Here is a comment from a cross border tax specialist
Petros, $250-$300 for a cross border US tax return an accountant that does not understand cross border tax. A good tax accountant would not even prepare a Canadian return for that fee. Check what H&R Block is charging for Canadian tax returns and remember they are essentially uneducated form fillers.
Perhaps you’ve noticed the complexities involved in filing a US tax return while living, working and investing in a foreign country?
There are considerable differences in a number of income items – the calculation of capital gains for example. How about Form 3520 which is commonly applicable to “average” Canadians? Form 5471? Again not an uncommon form for a Canadian. How about PFIC issues – do you know about those? Should you claim the Foreign Earned Income Exclusion? There’s a very good reason not to claim it. And don’t forget to add in Form 8938 this year. How about the time it takes to explain to the clients the issues on their returns because they want to understand what’s happening their tax returns and explain the differences between the Canadian and US tax return.
As a cross border tax specialist I’m tired of the comments that people are being gouged on fees. Most have no idea of the complexities involved their tax returns not to mention the education and knowledge required to be a cross border specialist.
How much does a plumber charge per hour? Looked at the shop rate for getting your car fixed lately? Ask Moody’s what the hourly rates are for their staff or what their quote was for the 2011 OVDI program. $700 for 3 Canadian simple, salaried employee returns = $233 per return. And you think that a US tax return should be $250 – $300?! You clearly have no idea what is required to be a tax professional and it would seem not a clear understanding of what is required to complete a US tax return for someone living, working and investing outside the US.
Ok enough ranting back to work.
Quite to the contrary, qualified cross border tax specialists indeed earn their money. There services are both valuable and indespensible given the complexities of US tax law, especially as it applies to persons living outside of the US.
And now under US law paid preparers who sign US tax returns as such have their necks stuck out for a mile (1.61 km.) because of the shared responsibity they now have for penalties due to errors, whether they be inadvertent or deliberate. In many countrie US citizens are no loner able to find qualified cross-border tax specialists who are willing to prepare US tax returns for any price.
Those are probably fair enough comments for an Accountant who really knows his foreign tax issues, and is not just an H&R Block form filer. He did forget form 1116, and I defy anyone to read the instructions for that form and understand it. The point is, you do have to search out foreign tax expertise, and not just assume that any ‘ole Tax accountant knows the issues you are talking about.
I used one in the Seattle region, and the cost was stunning to me. $1008 for a 1040x which resulted in $940 of tax due. But that was the charge I was willing to pay since I knew nothing, and assumed this expert, in foreign tax preparation knew everything. That is how he marketed himself.
However, my antenna went up, when he was dismissive about the requirements for FBARs , but maybe fair enough as back in 2009, a lot of accounts were. I, however, knew better, as I was learning how important it was!!! So, I let that comment slide.
Then, when I asked him to explain the obvious error that even I could see in the form 1116, and why I got so little US credit for taxes paid in NZ, he was flummoxed! He could not explain it except to say, that is what the computer gave him! I realized I had a data input guy, and not a tax expert! I thought was paying for a tax expert, but NOT! I had the plumbers helper masquerading as a plumber!
Needless to say, I have not been back, so it is very much a buyer beware world when it comes to expertise in foreign taxation matters. A good one, is probably worth something north of a plumber and electrician, which really are not necessary if you are just changing a washer on a leaky facet, or redoing a light switch, and yet, people still pay them exorbitant amounts to do what you could DIY.
Wow…looks like you stepped on someone’s toes :).
Lets talk about how professional these tax Accountants were who talked innocent people into the OVDI program?
How about when I phoned across this country looking for a ‘professional’ and the fee for doing 6 back returns started at 5k?….without them knowing anything about my tax history!
Quote;
As a cross border tax specialist I’m tired of the comments that people are being gouged on fees. Most have no idea of the complexities involved their tax returns not to mention the education and knowledge required to be a cross border specialist.
My comment to this is “welcome to the club buddy”. I will not devulge my job title on this site, but safe to say that not many people get paid according to there job description anymore.
