Delinquent expat tax situation, will I need an enrolled agent?
May 20, 2013 11:50 PM   Subscribe

I've had a difficult time figuring out my tax situation since I moved from the US and now I'm trying to get everything settled. I'm behind a few years and need someone to talk directly with the IRS on my behalf. Will I need an enrolled agent? A tax attorney? Both? Neither? Arg it's so confusing!

I've received recommendations from friends for CPAs, but they have either been unclear about their capabilities (experience with expat situations) or just completely non-responsive where they don't return my initial calls. Now I'm on the hunt for a tax expert to help me out of my mess, but I'm not sure where to look or who to look for.

I would like to avoid paying a huge amount for a tax attorney if they aren't necessary, but at the same time I would like to have someone that can represent me if needed. Then there's the enrolled agent, I'm not clear on what benefits they even have. I'm losing sleep thinking about the IRS so I would like to have someone I can rely on to do things right. Would it be better to approach a firm rather than an individual?

Finally, is there a good source online to find accountants? All their websites look so shady for some reason.
posted by tacocat to Work & Money (9 answers total) 9 users marked this as a favorite
Take a look at the info page of (Full disclosure - website is my partner's business but there's some solid info for you in the tax basics page.) Good luck.
posted by lois1950 at 12:02 AM on May 21, 2013

Hiya! I don't know what country you're in but I would not freak out about the IRS as an expat. First of all, there's an ex-pat tax threshold of $91,000+ under which while you are supposed to file, you do not owe taxes. You are supposed to pay a percentage on anything earned over that, although there will also likely be foreign income tax credits, too.

So basically: unless you're earning heaps, it won't be brutal.

I would go to an expat tax specialist like this one. I have no relationship with this company, it was just a Google result, but they appear to deal with people in your exact situation. They will deal with the IRS for you if you wish.
posted by DarlingBri at 12:02 AM on May 21, 2013 [1 favorite]

Don't work with anyone who doesn't specialize in your situation. I can't stress this enough. Even some tax lawyers who specialize in international tax issues are completely ignorant and incompetent when it comes to this scenario. Credentials don't matter so much--experience dealing with this scenario matters a lot. That said, tax compliance advice is not an area where it pays to be cheap. Find someone competent and pay what it costs.

I personally went with a lawyer since I couldn't find a competent CPA (although my situation was a little more complicated than yours). In your situation you could probably get by with a CPA who specializes in this kind of thing (there's nothing magical about CPAdom, but it's pretty rare for people less credentialed than a CPA to be experts on this field, in my experience.). And don't feel you have to work with someone local.
posted by phoenixy at 1:46 AM on May 21, 2013

From an anonymous commenter:
Hiya! I don't know what country you're in but I would not freak out about the IRS as an expat. First of all, there's an ex-pat tax threshold of $91,000+ under which while you are supposed to file, you do not owe taxes. You are supposed to pay a percentage on anything earned over that, although there will also likely be foreign income tax credits, too.

So basically: unless you're earning heaps, it won't be brutal.

This is unfortunately no longer the case. It was factually accurate up until around 2009 that you were supposed to file but there was little to worry about in terms of being late or accidentally not filing everything in the right timeframe if you didn't owe, but there have been tax changes and IRS policy changes since then applying to Americans living abroad that can potentially subject you to large penalties for not filing forms on time whether you owe or not. A situation such as yours needs to be handled carefully and by an expert in taxes for US persons overseas in order to spare you unnecessary expense and stress.

