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Expat Tax Blog

Dec 20

Who is Likely to be Targeted for an IRS Audit?

by julie

Are you wondering if you are at risk for an audit? Chances are, you probably won’t see one.

As the end of the year approaches, you may be starting to worry about having your taxes audited by the IRS. But, you likely have very little reason for fear. Last year, not even 1% of taxpayers were audited by the IRS – and the trend is toward even fewer audits this year.

It is simple math. The IRS has fewer auditors, so they can’t conduct as many audits. Over 2,200 IRS agents have been lost since 2010. This brings the total to around 11,600, which is the lowest number in over a decade.

Nonetheless, there are some people who are more likely to get scrutinized than others. While the IRS does not publish exactly why they single out certain returns for audit versus others, simply looking at the Internal Revenue Service’s track record does give some clues. The following are the ones that are most likely to attract the attention of the government:

Whole Story at TFX.

Dec 16

10 Tips for Americans Abroad to Prepare for the Upcoming 2017 US Tax Season

by julie

We are in the midst of the holiday season, and a new year is upon us. A new year means tax time. The best way to have an easy tax season is to prepare for it now!

Sure, the last thing you want to think about this holiday season is your taxes, but it’s the perfect time to make last minute moves and preparations. You can increase your tax refund by performing a few simple actions right now before the year is over. While you’re working on optimizing your tax refund, you can take a few extra steps to prepare for the upcoming tax season so the process of filing your US income tax return runs smoothly.

Whole Story at TFX.

Dec 10

2017 Tax Filing Season Begins Jan. 23 for Nation’s Taxpayers, Tax Returns Due April 18

by julie

The IRS announced that the nation’s tax season will begin Monday, Jan. 23, 2017, and reminded taxpayers claiming certain tax credits to expect a longer wait for refunds.

The IRS will begin accepting electronic tax returns that day, with more than 153 million individual tax returns expected to be filed in 2017. The IRS expects majority of tax returns to be prepared electronically. Many software companies and tax professionals will be accepting tax returns before Jan. 23 and then will submit the returns when IRS systems open.

April 18 Filing Deadline 

The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday — April 17. However, Emancipation Day — a legal holiday in the District of Columbia — will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017.

Refunds in 2017

Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund.

Beginning in 2017, a new law requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit until mid-February.

The IRS will begin releasing EITC and ACTC refunds starting Feb. 15. However, the IRS cautions taxpayers that these refunds likely won’t arrive in bank accounts or on debit cards until the week of Feb. 27 (assuming there are no processing issues with the tax return and the taxpayer chose direct deposit).

Help for Taxpayers

The IRS reminds taxpayers they have a variety of options to get help filing and preparing their tax return on IRS.gov. Taxpayers can also, if eligible, locate help from a community volunteer. Go to IRS.gov and click on the Filing tab for more information.

Seventy percent of the nation’s taxpayers are eligible for IRS Free File. Commercial partners of the IRS offer free brand-name software to about 100 million individuals and families with incomes of $64,000 or less.

Renewal Reminder for Individual Taxpayer Identification Numbers (ITINS)

ITINs are used by people who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number. Under a recent change in law, any ITIN not used on a tax return at least once in the past three years will expire on Jan. 1, 2017. In addition, any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) will also expire on that date.

This means that anyone with an expiring ITIN and a need to file a tax return in the upcoming filing season should file a renewal application in the next few weeks to avoid lengthy refund and processing delays. Failure to renew early could result in refund delays and denial of some tax benefits until the ITIN is renewed.

Original Story at IRS website.

Dec 9

IRS Advice to Those with Expiring ITINs: Apply Now to Avoid Refund Delays; Agency Offers Tips on Avoiding Common Errors

by julie


The Internal Revenue Service today urged any taxpayer with an expiring Individual Taxpayer Identification Number (ITIN) and a need to file a return in the upcoming filing season to file a renewal application in the next few weeks to avoid refund and processing delays. In addition, the IRS encouraged people to check their renewal application, Form W-7, carefully before filing and offered tips for avoiding common errors being seen.

ITINs are used by people who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number. Under a recent law change by Congress, any ITIN not used on a tax return at least once in the past three years will expire on Jan. 1, 2017. In addition, any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) will also expire on that date.

This means that anyone with an expiring ITIN should act now to make sure they have a renewed ITIN in time to file a return during the upcoming tax season. Failure to do so will result in refund delays and possible loss of eligibility for some tax benefits.

The IRS said that an ITIN renewal application filed now before the end of the year will be processed before one submitted in January or February at the height of tax season. Currently, a complete and accurate renewal application can be processed in as little as seven weeks. But this timeframe is expected to lengthen to 11 weeks during tax season.

The IRS reports several common errors being seen in recent weeks that are currently slowing down and holding up some ITIN renewal applications. The mistakes generally center on missing information, and/or insufficient supporting documentation. The tax agency stressed that ITIN renewal applicants should be sure to use the latest version of Form W-7, revised September 2016. This is the version of the form, along with its instructions, currently posted on IRS.gov.

