Expats: Avoid These Common Tax Mistakes
Even expats have certain tax obligations. A failure to meet these obligations can result in a range of penalties. Depending on the details of the issue, penalties can include fines or even criminal charges and revocation of your U.S. passport.
Examples of common mistakes: Due to the severity of penalties tied to tax issues, expats can benefit from a basic understanding of the most common tax missteps. One of the most common is a failure to file a U.S. return at all. Tax returns are generally required, even when living abroad.
A second common error is a failure to fully divulge assets. This can require more than just standard tax forms. Those who live abroad are required to include a Report of Foreign Bank and Financial Accounts (FBAR) form. This form can be required to disclose the presence of foreign assets, such as a savings account at a foreign bank.
Tips to avoid tax errors: Proactive steps can help you avoid these common errors. Three common steps recently discussed in a piece by financial experts published in the Huffington Post include:
- Never underestimate the power of organization. Simply having forms in order and paperwork easily accessible can make the process of filing these tax forms much more manageable.
- Look ahead. Try to estimate how long you plan to live abroad. It is wise to calculate the overall cost of keeping assets abroad versus in the United States to help guide your financial planning.
- Know when to ask for help. These issues are complicated. It is often advantageous to seek legal and financial counsel when attempting to navigate tax issues.
These tips can help you avoid issues with the Internal Revenue Service (IRS). Unfortunately, even with these steps the IRS may contact you. In the event that you receive a communication from the IRS, perhaps a notification of an audit or questions about past filings, it is wise to seek legal counsel. An attorney experienced in offshore compliance issues can help counsel you on your options and reduce the risk of the penalties noted above.
