US expats urged to prepare for the most complicated tax return season ever

by Ray Clancy on December 29, 2014

The 2015 tax filing season for US citizens may be one of the most complex ever and expats are being urged to plan ahead.

The American Citizens Abroad group has launched a Tax Return Preparer Directory specifically aimed at helping Americans living overseas navigate the complicated system and ensure tax compliance.

us expat taxes

The 2015 tax filing season for US citizens may be one of the most complex ever

For them, filing a tax return has been made more complicated by increased IRS and Department of Justice enforcement activities and the implementation of FATCA by foreign financial institutions around the world.

ACA says that the need for Americans abroad, currently estimated by the US Department of State at 6.8 million, to find qualified tax professionals is needed now more than ever.

Americans abroad need a comprehensive, reliable source for finding return preparers and similar professional advisors. Identifying and getting information about advisors is difficult.

“There is no one place Americans overseas can look. There is word of mouth, some of the American Embassies maintain lists and that’s about it. The ACA Tax Preparer Directory fills this void and gives Americans the resources they need to stay tax compliant,’ said Marylouise Serrato, ACA executive director.

The ACA Directory explains to taxpayers who can be a tax return preparer and the rules that apply. It lists 1,700 preparers and is free.

Figures show that the number of Americans living abroad increased from 70,000 in 1966 to between three million and four million in 1996 and more than seven million today, according to several estimates.

There are many reasons Americans have moved, including the globalization of the economy and increased cross-border migration generally, yet the US is the only developed country in the world that requires citizens who live abroad to file tax returns.

The FBAR (Foreign Bank Account Report) requires holders of foreign financial accounts to report detailed information about all such accounts each year. It can take many days to obtain and compile the information and then prepare the form.

The Foreign Account Tax Compliance Act of 2010 has made it even more complex. FATCA compliance costs for foreign banks are so high that many banks have closed the accounts of Americans living abroad.

It is estimated that around 3,000 US expats have given up their citizenship due to the tax system. Prior to the changes, it was only a few hundred a year.

{ 5 comments… read them below or add one }

John December 29, 2014 at 8:56 pm

I fail to see how this season can be any more complicated? FATCA affects bank reporting, not individual reporting. I still have to complete my 1040, 8949, 2555, 8891’s, and the dreaded FBAR. There are no FATCA reports that I know of. But this is one of our struggles. I have lived abroad 44 years. I don’t know the US tax system, and nobody at the IRS is willing to help me.

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JC Double Taxed January 5, 2015 at 11:24 am

@John Form 8938 came about from FATCA legislation. It was part of doubling my compliance costs. Report each account and show on it the line of the 1040 where any income/gains show up and how much.

In terms of this year, expats may pay for the 3.8% Obamacare investment income tax (even though they may never benefit from Obamacare). There are no credits for this tax against the taxes you pay in your country because your country has no Obamacare investment income tax, or 0% so then by tax treaty the tax is at the highest of the two countries or the US level. Year 2 for this. If you are an expat for part of the year then there is potentially the Obamacare insurance to deal with or potential penalties if you don’t have it. This is also the year that FATCA really starts to go into effect with all the financial institutions of the world outside of the US going through their client lists and vetting out the US persons, then reporting to their government who reports to the US IRS. If someone makes an error in this process you could get 30% of your account value “witheld.”

TAXATION
WITHOUT REPRESENTATION ( no representatives only focused on 7+ million US persons living overseas. Currently the vote gets split among 50 states and effectively divided to near oblivion)
WITHOUT ANY SERVICES – you live overseas and no US government services for your US tax.
WITH EXCESSIVE COMPLIANCE
WITH OVER THE TOP COMPLIANCE PENALTIES that could potentially be bankrupting
WITH DOUBLE TAXATION such as on retirement accounts.
WITH A US GOVERNMENT THAT DOES NOT CARE ABOUT YOUR WELL BEING OR YOUR COMPLIANCE COSTS
IS TYRANNY.

Any US persons living overseas caught up in this must visit the message boards of The Isaac Brock Society, and consider contributing to legal challenges to FATCA, FBAR, and CBT by The Alliance for the Defence of Canadian Sovereignty.

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Marilyn January 5, 2015 at 8:04 pm

While there is no FATCA form for We the People, we have to worry about correlation issues this year.
In years past we could report as best possible and that was good enough.
Starting this year the IRS will be data matching and We the People will be the ones to get the “please explain” letters if our report doesn’t match what FFIs have reported.

I haven’t seen the forms yet, but I’m also concerned about the obamacare effect on expats.
While we are taken to have adequate coverage, have the tax forms been written to give us that benefit?

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Tricia January 5, 2015 at 8:27 pm

@John,

There is a form that is considered to be the “FATCA” form, 8938. Some of the items to be reported are duplicated from FBAR. Here is how you tell if you need to file:
You must file Form 8938 if:
1. You are a specified individual.
A specified individual is:
A U.S. citizen
AND
2. You have an interest in specified foreign financial assets required to be reported.
AND
3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you:
If you are a taxpayer living abroad you must file if:
You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

You will be glad to know that the IRS has relaxed the requirement to report RRSPs on 8891. You no longer have to file that form. However, You DO have to include on FBAR if you are over the $10k aggregate.

nobledreamer16 at gmail.com

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Reiner Wilhelms February 7, 2016 at 7:24 pm

I’m a US resident (Green Card) but have moved half a year ago to the UK. I had lost my job in the US at the end of 2014, and finally moved in August 2015 to Britain because I found a good job here. All my income for 2015 is in the UK, but presumably I still have to file a tax return in the US. I thought I could then file either a 1116 form or a form 2555 so I don’t have to pay taxes because I already payed them here in the UK (it was automatically withheld from my income, by the employer). The problem I have is that all the “requirements” for filing either of these forms don’t seem to apply in my case: I have not been here for more than 330 days, my stay does not “include an entire tax year”, etc.

I do want to keep the Green Card, and so what should I do to not suddenly be taxed twice? There got to be a way to get a credit for having already paid all taxes here for the 5 months I lived here.

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