Get caught up with help from Bright!Tax!

If you need some support in taking advantage of this opportunity, our team of experts is at the ready! Whether you’re behind a couple of years or are just learning about your filing obligations, we specialize in getting you caught up (quickly!). 

The post IRS Eliminating $1.2 Billion in Penalties: The Latest Round of COVID Relief (Announced August 2022) appeared first on Bright!Tax Expat Tax Services.

If you work as a freelancer, independent contractor, gig worker, or are otherwise self-employed, the phrase “1099 form” is almost certainly familiar to you. That’s because any client from whom you’ve received at least $600 is obligated to send you a 1099-NEC, a tax form that is used to report payments made to non-employees.

But if you pay close attention to the news, or have received or transferred large payments through online platforms, you may also be familiar with the similarly-named (but different in function) Form 1099-K.

Form 1099-K has entered into the news cycle in a major way in recent years as reporting threshold updates were announced and recently, postponed. But, what exactly is Form 1099-K? Why is everyone talking about it? And, how might it affect you? 

What is Form 1099-K?

Form 1099-K, officially titled “Form 1099-K: Payment Card and Third Party Network Transactions,” is a form that is used to report payment transactions made through online platforms, apps, and other third-party payment processors. Examples of these include Venmo, PayPal, and Square, among others.

In recent years, third-party payment processors have been required to send 1099-K forms to anyone who has received more than 200 business-related payments totaling over $20,000 in one year. In turn, the 1099-K recipient must report the information included within it on Schedule 1 of Form 1040, “Additional Income and Adjustments to Income,” when filing their federal tax return.

Why has Form 1099-K been in the news?

The American Rescue Plan of 2021 — the legislative package signed into law by President Biden to stimulate the US economy in the wake of the COVID-19 pandemic — contained a number of changes to the US tax code. One of these changes (included under Section 9674) required payment processors to send a Form 1099-K to anyone who had received more than $600 in business-related payments during a particular tax year through their platform. This was an astounding change for those familiar with the previous $20,000 threshold.

The motivation behind this change to the tax code was primarily to implement more stringent regulations on third-party payment processors by obliging taxpayers to report their earnings at a lower threshold. This also ensured that both parties were subject to mandatory financial disclosures (and, subsequently, paying taxes on those disclosures). With the IRS missing out on billions of dollars in uncollected taxes each year, Biden’s administration has made closing the tax gap a key priority. The tax gap is the difference between what the IRS is truly owed and what they actually receive in on-time payments.

Originally, this change was supposed to go into effect for the 2022 tax year. Third-party payment processors were directed to send Form 1099-Ks reflecting the previous year’s payments by January 2023. However, the IRS announced in December 2022 that the Form 1099-K reporting threshold changes would be delayed in order to “facilitate an orderly transition” for taxpayers, third-party payment platforms, tax preparers, and others who would be affected by the changes.

So, when will the Form 1099-K changes take effect?

The IRS has not yet stated when the new changes will go into effect. However, they noted that “additional details on the delay will be available in the near future along with additional information to help taxpayers and the industry.”

Who will receive 1099-Ks in the future?

Whenever the 1099-K reporting threshold changes go into effect, they will be sent to those who have received $600 or more from third-party payment processors for goods provided or services rendered. This could include:

• Small business owners who sell or flip goods through eBay, Etsy, Amazon, Shopify, etc.
• Property owners who rent out their properties on Airbnb, Vrbo, etc. 
• Gig workers who earn money through gig economy apps like Uber, Lyft, TaskRabbit, Instacart, etc.
• Freelancers, consultants, and independent contractors who are paid for professional services through platforms like Square, Stripe, PayPal, Bill.com, Venmo, etc.

The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member, partner, or roommate for a household bill.

How does the 1099-K affect US Americans living abroad?

With the 1099-K reporting threshold changes postponed for this tax season, US expats will largely not be impacted just yet. However, they may still receive a 1099-K because of the last-minute communications from the IRS about the delay in implementing the lowered threshold. While the IRS has not yet issued specific guidelines for such taxpayers, they stated that they are “working rapidly to provide instructions and clarity so that [those] taxpayers understand what to do.” 

In general, it’s always good practice to keep official tax paperwork organized and readily accessible. If you receive a 1099-K form, save it to a secure, easily accessible location so that you can produce it at a later date if needed.

