The introduction – Hey – this section is not a repeat from last year......I rewrote this – really I did!!!
Well, well, well, here we go again – for the fourth time around, I am happy to say: Welcome, dear reader, to the 2014 edition - the 'supplement' edition of Larry's U.S. Tax Guide for Expats and Green Card Holders - in User-Friendly English!
It was mid-December when I succumbed to doing another year of US tax writing for ebook publication. True, there were no new laws passed by Congress and signed by the President this past year. Regardless, the IRS has been at it, full bore, and there are sufficient changes to warrant an update to last year's gem of a book!!! Were it not for the fact that here it is, 2014 and the 2013 book is still selling (albeit, I'd truly starve if I had to rely upon royalties from books about taxes that are written for people who don't really wish t read them), guilt tripping me into diligently working upon this supplement which covers that which is relevant, that which is new and that which you really should know a very little bit about.
I live a very domesticated life within an international work environment. Thus, I feel I can adequately compare and contrast some large jurisdictions of the world with home life. What do the governments of Greece and Spain have in common with my wife (aka 'Tiger CFO'). This is a question I ask every year. Here is last year's answer: the two countries, nearly bankrupt, must have a balanced budget and reign in their respective deficits. Same thing at home - especially after putting our daughter through boarding school and now, university, we're precariously close to the fiscal edge in order to pay for the costs of education. Yet unlike those jurisdictions, we don't have either the IMF or the Federal Republic of Germany to bail us out and as a result, 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! The last thing that we need; the last thing we'd want would be a tax audit. Getting a letter in the mail from the IRS is probably the instantaneous cure for constipation!
So you get a letter in the mail from the IRS - don't pay it unless it is correct and do not assume that it is automatically correct because the IRS sent it. Computer generated letters are routinely sent by the IRS, assessing incorrect amounts. Read the letter. Have a professional read the letter. 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 you are an overseas resident getting absolutely no where 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
Now what happens if after reviewing the letter you've determined that the letter from the IRS it is correct - then pay it !!!!! But make sure you keep the receipt/proof of mailing to the IRS because the IRS loses things in the mail, too! You just might have to prove that you paid them.....
One of the joys of writing a book like this one are the emails I receive from fellow expats. We expats have grown quite accustomed to both the foreign earned income and foreign housing exclusions. I've taken these exclusions for granted but for the first time in the 24 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 backfiring 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. And the other Apple stuff? That's all happening as an Irish company with a wonderfully low tax rate. To the minds that discovered these tax loopholes I tip my hat - it is the role of government to curb these perceived abuses. 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!
Unfortunately it seems that the IRS perceives all expats to be tax cheats! Hey, we all know people who are taking advantage of 'the system'. Yet these people are a very small minority. For the most part, the expat is not on an international package with tax equalization - all the more power to you if you have an international package and are still reading this book simply to keep informed!
Why the IRS lumps the expat or green card holder together with the domestic US tax filer with offshore accounts defies common sense - 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 because they've never left the country. They 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 2014 supplement. It is to those of you who purchased - and are still purchasing - the 2013 edition, bringing in sufficient royalties to cover the costs of writing this book who 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 the supplement is even cheaper - you've purchased it and I think you will like it. I've tried to be 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 neglect' 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. After this year's theater-absurd stand-off which shut down the U.S. Government, 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? The 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?
So what do you read next? Well, friends, simply go and look at the sections of this supplement - nah, you don't have to read all of it - only read the stuff that you think matters to you! True, reading it all is going to be beneficial to you but it is not absolutely essential. See which essays (and that is what I've essentially written - essays about certain areas which I believe are applicable to you, the overseas American tax filer) interest you. Read them! And the sections that are not of interest? If, late one night, you find yourself simply unable to go to sleep, then read the uninteresting sections
