I published a letter that I sent with my 2009 tax, which was late because of sheer frustration about what to do. In the letter, I explained that I had relinquished my US citizenship. Yet the IRS seems to think that I do not qualify for the Foreign Earned Income Exclusion. If you will recall, they sent me a threatening letter asking for more information, to which I replied about a month ago, possibly with insufficient time for them to take it into account (though I don’t see how they could not have received it before June 12, as it was sent in early May). The original 2555, filled out by my cheap tax preparer (no longer qualified according to the new rules), did not include the dates of my residence abroad. Thus, I amended that form and resent it. This shows the problem of finding a good tax preparer. If one is cheap, he will make mistakes. If a tax preparer makes no mistakes, expect to pay over a thousand dollars for a simple return. In any case, I will appeal this decision within the 60 days.
Here is the important bit of the IRS bill explaining the changes:
I would appreciate any input from readers. It seems they lowered my total taxable income due to a calculation error, then disallowed the FEIE, and reassessed the taxes based on there being no FEIE.
Even though the IRS knows I am no longer a citizen, this is likely not malice but merely incompetence. I have lived outside the United States since 1986, and this is not my first return. My story has always been consistently the same. And they have flimsy grounds on which to charge my “account” (which I consider a dead issue, as I am NOT AN AMERICAN–I said that in my accompanying letter).
Hey IRS stupid people! Good luck collecting this bill! I will not be paying it–you are wasting your time and other taxpayers’ money. I AM NOT LOW HANGING FRUIT!
I was hoping that this divorce could be painless. But I guess the IRS, the stalking ex-spouse, has other plans.
@petros- it just occurred to me that when it comes to the requirement that a U.S. person be able to prove that he/she meets the physical presence/bona fide/tax home test that there is a double standard. What I am referring to is the fact that they make us all residents of Washington D.C. even though we can’t be when you consider that we can’t meet any of the same tests in order to qualify for residency there.
Considering that interest rates on U.S. Treasury debt is just barely above 0 and that the banks are paying virtually nothing for deposits, it seems rather unseemly for them to charge 4.00% interest on an overdue tax bill.
This requirement to prove on a yearly basis where you live is ridiculous. Canada and every other nation have perfectly functional ways in which to give up residency and without foisting this yearly interrogation on their citizens. You would think that the nation that considers itself to be the best nation in the world would be able to adopt the same rules.
The IRS tried to disallow my FEIE the year I expatriated. They claimed that I hadn’t attached a copy of the bilateral tax agreement between Switzerland and the US. It has taken months and dozens of phone calls and we recently received a “letter of no change” from one department meaning that they accept our return with no change. The problem is that the AMT department still has a process open.
@ConfederateH: The FEIE is not treaty related. That means you can go to any country in the world, ones with a treaty and one without, and still claim the FEIE. You have been the victim of stupidity.
What does a federal employee care if he wastes the time of a tax payer with frivolous charges to their tax filings? They get paid their salary whether they are effective or ineffective. Perhaps my initial letter is what made them decide to scrutinize my return even more. They changed my income level–no explanation of the actual math error. Perhaps that was so that the tax levied wouldn’t be $5000. Perhaps they think that because it is a bill of less than 4K I’ll be willing to pay it rather than challenging it? Why are they being this stupid. I don’t understand. And this is to someone who said, take your citizenship and your tax forms and shove it. I don’t want anything more to do with you.
@Petros, are you certain that FEIE isn’t BILA-tax-treaty dependent? The purpose of BILA’s is to prevent double taxation, if there is no treaty then why not double-tax?
I too would love to be done with the Federal Government, but even 2 years after receiving my CLN I fear that the Feds aren’t done with me. I feel like a fugitive slave who cannot sleep due to worries what his past master may be doing in order to haul him back to servitude.
For one, I am afraid of that my Colorado birthplace may brand me in some unknown way as being an ex-us-person-slave. Other countries/institutions could avoid me because I am one of IRS’s bitches. For another, I am afraid that OECD and other western governments may join forces in some Interpol style and the US, through its dominant position, could brand me as “extremist” in every computer system around the world.
