H&R Block Counsels Expats on ACA Tax Requirements

Michael Cohn for Accounting Today writes: Nearly 6 million Americans living abroad are facing a June 16 deadline to file their taxes this year.  Regardless of the confusion that U.S. citizens abroad have over what will ultimately be required of them under the Affordable Care Act and other laws, all taxpayers whose income exceeds $10,000 are still required to file a federal tax return with the Internal Revenue Service, no matter where they live, even if all of their income was earned in a foreign country.

Despite this obligation, a recent survey by H&R Block found that nearly one-third of U.S. expatriates are confused by U.S. tax filing requirements and more than three-quarters use a U.S.-based tax preparer. H&R Block is helping taxpayers meet their filing obligations in their offices in more than 14 countries and U.S. territories, as well as through an online service it set up last year at expats.hrblock.com (see H&R Block Offers Remote Tax Prep for Expatriates). The Tax Institute of H&R Block has also been working with U.S. expatriates abroad to help them cope with recent tax requirements, including the Affordable Care Act and the Foreign Account Tax Compliance Act. "It’s not that FATCA necessarily changes the rules in a big way for U.S. expats, but what it’s done has really heightened the awareness of these annual filing requirements that they have, even after leaving the United States on a permanent basis,” said director of expat services Roland Sabates in an interview last week. “In the last year a lot of the potential clients that are contacting us are terrified. They’ve just found out that they should have been filing these tax returns after moving abroad. It’s an honest, innocent mistake, but now they’re extremely concerned about the potential exposure to the foreign accounts reporting penalties.”

Many expatriates are finding out about these tax obligations from the foreign financial institutions that are serving them, who as a result of FATCA are now asking their U.S. clients to make sure they are compliant with filing all of their back tax returns with the IRS. In many cases, foreign banks are closing the accounts of U.S. citizens to make the compliance burden easier on the bank. Either that or they are asking for the information now on their customers’ compliance with their U.S. tax reporting obligations and informing them that the banks will be reporting the information to the IRS going forward.

“A lot more banks are requiring expats to fill out and provide W-9 forms,” said Sabates. “They’re expecting to see information reporting documents for a lot of foreign source income, which we’ve never seen in the past.”

The Treasury Department has been reporting a spike in the number of citizenship renunciations by Americans in recent years, jumping 47 percent to 1,001 in the first quarter of this year, compared to 679 a year earlier, according to the Federal Register. The number tripled to 3,000 in 2013 from the previous year, according to IRS data (see Yul Brynner’s Tax Spat Augurs Rush to Give up U.S. Passports).  [snip]   The article continues @ Accounting Today, Click here to continue reading....