IRS Offers Resources for Taxpayers Abroad

As expatriate taxpayers face increasing difficulties from implementation of the Foreign Account Tax Compliance Act, the Internal Revenue Service is offering YouTube videos and other online resources to assist taxpayers overseas.

The IRS noted that the June 15 filing deadline for Americans abroad is approaching soon, so it is launching three new online videos and expanding other online resources to help taxpayers, especially those living abroad, meet their U.S. tax obligations.

By law, Americans living abroad, along with many non-U.S. citizens, must file a U.S. income tax return. In addition, key tax benefits, such as the foreign earned income exclusion, are only available to those who file a U.S. tax return.

Three new videos are now available on the IRS YouTube page, and several more of interest to taxpayers abroad will be released in coming weeks. The online resources are designed to help affected taxpayers understand how the rules apply to them. Now available are:

• International Taxpayers—Filing Requirements: Learn about the requirements for filing an individual income tax return including income limits while living abroad.

• International Taxpayers—Foreign Earned Income Exclusion: Find out who is eligible, what income qualifies and how to claim the exclusion.

• International Taxpayers—Individual Taxpayer Identification Number (ITIN): This video helps non-U.S. citizens determine if they need an IRS-issued tax reporting number, known as an ITIN, and how to apply for one.

Upcoming IRS YouTube videos will deal with the foreign tax credit, filing status for a U.S. taxpayer married to a foreign spouse and an introduction to the IRS Web site for international taxpayers.

The IRS has also added two new international tax topics to Tax Trails, the agency’s interactive online tool that helps taxpayers get answers to their general tax questions.

The new topics are:

• Am I Required to File a U.S. Individual Income Tax Return (for U.S. Citizens/Resident Aliens Living Abroad and Nonresident Aliens)?

• Filing Status of a U.S. Citizen or Resident Alien Married to a Nonresident Alien

The International Taxpayers page on IRS.gov also contains information to help taxpayers living abroad, resident aliens, nonresident aliens, residents of U.S. territories and foreign students. Among other items, the Web site features a directory of overseas tax preparers.

In addition, the IRS uses a variety of social media tools to share the latest tax information with interested taxpayers both in the U.S. and around the world. These include the IRS2Go phone application, YouTube, Tumblr and Twitter. A listing of IRS social media tools is available on IRS.gov.

To protect taxpayer privacy, the IRS noted that it only uses social media tools to share public information, not to answer personal tax or account questions. It advises taxpayers to never post confidential information, like a Social Security number, on social media sites.

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain non-resident aliens need to report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. 

Under the Foreign Account Tax Compliance Act, also known as FATCA, which was included as part of the HIRE Act of 2010, certain U.S. taxpayers holding financial assets outside the U.S. must report those assets to the IRS on Form 8938. Reporting thresholds vary based on whether a taxpayer files a joint income tax return or lives abroad. For more information, see the instructions for Form 8938.

FATCA continues to generate controversy among many taxpayers and has contributed to a record number of U.S.-born expatriates electing to renounce their citizenship, according to figures released by the IRS (see Americans Living Abroad Set Record for Giving up Citizenship).

A recent survey by Greenback Expat Tax Services survey of more than 1,800 American expatriates found that FATCA continues to be a major frustration. Only 34 percent of U.S. expats surveyed indicated they are not currently affected by FATCA, while 36 percent of the survey respondents said they would need to file additional tax forms due to FATCA regulations. Thirteen percent of the respondents cited issues with their foreign bank, although the firm acknowledged that it is difficult to pinpoint how much of the problem rests with FATCA and how much with other non-tax U.S. and non-U.S. regulatory rules.

“U.S. expats represent a larger community than the entire populations of Rhode Island, Montana, Delaware, South Dakota, North Dakota, Alaska, the District of Columbia, Vermont and Wyoming combined,” said David McKeegan, co-founder of Greenback ExpatTax Services, which prepares U.S. tax returns for thousands of Americans living overseas. “This is a significant voting population that could have a real, material impact on the upcoming Presidential election. … Our survey indicates that with the major issues U.S. expats are facing, including tax compliancy, FATCA and FBAR reporting regulations and a feeling of being under-represented, it stands to reason that they may be more inclined to vote if a candidate actively addresses their concerns and lobbies for positive change on their behalf.”