@ Confederate, I think the only time FEIE doesn’t apply is when you are Cuba: See:
http://www.irs.gov/pub/irs-pdf/i2555.pdf
*@Petros, You are correct, the FEIE has absolutely nothing to do with whether or not there is a tax treaty. It is denied to US citizens who reside in countries where US citizens are not authorize to travel. Cuba is one and I am quite sure that North Korea is another. There may be a way around that for US citizens, such as newspaper reporters who have been authorized by those countries to live there and have been duly licensed by the Treasury Department to travel and live there for this purpose, but I am not absolutely sure.
Your latest bill sounds like a case that you might be able to resolve throughthe Tax Advocate. They specialize in cases where the IRS has failed to do its job properly. I believe you should be able to access the TA from Canada through its toll free number, although the call likely would not be toll free from Canada. You might have to wait on line but you will eventually have an answer from a live person. My persoal experience with the TA about 5 or 6 years ago in resolving a problem with the IRS was excellent.
There is also the “suspend collection” mandate discussed on this website for US citizens who have been residents of a foreign country for 6 months or more. I confess I don’t know just how this operates, but it might be worthy of investigation.
At any rate you should not pay what you are absolutely do not owe. You should have full benefit of the FEIE up until the effective date of your US citizenship. I believe that for less than a year abroad as a US citizen it is prorated. Foreign Source Income after that date should not be subject to US tax at all.
*@Petros, on the Taxpayer Advocate website there is a telephone number which may be used to reach its international office which is located in Puerto Rico. Here is the information from that website:
International Taxpayer Advocate:
To request Taxpayer
Advocate help, call:
Roger: you are Mr. Incredible. Helping me get through the bureaucracy of the IRS monster.
@petros, off topic a bit but still relevant to your experience, always send everything to the IRS by courier, that way it will arrive in a timely manner and you have a record of when it was received.
Sorry to hear this, Petros. I hope that the problem can be solved by calling them and making them see your amended form, which they probably haven’t seen yet. The IRS seems incompetent and unreasonable as they are sending you this bill only a month after the first request, to which you responded. Are they really asking for proof of residence in Canada, or just that you provide the dates? Anyway, it’s a ridiculous action by form nation.
If I have time, I’m soon going to my representative’s office in person so someone will hear me there. The insanity has to stop.
@ bubblebustin, I am too cheap to spend money like that: that’s throwing good money after bad. Look at what I made. Barely enough to live on. 🙂 I wonder which one of the residents of the United States who made 28K was required to pay 3.3K in taxes in 2009? Which one? When people in the bottom 50% of wage earners paid only 3% of the federal income taxes.
I’m just saying that maybe Americans who actually live in the United States should pay more taxes and they should stop looking for loopholes to make people abroad pay, people who don’t even want their citizenship any more. Why should any of us pay for other people’s benefits?
@shadow, the first request for additional information came a long time ago (ca. March 27). I didn’t respond right away, as they said I only had 20 days or some stupid thing like that (since by the time I got the form there was only a week left to respond). It think that I must not have answered the question correctly. It is Form Nation: not Justice Nation, but FORM NATION. That means if you don’t fill out the form correctly, the facts are without merit. See picture below of how I filled out the letter March 19 that I received around the 27 March from the IRS. I should have checked both boxes. Not one or the other. Therefore I don’t qualify for FEIE in Form Nation, because I didn’t check both boxes (see 2555 instructions).
@petros, I guess I have more cash than LCU’s to spend on running a risk that my submission is late, especially when it’s their word against mine.
Thanks for the explanation, Petros. The date on the letter is “Mar. 19”, and when I first saw it I thought it was “May 19”. My mistake.
The form 2555 instructions say that to qualify for the FEIE, you have to be a bona fide resident OR physically present in the country for the whole year. I know you meet both requirements, but even though you only marked one box it still seems to me that they should have approved your FEIE.