I blame much of the problem this whole problem on so called cross border tax “professionals” along with the larger accounting firms such as PwC and KPMG that want to get a lot of money from various financial institutions to implement FATCA. I also want everyone to know that I think I found a member of European Parliament from the Netherlands named Judith Sargentini who I think might willing to help on this issue. She posted several months ago on Michael Powers Canadian privacy blog and on her twitter stream(in Dutch) indicating she was looking for more information on FATCA seeming to indicate that EU Commission and many European Banks were not being responsive to her requests. According to what I could dig of her political biography in Dutch she was a big of a ring-leader in the big “SWIFT” rebellion a few years back.
http://www.europarl.europa.eu/meps/en/96815/Judith_Sargentini.html
The following is written request to the EU Commission by Sargentini and some other MEP’s. I’ll note from a limited amount of research I did that the Patriot Act and its application to European entities is a very big issue right now so perhaps that one reason why FATCA is not getting as much attention.
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+OQ+O-2011-000326+0+DOC+XML+V0//EN
The complexity of U.S. tax returns as it relates to filings by expat Americans and long term residents is one of the repeated criticisms that the Tax Payer Advocate services levels at the IRS, in her recent report. She points out that for every reference to one form that there are hundreds of other cross references that crop up in connection with the original reference.
As I read her report I found it very interesting that no where in her report does she say the tax filer’s level of education should be the criteria for determining if there is culpability. Yet this is one of the IRS’ standards for ascertaining “willfulness”.
The truth is that the whole thing is a mess. The IRS has foisted upon the individual the responsibility of harmonizing two tax systems that cannot be harmonized. And this tax means that either the individual has to become a tax expert or else he has to pay for a tax expert and when that happens then whether or not you receive tax justice becomes a matter of money.
I don’t have money for the so called cross border tax experts and I don’t have the tax knowledge that would allow me to perfectly reconcile the two tax systems.
This is all just another example of how absurd is citizenship based taxation. The expat U.S. tax payer is at a definite disadvantage compared to his U.S. resident based counterpart.
I agree that it’s a shambles. My accountant is expensive but given the complexities, I feel they were fair in what they charged.
@Tim
Thank you for posting the information about Judith Sargentini. I live and work in Brussels so it is nice to see that at least some of our politicians here in the EU are standing up to the big bully on the block, the IRS! I understand that Japan, Australia and China have all said that they will not implement FATCA, so if the EU were added to that list I imagine that that might be enough of a grouping to make the whole legislation untenable. Hoping for the best.
I have to say that while I think there are indeed accountants on both sides of the border who are absolutely inflating their fees and taking advantage of the fear of losing hard earned retirement savings and threats of criminal prosecution, I must say that I do feel a bit suspicious of those $200 flat rates for a tax return that involves hours of preparation. I prepared my own tax returns, but I have had previous experience in doing so while I lived in the USA. It still took me hours and hours to figure out all the mumbo jumbo as an expatriot and to prepare several different forms for each year. I spoke with one cross border accountant who charged a flat fee and was very generous with his time but there was a bit of misinformation provided by him. I am guessing that he means well, but I don’t believe the experience is there. Depending on how big your return is (just have a look at your Canadian return as a reference) you could probably do the forms yourself. Once the first one is done, the rest are repetitious. So yes, I don’t believe I would want to go through 4 years at university to make less than the guy who works on my car… but you have to be careful of that guy too! In the end, you need to know your mechanic. ;-
I’ve posted this before, but it is worth repeating:
Page 154 of the TAS’s report to Congress released last week cites two separate independent reports on tax compliance cost for US filers residing abroad. One report states “international tax preparation cost can exceed $1000 per return” the other report sets that figure as high as $2000 per return.