To ensure prompt processing of the form, ITIN renewal applicants should also complete the following steps:

  • At the top of the form, be sure to check the box that says, “Renew an existing ITIN.”
  • Under, “Reason you’re submitting Form W-7,” every applicant must check one of the eight boxes. If more than one applies, be sure to check the option that best describes the tax purpose for filing the application. Do not write, “ITIN renewal,” in this section of the form, as it is not a valid reason.
  • On Line 3, an applicant living outside the United States should enter their foreign address, if different from the mailing address on Line 2. If now living in the U.S., be sure to enter the foreign country of last residence. See the Form W-7 instructions for details.
  • Include original supporting and required identification documentation, or certified copies from the issuing agency to prove foreign status and identity.

ITIN renewal applicants are also reminded that only a passport with a U.S. entry date is now acceptable as a stand-alone identification document for dependents. This is a change from past policy.  This means that dependent ITIN applicants who use a passport without a date of entry must provide additional documentation, along with the passport, to prove U.S. residency. Acceptable documents include:

  • If under age 6, a U.S. medical record
  • If under age 18, a U.S. school record
  • If at least age 18, a U.S. school record for anyone who is a student.  Otherwise, anyone 18 and over can provide a rental or bank statement or a utility bill listing the applicant’s name and U.S. address.

Dependents from Canada, Mexico, or dependents of U.S. military personnel stationed overseas are exempt from these additional requirements.

ITIN renewal applicants can get help by visiting IRS.gov/ITIN, consulting a Certified Acceptance Agent or Acceptance Agent or making an appointment at an IRS Taxpayer Assistance Center (TAC). Here are details on each of these options:

  • IRS.gov: The IRS website has information in several languages to assist with the renewal process. This includes Form W-7 and its instructions. Be sure to fill out the form completely, attach required documentation and mail it to the IRS. The IRS returns documents to applicants via standard U.S. mail within 60 days of receipt and processing of the Form W-7.
  • Acceptance Agents: Certified Acceptance Agents and Acceptance Agents submit Forms W-7 on behalf of their clients. Rather than mailing the IRS important original documents, applicants have the option to work with an IRS authorized CAA. The CAAs review documentation for taxpayers and their spouses as well as passports and birth certificates for dependents. Acceptance Agents complete the Form W-7 and send the original documents or previously certified copies of the documents to IRS for processing.
  • IRS Taxpayer Assistance Centers: Applicants may submit W-7 applications in person with original documents at designated IRS Taxpayer Assistance Centers. Employees at designated TACs certify original and certified copies of passports, National ID cards and birth certificates. Service at the TACs is by appointment. Schedule an appointment by calling 844-545-5640. See IRS.gov for a list of designated TACs that offer ITIN document authentication services.

Whole Story at IRS website.

Dec 5

US Taxes & the Child Dependency Exemption

by julie

11302016The following article will discuss the requirements that must be met in order to claim children as dependents, and requirements if non-custodial parents want to claim the exemption.

We will also discuss the rules for “breaking ties”, how custodial parents can voluntarily release the exemption to the other parent and also a recent decision by the Tax Court that considered this issue.

What are the Requirements to Claim the Exemption?

A taxpayer must meet all the following requirements, or the IRS will disallow the exemption. The child that is being claimed as a dependent must:

  1. Have resided with the taxpayer over half of the year. Absences of a temporary nature (such as being away for school) do not get considered. The exemption can be claimed for children born within the tax year if that child was living with the taxpayer after being born for more than half of the remainder of that year. Children who are stillborn cannot be claimed, but children who lived for even a moment outside the womb do qualify.
  2. Have been under the age of 19 as of December 31. (Birth date is considered as December 31 when born January 1.) The age is 24 for a child who is a student full time (according to school rules), for at least five months out of the year. These do not need to be consecutive.
  3. Be younger in age than the person claiming the exemption, including a spouse if filing jointly. These age requirements are not applicable to a child who is totally and permanently disabled.
  4. Not have provided over half of their support themselves. The parents are not required to provide over half the support of the child. This tests only for relatives who are being claimed. The definition of support includes things like room and board both at home and at school, health care, education expenses, clothing, transportation costs (cars must have been registered under the name of the child’s), expenses for operating a car that is registered to the parents, equipment for recreation and athletic events, wedding expenses, entertainment, music and dancing lessons, musical instruments, and summer camp. Included in the child’s support are savings as well as other income (like social security and other government payments), if the money is spent by the child themselves for purposes of supporting themselves.
  5. Have their social security number or taxpayer identification number (for non-resident and resident aliens) reported on the income tax return. Without this number, the IRS disallows the exemption.
  6. Not file a return jointly if they are married, unless it is filed only to get a refund when no taxes are due.
  7. Be a citizen of the US, a resident alien, resident of Mexico or Canada, a United States national owing allegiance to US (a person born within the North Mariana Islands or American Samoa who isn’t a naturalized citizen of the US).

Whole Story at TFE.