*@Petros, for everyting you send to the IRS, be sure you do it in a way that you have delivery confirmation.Between some, but not all countries, you may be able to used their expedited mail delivery service or registered or certified mail with a return receipt, as well as courier services. If the response address is a PO box number then you are restricted to the postal mail, since couriers generally do not deliver to other than “physical location” addresses. You may also be able to submit information by fax, so if and when you are able to talk to a real person (which you can do when you contact the Taxpayer Advocate, you can save time by doing this.
You can also reply by fax and confirm by sending a hard copy, just to be sure. If your fax machine prints out a printed transmission receipt showing the destination fax number, so much the better. Not all of them do this.
*The same thing happened to me—that I had not filled out that line correctly. The same bill will come again 2 or 3 times more before they process your response (I had also responded to each of those with copies of the first response). There will also be a note which states that you should pay the amount and wait for the correction and refund. It will take about 6-9 months to get it resolved (any IRS issue takes about 6-9 months to solve.
*There are few government tax authorities that are competent. My Norwegian taxes have been incorrect each and every year of the 5 years I worked there. More than 20 letters and phone calls did not create a response each year, until the 6-9 months had elapsed and the problem was solved by time.
Mark Twain, thanks for the info. I see that you are right. 6-9 months to resolve an issue and the IRS will get nothing. What a waste of their time. Cloward-Piven strategy says overload the system in order to bring it down. Perhaps I should relish this opportunity to waste their time.
*The IRS letters sent to my Scandinavian address (the IRS prints their notices and sends from Paris) are always postmarked well after the letter’s date, and often arrive after the due date of the response. I respond within a week, and they respond within 9 months.
Worse yet, Norway and Sweden CALL me to ask me to send them more information. Response from Sweden was also very slow: 3-9 months.
@Petros…
Roger is Mr. Incredible, and the TAS is the easy and best answer to your problem.
I have also called the the TAS for another issue unrelated to the OVDP, and found them to be very helpful. In that case, I was trying to get an actual copy of a tax return I did not have a copy of anymore. All the IRS agents I talked to up to that point, said I could only get a transcript, but when I requested the transcript following their instructions, I got a letter back saying the transcript was not available. Frustrated, I called the TAS, and the gal was very helpful. She got the process rolling, and then some weeks later even called me back, overseas, to assure that I had received it. I was very impressed.
So, I would do as Roger suggests. Waste no more time. Call the TAS on Skype to keep your cost down. That is what I would do. Actually for $2.99 a month, on Skype, I have unlimited calls to the States, so Long Distance calling is no issue from overseas.
Finally, one alternative to an expensive delivery receipt cost, is just to mail them some nominal amount. Say, $1,00 with your SS number and the tax year you want it applied. They have to deposit it, and then you have the record that they received what you sent them! Cheaper solution. 🙂
*@JustMe. I agree that sending a check to the IRS is a good way to give you confirmation they received your correspeondence. That is no assurance they will read what you have sent them, but at least you have proof they received it by the canceled check.
My bank makes immediately available on-line both sides of checks when they are debited against my account. It may take the IRS a week or 10 days before they get around to depositing the check, but be sure and mention the check by number in the correspondence you send them. That way you can produce a scan of the check with the Treasury Depeartment account deposit information stamped thereon as proof that they received and deposited it.
*@Petros
Here is where you are and how you got there:
You claimed the FEIE on your late filed 2009 return but when you filled out Form 2555 you failed to include the information that demonstrated your eligibility for its benefits.
When the clerk at IRS whose only duty it is is to input your data into a computer data base finished that job, the computer’s program detected a) the existence of a Form 2555 claim for exclusion and b) the absence of data supporting that claim.
Result?
A computer generated request for additional information to support your claim. Although this request gave you only 20 days to respond, you still received it in time to do so either by fax – as suggested – or telephonically; but you did neither. Instead, you sat on it and let the IRS’s computer’s clock count down to zero.
After the passage of a preset interval (probably keyed to the deadline you were given to correct your initial omission) and there was no record of any attempt by you to correct your own original error within the time alloted, the IRS computer performed the digital equivalent of a shrug and cranked out a signal ordering the generation of the CP11 notice of change to your tax return. In addition to denying you the FEIE eligibility for which you failed to substantiate, the computer detected and gave you the BENEFIT of another computational error you appear to have made on your return.