The following is a link to the TAS Report: http://www.irs.gov/newsroom/article/0,,id=233959,00.html
I have found the following MEP’s who have made statements critical of FATCA according the EU parliament’s website(search for FATCA under the questions section):
Jan Philipp Albrecht(Germany), Rui Tavares(Portugal), Raül Romeva i Rueda(Spain), Judith Sargentini(Netherlands), on behalf of the Verts/ALE Group
Cornelia Ernst(Germany), Miguel Portas(Portugal), Marisa Matias(Portugal), on behalf of the GUE/NGL Group
Sophia in ‘t Veld(Netherlands), Sylvie Goulard(France), Sonia Alfano(Italy), Alexander Alvaro, Baroness Sarah Ludford(United Kingdom), Theodoros Skylakakis(Greece), Ramon Tremosa i Balcells(Spain), Philippe De Backer(Belgium), Jens Rohde(Denmark), Stanimir Ilchev(Bulgaria), Giommaria Uggias(Italy), on behalf of the ALDE Group
I should also note that Eva Joly and Pascal Canfin both of France and the Verts/ALE have made statements in favor of FATCA citing the need to crack down on “tax cheats.” The name Eva Joly is familiar from someplace but I can’t remember off the top of my head. Maybe someone from France knows?
I also note that some of the parliamentary grouping such as GUE/NGL are pretty left wing for those who just assume “Conservatives” don’t like FATCA. Cornelia Ernst from what I read is a member of the German “Left” or “Die Linke” party which is the sucessor to the old East Germany communist party. My personal opinion is for people in Europe if they live in a country where one of the MEP mentioned is from is probably contact that person first given they probably have some knowledge already of the situation.
I was trying to reply directly to Don Pomodoro
Omater,
I hope i didn’t steer you wrong in your choice of Accountant….or are you talking about someone else?
I agree, Recalcitrantexpat. Citizenship based taxation is absurd and ridiculous. I’m a Canadian citizen who has been living entirely in Canada since 1971. I absolutely cannot afford accountant’s fees so I’m filing myself, because I want to be able to visit relatives in the US. However, if I make a mistake and get fined, I won’t be able to cross the border anyway. Can’t win in this mess. I wish the Canadian government would negotiate with the US so that Canadians with no financial ties to the US don’t have to file. I’m writing a lot of letters, but doubt if we’ll get any help.
Eva Joly is the Green Party candidate for the French presidency. Interesting lady – she has often tangled with the Far Right. I think she is a dual – French/Norwegian.
http://evajoly2012.fr/
There is no way that I or anyone in my family can afford to pay that much to complete an IRS return. I am sure that we aren’t the only ones for whom this is true. Compliance under these terms is nothing more than a trip to the poor house and for that reason a lot of people will not bother even trying. The IRS paints us all as fat cats which is itself a policy that is driven by class envy.
The FBAR’s themselves aren’t hard to do once you figure them out. Where they get you is with all of the other ancillary forms.
Even if a person wants to hire a so called cross border “professional” the problems are in finding one and then determining his/her competency and trustworthiness. Finding an affordable and trustworthy cross border tax accountant/lawyer is like finding a trustworthy immigration lawyer- a stroke of luck. We have even less grounds for picking such an individual then we have for picking s surgeon.
Tax compliance should not come with a cadre of so called tax professionals attached to it. If we do the work on our on and get things wrong then the IRS should at least send the forms back, telling us what is wrong and telling us how to correct it. And all without any penalties being levied.
We should not be held captive to expensive intermediaries, who may or may not know what they are doing.
Victoria:
Interesting, I knew the name was familiar. My sense is the MEP’s I listed as crictizing FATCA are all heavily involved in Data Protection law issues whereas Joly is not. I will also note the three European parliament blocks I mentioned range from far Left to classical Liberal so it is not as if only the far right is opposing FATCA. I think there is an interesting tension on this whole issue between those who want to go after “tax cheats” like Joly and Canfin and those who see the whole issue through the lens of personal privacy. I note if you actually look at Question Period in the European Parliament(link below) the issue first came up with Pascal Canfin in mid October saying how great FATCA was and sentinment swung in the completely opposite direction by November and December with quite a few MEP’s coming out and blasting FATCA.
http://www.europarl.europa.eu/sidesSearch/sipadeMapUrl.do?PROG=QP&SORT_ORDER=DA&S_REF_QP=%25&S_RANK=%25&F_MI_TEXT=fatca&MI_TEXT=fatca&LEG_ID=7&L=EN
200.00 is the same rate that is charged in the U.S. Most of us aren’t people who have complicated sources of income. The higher fees that are charged are a fear charge. Like when the price of oil goes up whenever there are problems in the Middle East. The price hike isn’t because of an actual shortage of oil, the world is actually awash in oil, but because people fear the unknown.