Living or moving abroad can sometimes complicate how to file certain forms – read more about how a mid-year move abroad could affect your tax planning.

Once the Form 1099-K reporting thresholds are officially updated, anyone who receives the form must report the relevant information found within it on their tax return. Tip: make sure to use a reliable currency calculator if the payments received were in a foreign currency. In theory, you shouldn’t have to pay additional taxes as long as you already properly report this income. However, it will add an additional step in the filing process.

Rest assured: Ensuring that you have the most up-to-date information is our top priority, so if there are any status changes regarding the Form 1099-K updates, we’ll be sure to update this article accordingly.

In need of US-tax filing services for Americans abroad?

Taxes are confusing enough as it is, especially for expats. In addition to many long, confusing forms, you have to consider things like avoiding double taxation, filing additional reports. It’s not uncommon to spend hours of time researching and learning about tax deductions and credits that only apply to US taxpayers residing abroad. However, these must must be correctly claimed in order to be applied. Add to that the ever-changing nature of the tax code, and filing expat taxes can begin to feel downright overwhelming.

Fortunately, our Bright!Tax team makes it possible for you to hand off your expat tax filing responsibilities to an expert CPA. With years of experience helping US citizens and permanent residents navigate their tax returns, we’re confident in our ability to help you get and stay compliant, minimize your tax liability, and save you time and stress. And of course, our team of CPAs frequently monitors any changes in tax law, so our expat tax projects are always completed to the best advantage for our clients.

If you have any more questions about Form 1099-K or expat taxes in general, we’re here to help! Just share some details about your situation and one of our CPAs will reach out within one business day.

The post <strong>Form 1099-K: Everything US Expats Need to Know</strong> appeared first on Bright!Tax Expat Tax Services.

In January of this year, the IRS warned taxpayers to file early and to ensure returns were accurate in order to avoid delays. But for many US expats, filing early wasn’t an option – particularly if they were waiting on tax paperwork from other countries. In fact, many expats may have even filed for an extension, pushing their tax deadline to October 15th of this year.

Whether you filed your returns before the expat deadline of June 15, 2022 or if you still haven’t filed yet, here’s what you need to know about the IRS backlog, how it impacts you, and some tips for reaching out to the IRS for a faster response time.

The IRS Backlog is Worse than Last Year’s

If you thought last year’s backlog was bad, it may surprise you to hear that the IRS is even further behind this year. As of June 22, 2022, the IRS had 21,300,000 paper tax returns awaiting processing. Last year at this time, the number was 20,000,000.

Expanded tax credits, such as the Child Tax Credit, and new tax changes from 2021 are further complicating the tax-review process.

Prior to the pandemic, if taxpayers filed their tax returns by mail, it typically took the IRS four to six weeks to deliver refunds. US expats receiving paper checks may have waited even longer. However, now refunds for paper tax returns can take longer than six months to process – and in some cases may even exceed ten months.

US expats who filed by mail may face even longer delays since it will take longer for the IRS to mail a refund check or reach out to them with questions or official notices. So, if their 2021 tax return or any other required paperwork – like FBARs – aren’t correct, it may take a long time for the IRS to connect with them.

Four Things You Probably Didn’t Know About the IRS

Once you receive an IRS letter, figuring out your next steps can be confusing. You may want to reach out to the IRS directly, but due to their strained staffing resources and their having millions of returns to sift through, you might find it difficult. 

Here’s what you need to know when contacting the IRS to set you up for success:

1. The IRS does not have a centralized computer system.

It may feel impossible to believe, but it’s true – the IRS does not operate on a centralized system. As a result, it’s important you reach out to the IRS by calling the phone number listed on your notice. If you reach a different IRS department, they may not be able to view your file or they may not have any record of the issue you’re trying to rectify.

2. If you reach an IRS agent, they may not be fully trained.

The unfortunate reality is not all IRS agents on the phone lines are fully trained. They may know the ins and outs of domestic tax law, but US expat tax regulations are much different and more complicated. Our team of experts has found that some agents aren’t up to speed on IRS processes like the Streamlined Procedure, for instance.

This can make trying to take care of an IRS letter even more frustrating, and sometimes it requires multiple phone calls to remedy.