Even now the IRS is offering you an opportunity to respond and correct matters and has provided you a preprinted form (a “response voucher”) that will help it detect your response and key it to your account.
Simply by checking the appropriate box on the response voucher and enclosing correspondence stating clearly and concisely why you disagree with the proposed change, you may yet get the correction you seek without making a federal case of it or wasting the time of the Taxpayer Advocate.
Indeed, it may very well be that your belated response to the IRS’s original request for information is even now working its way through the system and will eventually produce the desired result without any further input from you.
On the other hand, it may be that the lateness of your original response or the manner in which you made it may cause it to be ignored.
So, why don’t you simply follow the directions in the CP11 and clip off the response voucher they have provided you and send it with a nice concise letter (including a copy of the earlier IRS request and your (belated) response as exhibits) that reads as follows:
Dear Sir or Madam,
I do not agree with the changes proposed by your CP11 dated 21 June 2012.
I am entitled to the benefits of the Foreign earned income exclusion (IRC Sec. 911) as claimed on my original return because I met both the bona fide residence test and the physical presence test.
Unfortunately, on my original return I failed to provide the qualifying information concerning the qualifying periods of time for either test and although I provided that information to the IRS when I was asked to do so, I did not provide it within the time alloted for a response. (See enclosed copy of IRS letter dated 19 March 2012 and my response dated — May 2012).
For the record: I was a bona fide resident of Canada for the entire calendar year 2009. Except for the following periods of time in which I was present in the USA:
I was physically present in Canada or another qualifying country at all other times.
Please amend your records to reflect that fact and that I owe no US taxes for the year 2009 and inform me if you have any questions or require any additional information.
Sincerely,
Wait 60 days and see if you get any further correspondence asking for money. If you do, let us know.
@ Todundsteuer, my tendency is to do as you suggest, since your explanation seems likely to me. Let’s leave the TAS to the bigger more recalcitrant problems. If I get no result from your suggestion, I will of course eventually take up Roger’s and Just Me’s suggestion to consult the TAS. Thanks.
*It is very easy to make this error, and it is just as easy to copy the same error in 2 following (or preceding) years. Those 3 years will make a bill of over $50,000. During the 6-9 months”of waiting (or if a 2nd clarification is needed then 12-18 months), the bill becomes “seriously delinquent”. Then with the wonderbill s1813 (MAP-21) your passport is confiscated—it is that easy.
*@Todunstuyer. An excellent draft letter. Just one point, the fact that you left Canada to make a short trip outside of Canada did not affect your status or cause you to dcease to be a permanent resident of Canada for those days. If you were being paid by your employer for work on that short trip to the US then that income is not excludible under the FEIE exclusion because it was for work performed in the US. But if you were in the US for vacation or some other non-business reason and not working in the US, then your vacation pay is excludible pay and not US source income. If you are claming the benefits of the FEIE as a permanent resident of Canada, then short vvacation trips to the US don’t matter. But if you are claming FEIE because of physical presence in Canada then they do matter. At least this is the way it was when I was a permanent resident abroad which I was for 11 years.
I have a question: If you are taking advantage of a provision of a tax treaty which allows you to reduce your US tax liabbility, is there a requirement that you include a copy of this tax treaty with your tax return? I seem to recall that the text of these tax treaties is available on an IRS website, in which case, if this is right, that would be akin to asking you to attach a copy of an IRS publication -which the IRS quite obviously already has.
Can you submit your tax return electronically using TurboTax or some other IRS approved program, or are you required to submit a hard copy? I don’t know if there is any way to submit attachments if you file electronically.
I went to my representative’s local office today. To make things simple, I restricted my complaint to the FBAR. The lady there apparently had never heard of an FBAR, but she listened to what I said, understood and seemed sympathetic. I handed her a letter with my comments and she said that she would forward it to the Washington office, which deals with laws and regulations (the local office deals with individual cases). I hope I get a response this time. If not, next time I’m going directly to the Washington office.