are routinely sent by the IRS, assessing incorrect amounts. If you receive a letter from the IRS and it is wrong, then do not pay that assessment. Challenge the IRS: send them a response through registered mail, keeping that registered receipt (as well as a copy of what you send to the IRS - you'd be surprised how frequently I encounter clients who have kept neither and hence, cannot prove their compliance!). And be prepared to have to re-send that letter perhaps three or four times prior to the IRS recognizing that you are asking the IRS to correct their errors. I seriously wonder if the IRS would ever let us know how much money they collect from correspondence that should never have been sent out in the first place. Patience and patience and patience: don't give in to the IRS if you are right and they are wrong - unless, of course, that incorrect assessment and penalty is so small that it is cheaper to pay than to be bothered by it! Let me add that if are an overseas resident getting absolutely nowhere in your battles with the IRS and you remain convinced that you are correct, then write to the IRS Taxpayer Advocate Service – this is an IRS ombudsman there to assist you. Now I don’t guarantee (no one can guarantee anything about the IRS other than that they are trying to get money out of you by scaring you – intimidation works!) that you’ll get the help you are looking for but you will get a response – and that is better than nothing at all!
Internal Revenue Service
Taxpayer Advocate Service
City View Plaza, 48 Carr 165
Suite 2000
Guaynabo, P.R. 00968-8000
Two years ago was the first year of what will hopefully become an annual 'activity': I started writing 'Larry's 2011 Tax Guide for the U.S. Expat and Green Card Holder - In User-Friendly English' with a question. Well, a year later, as I started the 2012 edition and this year as I start upon 2013, why change a successful way to start - I'll ask another, albeit different question.
What do the governments of Greece, Spain and, I suppose, the United States have in common with my wife (aka 'Tiger CFO') was the question I asked last year. Last year’s answer: they all must have a balanced budget and rein in their respective deficits. Yet unlike those jurisdictions, Tiger CFO has definitely learned to cope with economic realities of life and has eliminated all of our credit card debt, bringing us peace of mind and a balanced budget! This year’s question: what do they not have in common? This year’s answer: the same as last year…..sad as it may be…..
I’ve added a ‘non-tax’ essay in this issue entitled “Sound International Planning in the Midst of a Worldwide Depression”. This one is based upon speeches I made in New Delhi and Mumbai, mid-October, 2012. I thought that this one would be easy, too, converting it from a speech to an essay – I was wrong again. Yet I think this will be a worthwhile read for you.
I’ve also added a copy of Publication 54 in the appendix. This is the IRS’s sole tax guide for Americans overseas: “Tax Guide for U.S. Citizens and Resident Aliens Abroad”. But I’ve gone one step further: I’ve highlighted the sections I think are relevant to the average overseas American. Obviously there is far more than I underlined so if you want to look a bit more carefully (including the ‘frequently asked questions’ at the end), then, by all means, do so! Frankly, I think I’ve written a better, more comprehensive guide that is definitely easier to read and far funnier than the IRS could ever hope to be! This year’s edition has been changed from last year’s Publication 54 which had 44 pages compared to this year’s new, ‘compact’ 39 pages. Is it an improvement? Read and find out!
It is time to quote from last year’s introduction:
“Yet beware - it is quite likely that even though new legislation will be voted upon by the two houses of Congress and signed by the President, mid-2013, that new legislation will be retroactive to 1 January 2013. Thus, some 'user-friendly' knowledge of the tax laws applicable to 2012 should be looked at quite seriously by the expat or green card holder because taxes (especially for capital gains) are likely to go up the year after (and for that you will simply have to read my 2013 edition!).”
The United States has always functioned best when there is an outside enemy and it just seems possible that the U.S. expat will be the 'chosen target' this time. I said that too, last year….I say it again, this year. When was the last time you tried to open up a bank account using your U.S. passport as your nationality designated proof of who you are? Well let me tell you, my friends, you simply cannot - at an international bank - or any bank, for that matter, which has income producing assets in the United States. The FATCA section of this book will tell you why.
We expats have grown quite accustomed to both the foreign earned income and foreign housing exclusions. For the first time in the 23 years I've been an expat, I think we are in danger of losing them. Starbucks in the UK – and their application of comprehensive worldwide tax strategies is back peddling faster than Starbucks really has a chance to react. All those apps I purchase through iTunes, which are paid through Apple's Luxembourg corporation are tax-free. Many U.S. corporations are tax-free and we, the tax filing (if not tax paying) individuals, are the ultimate payers. We should definitely feel outraged by this but there is little we can do. Taxation without representation is tyranny.....and no, I am not a Tea Party believer!
Douglas Shulman, immediate past IRS Commissioner, to my knowledge, is still not filing his own tax returns - we should be annoyed about this because if the head honcho of the IRS has to pay someone else to prepare his tax return, what does that tell us? This is as outrageous to me as the bonuses being paid to Freddie Mac and Fannie Mae bosses - government bureaucrats (even if they do not view themselves as such) who, in spite of those humongous losses their respective, guaranteeing organizations have incurred, are getting bonuses more than 2-1/2 times their base salaries. More outrageous, though is the IRS's perception that the expat is a tax cheat! Why is the expat or green card holder lumped together with the domestic U.S. tax filer with offshore accounts - our everyday needs are different but how can you explain this to our 536 elected officials (both Houses of Congress plus the President), most of whom do not have passports, who have never left the country, who simply cannot comprehend what it is like to be a U.S. tax filer outside of the U.S.?
It is with the permission and blessing of Tiger CFO (the Comptroller of our currencies) that I write this 2013 edition. It is to those of you who purchased the 2012 edition, bringing in sufficient royalties to cover the costs of writing this book whom I thank as well – without you guys covering the costs, Tiger CFO would have never given me permission! This book is priced to sell and, hopefully, both cynical enough, funny enough for you, the reader, to sit back and enjoy it.
The sad fact of the matter is that now, more than ever before, you, the reader are being held responsible for understanding an absolutely incomprehensible tax system because, if you do not cover your behind and file annually, you are deemed to be 'willfully negligent’ and subject to potential penalties, even though you do not owe any tax.
Taxation is an issue that helped determine the results of the 2012 national elections. I’m sure it will again be the central issue for 2014 Congressional races. That growing gulf between the haves and the have-nots of American society has manifested itself in many ways, few of which seem to have shown tangible benefits. We are concerned as tax filers and tax payers but what about those disenfranchised poor who do not pay taxes (and likely do not file tax returns, either); those minorities living in the inner city barrios or ghettoes? They need assistance, usually provided by the states and municipalities, already cash strapped. Where's the tax money necessary for their assistance going to come from?
Anyway, I've got to assume that you've read the 'preliminary' pages, prior to this, the actual 'introduction'. So what do you read next? Well, friends, simply go back a page or two and look at that 'annotated' table of contents. See which essays (and that is what I've essentially written