3. IRS notices are not always correct. You may owe less money or nothing at all.

Just because you’ve received an official IRS letter with an amount due, does not mean the notice (or amount) is correct. These letters may claim that US citizens or expats have made one or more filing errors that lead them to owe more money than stated on their tax returns. But, in our experiences, this information isn’t always accurate.

This year, in particular, our Client Advocacy team has reached out to the IRS on behalf of our US expat clients, only to find that in several instances, there were no errors on their tax returns. In these cases, the amount due was removed immediately.

4. The IRS tax professional line is often more backed up than the individual client lines

A special IRS phone line is designed for tax professionals, but it’s not always the best option. Our Bright!Tax team has tried many times to use this professional line, but at times, it can be extremely hard to get through. In our experience, it’s most efficient to use the individual client lines instead.

Five Tips to Help When Dealing with the IRS

Connecting to the IRS right now can be challenging. The IRS recently noted that during the 2022 tax season alone, it received over 73 million phone calls. Of this number, only one out of ten calls actually reached an IRS employee. And, the fiscal year isn’t over yet.

Last year, for instance, the IRS received over 282 million phone calls, but only 32 million were actually answered. This may feel frustrating, but with its staffing shortages, it’s not possible right now for the IRS to answer every phone call.

Here are some tips to help boost your chances of reaching an IRS agent; therefore improving your odds of resolving an issue over the phone:

1. Time your call

The timing of when you reach out to the IRS plays a large role in whether you’ll get connected to an agent. While there’s always an element of chance, calling in the early morning or late evening Eastern Time (ET) is when you’re most likely to encounter the shortest wait times.

The IRS’s helpline is available from 7am until 11pm ET, so trying to call between 7am and 8am ET or after 9pm ET can boost your chances of reaching an IRS agent.

2. Consider using Skype

Calling over the phone may seem like the simplest way to reach out to the IRS, but using an app like Skype could save you money. Since you don’t know how long you’ll be waiting for the call to be answered or how long you’ll be on the line when you do get through, if you’re calling internationally, your phone bill could significantly increase while trying to remedy your tax issues.

A paid Skype account, however, can connect you to any of the IRS lines, and is a more cost-effective solution. So, if you have a major tax issue or worry you may be on the phone for hours, opting for Skype might make the most sense.

3. Prep before your call

This may seem obvious, but having all of your tax paperwork in front of you before calling is crucial. This means your tax returns and any other financial documents, such as your FBAR, business paperwork, pay stubs, documentation of taxes paid to other countries, IRS notices, and bank account information. 

Even if you’re able to pull all of this information up online, we recommend either printing it out or having it open in a format (like a PDF) that is unlikely to crash or disconnect while you’re on the phone. Otherwise, you risk having to end your call and reach out again when you have all the proper paperwork ready.

4. Mention your expat status right away

You may think the IRS agent you’re speaking to knows you’re a US expat by the information in your tax report. While they may pick up on this right away, it’s best not to make any assumptions. Instead, immediately let them know that you’re a US expat. This way, right at the beginning of the call, they are informed that you have different filing requirements, including an extended deadline.

This could also save you from being given advice that does not apply to your financial situation as a US citizen living abroad. 

5. Open a US bank account

You may already have a US bank account, but if you don’t, it’s smart to open one – even if it only serves as an account for paying or receiving tax money. If you owe taxes to the IRS, it’s often faster to pay with a linked US bank account. Likewise, you may receive your tax refund faster if you have a US bank account where the IRS can direct your return.

Reach Out to Bright!Tax if You Need Support

Even in a normal tax situation, receiving an IRS letter can be frightening. And tracking down the IRS when you’re thousands of miles away, in another time zone, presents its own challenges. If you’re not sure what you need to do next, or you think the tax liability claims in an IRS letter may be wrong, we have a team of experts, ready to advocate for you.

Our CPAs work with US expats every day to help facilitate the tax filing process. We know the US expat tax laws and can help you figure out the best path forward. We’ll even reach out to the IRS on your behalf. Don’t get discouraged – we’ll help you reach the IRS and make sure you feel better about your tax situation. Simply reach out to our Client Advocacy team, and we’ll connect you to support in one business day (or less!).

The post Expert advice: Dealing with the IRS backlog & its impact on expats appeared first on Bright!Tax Expat Tax Services.