The issue isn't actually about your income tax declaration but about FBAR/FATCA/5471. If you haven't been filing FBAR but you needed to (the most likely case), and/or if you haven't been filing FATCA but you needed to, and/or if you haven't been filing 5471 but you needed to, before taking any action such as contacting the IRS or filing past-due forms you need to speak to an experienced accountant specializing in US persons overseas who is aware of these requirements and related issues like OVDI opt in/opt out, because the penalties for these mis- or non-filed forms start at $10,000 and go up, and can be applied these days at the discretion of the IRS whether you owe tax or not. I know people who have had disastrous outcomes from "fixing" multiple overdue FBARs without taking any additional steps on the bad advice of an accountant who wasn't really specialized in the tax issues of Americans overseas, based on the theory that nothing really bad could happen because no actual tax was owed and hey, it's just expat tax. I don't think it's so much important whether that person is an enrolled agent as it is that they are accountants who are frequently working with cases like yours (which are very common at the moment) and getting good results.

My test for whether an "expat tax" accountant has any clue about what is actually happening right now with the IRS and Americans overseas is to go research form 5471, FBAR and FATCA and the OVDI so you yourself have some understanding of what they are (even if 5471 and FATCA don't apply to you, they are excellent shibboleths for identifying a BSing accountant with a pre-2009 notion of what the IRS cares about and does with regard to expats), and when interviewing your potential accountant, ask them to explain these things to you. If they can't discuss them with accuracy in a completely fluent and confident way, that is an accountant who isn't really doing expat tax or is doing it in a way that harms their clients. Ask your potential accountant about a case in which they filed back FBARs and what happened, and how much ended up being owed in penalties (it is possible that it ended up with nothing being owed, which is great and what you want, but they should be able to explain the steps taken to lead to that result). Ask whether they opted in or out of OVDI and what the outcome of doing that was, and how long it took to resolve (the answer in every case I've heard of was that it took a while to resolve). These will be very common experiences for a real expat tax specialist at the moment so if they are stammering about OVDI or you can hear them googling it on the call, that is not who you want for your case. It has not been my experience that a good expat account has to be unusually expensive, but you definitely need to quiz them to weed out the clueless.

Don't freak out, because a good accountant can sort you out and get you on track, but do not be blasé or think that expat tax is still in the casual bucket, because in 2013 it is a more serious matter than filing taxes as a US resident. This is a side effect of increased enforcement against US residents who hide money overseas to avoid taxes, but unfortunately the enforcement measures have ended up taking the largest toll on non-residents who do not owe any US taxes. Best wishes to get your issues sorted out without any problems.
posted by taz at 3:10 AM on May 21, 2013 [2 favorites]

This is unfortunately no longer the case.

Crap, I had no idea - I did indeed last address this myself pre-2009. Tacocat, I still think you are going to feel better if you talk to an expat tax consultant to get a better idea where you may stand. The tax person is on your side, while the IRS is not.
posted by DarlingBri at 4:00 AM on May 21, 2013

I recall that when I worked for a UK accountancy firm we were loathe to get involved in US expat busines. Have you asked others in the expat community locally for recommendations? It may be the best bet because you do need a professional and they need to be experienced in the interaction between the US and the country you are living and presumably working in.
Good luck.
posted by BenPens at 5:18 AM on May 21, 2013

Response by poster: Taz's comment explains why I'm so confused and worried. There are so many rules I missed regarding foreign (I consider them local!) bank accounts, I've heard horror stories about the crazy penalties they apply. It's not a good time to be an American expat, our situation gets more complicated and unfair each year. At least it provides entertainment for our non-American expat colleagues I guess.

Thank you for all the very good advice so far about screening candidates! The ones I managed to get in touch unfortunately weren't very knowledgeable or didn't want to bother, but it seems I need to be more proactive about seeking out potentials.
posted by tacocat at 6:57 AM on May 21, 2013

This site is a little painful to look at but the information that I checked appeared to be correct. He also offers help with tax return preparation.

Also, the income threshhold of $91-something thousand applies only to earned income. For example, if you have rental income, you'll need to pay income tax on it. Also, if you're self-employed, you still need to pay self-employment tax (Social Security, Medicare), and you need to pay it quarterly. I got dinged last year for not making the quarterly payments.
posted by ceiba at 11:22 AM on May 21, 2013

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