"Gary Bode has just completed our tax returns for the first time and I am totally satisfied with his level of service. He has been very attentive, asked all the right questions, and not only fixed some problems from our previous accountant, but also set us up for future success through a thorough and professional analysis of our corporate structure in conjunction with several personal variables.Expat CPAs warn their expatriate Clients that Customs can detain them, on behalf of the IRS, if they have unpaid tax assessments. The Department of Homeland Security taps into an IRS database as they check your passport. Detainment is most likely if you don’t live in the US. I wonder if there’s an equivalent to the Miranda statement; you have the right to an Expat CPA? Maybe I can get a TV series?
I prepare expatriate tax returns so I stay current on expat tax trends. An article in the August 2012 Journal of Accountancy inspired this post but I also looked at the underlying IRS regs.
I think all Expat CPAs get clients who are/were unaware of their US tax obligations:
- For example let’s say you had a foreign corporation but failed to file Form 5471.
- The IRS obtained some document showing you had income, perhaps from a FATCA probe at your foreign bank.
- They assume all of the income is taxable.
- They don’t have an accurate address because you’re out of the country.
- So the IRS proceeds with their collection process that culminates in a tax lien. You travel to the US and get detained at Customs. T
- Then you can’t travel outside the US until the IRS issues are resolved.
Customs and Immigration Enforcement can ask about what assets you have in the US, your vehicle registration information and US employment information. Why? To ascertain what assets they can seize, or what wages they can garnish to satisfy the tax lien. Generally an IRS Agent follows up on the case. But that’s good news as the Agent can expedite resolution, see below.
Tax liens take time to resolve, meaning your trip the US could be extended. In the example above, your ExPat CPA would prepare Form 5471, which could result in no taxes due. Why? The IRS probably had only income information which they assumed was all taxable. Form 5471 presents the deductions and tax credits. So this an example where something trivial turns into a major problem. Here’s a few posts to help understand the process:
- IRS tax lien process.
- IRS tax lien withdrawal, Form 12277.
- IRS tax lien release, Form 10916(c).
Moral of the story? At least keep the IRS updated on your non US address. Typically your ExPat CPA could have kept you in compliance. In this example, filing Form 5471, a common exptriate tax return, would have prevented the problem.
I’m an ExPat CPA with a virtual office. Call for a free phone consult (910) 399-2705.