You can be sure that those proefessional accountants use a tax software program that is very similar to what is used by H & R Block. What you are paying for is being able to sleep at night. But are you getting what you pay for? Are your fears maybe overblown?
If you can say the word “shakedown” then that is what you is happening to us.
@Tim
Thank you indeed for the list of MEPs and your link to the parliamentary questions. I see three people that I can contact and have actually (very briefly!) met Alexander Alvaro (DE) from the ALDE group. Very pleased to see them trying to defend our own privacy laws here and I hope that they will keep up the pressure on the Commission to not roll over.
The article I linked below actually I believe discusses the concerns of the MEP’s I cited but from the perspective of the Patriot Act which is a lot more “sexy” topic than FATCA. The issue with FATCA vs the Patriot Act is in my mind and what makes FATCA easier to fight is every institution right out in open has to sign an agreement with the IRS that breaks EU privacy law whereas with Patriot Act everything is done behind closed doors in secret mostly.
http://www.zdnet.com/blog/btl/european-companies-need-confidence-over-patriot-act-concerns/56878?tag=content;siu-container
I did leave out form 1116 as that is standard in a cross border US tax return but thank you for mentioning how complicated it is to complete. That is one of the reasons that even a simple Canadian return is not a simple US tax return.
One comment on using a US based tax preparer is that you need to ensure that they understand what you may be into as a Canadian (RESP, TFSA, RRSP, RPP etc). Unless the accountants have true cross border experience they may not even be aware of the questions to ask you about your personal circumstances in order to properly prepare your US tax return and schedules.
Yes it’s buyer beware out there but in Calgary outside the Big 4 and major accounting firms there are very few options (less than a half dozen?) to choose from for US tax preparation. It’s not as though there are tonnes of us out there.
What’s interesting to me is the number of people who expect me to suggest on the phone how much its going to cost without providing me with detailed info about their tax situation (and inevitably everyone thinks their situation is simple).
Petros didn’t step on my toes at all. It’s forums like these where information needs to be disseminated and I was merely trying to provide information regarding the issue of fees for US tax returns for taxpayers living, working and investing in Canada. The fees are what the fees are and if taxpayers don’t want to pay them then don’t.
A good post by Roy. It’s not the fault of the cross border tax accountants that the system is so complex and convoluted. Or that the US taxes on the basis of citizenship.
We certainly didn’t create the mess. We’re merely trying to guide clients through the maze that is the US tax system.
Thanks for coming back and commenting. I do believe it is very valuable to hear from professionals who have experience. If I have an incorrect understanding of something, I want people to tell me, and I think your reaction to what I said was worth a post dedicated to the subject.
My worry then is Recalcitrant’s comment, that he would never be able to afford such fees. Perhaps he could use TurboTax.
As for me, I care not about compliance. I have chosen instead to live in exile.
@Somefugle, either the Canadian government is complicit or you face no big trouble as a result of not filing (don’t ask me which one) – I don’t know if you remember, but the Chinese government as calling for a extradition of a Chinese businessman from Canada as a result of tax crimes in China (in China, so I doubt it was FBAR-related :-)) Canada said NO! last thing I heard.
@DonPomodoro
The other thing I’ll mention is I found several statements from Mr. Alvaro in the aftermath of the SWIFT accord fight that if the US approached Europe again for an agreement of data exchange of any type there would be a really big fight. There is rumor I have heard that US Treasury has already come to the conclusion that FATCA cannot implemented in Europe without the agreement of the European Parliament and getting that approval might be the mother of all politcal fights thus you aren’t hearing any public statements out of Treasury until they know what there strategy is for dealing with Brussels. There is a possibility I have heard mentioned that like other extraterritorial laws the US has tried to implement EU countries could be exempted(for years?) until an agreement can be reached between Washington and Brussels.