32 thoughts on “Myth: EVERYONE is Eligible to Free File!”

1. *I was able to free file using TaxAct for my 2011 taxes.

2. *Looks like I skipped TaxACT.  Yet, they can also only be used if one is between 19 and 55 with an AGI less than $57000.  See http://apps.irs.gov/app/freeFile/jsp/index.jsp?ck  (I seem to have to click the link twice to get it to work)

3. I do it on paper. Handwritten. Why make it easy for the IRS? Let them pay for someone to type the stuff in. They are wasting my time since I don’t owe any taxes. Tit for tat.

   Besides, it’s better for checking your work.

4. *Free Fioling is available for all US citizens living overseas unless the overseas location is a foreign address.  Now what could be clearer than that?

   @Petros, does TaxAct accept foreign addrersses?

5. This is a bit interesting.  The IRS link to TaxAct freefile lists restrictions

   You qualify for free tax preparation, printing, & e-filing if your adjusted gross income is $57,000 or less and you are age 19 through 55 years old. Offer valid in all states.
   https://www.taxactonline.com/s_online_tax2011/index.asp?sc=11050302&m=FFA&src=FFA

   The direct link, however, says that it has no restrictions:

   FREE for Everyone – No restrictions or gimmicks
   http://www.taxact.com/taxes-online/free-online-tax.asp

   So, the conditions are more favorable to Americans abroad when the IRS is not involved?

6. @Swisspinoy–

   Actually some IRS person pointed out to ACA that foreign earned income exclusion will usually get expats’ AGI below $57 000. So TaxAct would work. Unless you’re 55.

   Anyway, I’m sticking with the pen and paper. One last time and I’m DONE. Yay!

7. @Swisspinoy, My income for 2011 was very subdued because I didn’t file for dates passed 7 April, the day the State Department says I lost my citizenship (it is a lie, I lost it February 28, 2011).

   @ Roger, yes you can input a foreign address with TaxAct.

8. Can these e-filing options handle FBARs?  I am assuming that 1040 & 1040NR forms should be no problem, but that form 8854 will have to be done by hand in any case of course!

9. *@Dom Podormo,  FBARs are submitted separate from income tax returns to the Treasury Department, rather than to the IRS.  I suppose therefore that you can’t use these e-filing options for submitting FBR reports.  Can anybody confirm this?

10. @Don Pomodoro

    FBAR has its own completely separate new! and exciting! e-file mechanism.  Personally I always use paper and captcha-quality handwriting, both for returns and FBARs.

11. Yea, that’s why you just make up numbers if you even bother to report income at all.

12. *As a dual citizen living in my Country of origin, it remains a pain to file Income Tax Forms to two countries.When I was living and working in the USA I only filed to one.

13. @Watcher: ah yes, the FBAR e-file mechanism, which only works under Internet Explorer, and for which the help desk number does not work (you call it, press “1” as directed, and get … dead silence).

    I had some notes on a bunch of these useless online tax filing providers that I was intending to expand into a blog post, but I never got around to it … here they are:

    TaxAct: cannot enter a non-US phone number. Can select “foreign” for state but there is nowhere to put the country, so you have to put everything into the “Street” field, but it is too short to hold the whole address

    FreeTaxUSA: on the IRS site they claim to accept foreign addresses, but in reality you cannot enter a non-US address; you must select one of the 50 states.

    FileYourTaxes: When trying to enter a foreign address, if you put anything in the street address field, it complains “when providing a foreign address, this field must be blank”. WTF?

    FreeFillableForms: The IRS site claims “everyone can use free fillable forms”. But you have to fill in a state. There is no option for “foreign”. The “country” field does nothing when you click on it. If you go through all the way to the end and try to submit your 2555 you get all sorts of useless validation errors. I’m not the only one to have problems with these guys.

14. @Roger, I paid turbotax for the delux package for 2011 because I was frustrated with various other services and had hoped to figure out how to properly list all of the deductions for future free filings, instead of simply listing all income as being excluded under FEIE.  While I could fill out FBAR with turbotax, I still had to print it out and manually send it in.  The US government sure likes making things difficult and expensive for itself. 

15. @Eric, I updated the post with this information.  I didn’t mention the TaxACT phone number issue because I couldn’t find a link on their site mentioning the problem.

16. I typically just put in whatever.  Toss in an old phone number or some garbage.  The forms are not *that* intelligent.  Seriously, absolutely zero reason to get all boyscout about providing data that they cannot confirm anyways.

    HR block does a better job in my experience, but the second it gets even remotely complicated they start milking you… my typical ploy is to use them, upgrade everything to poke around with my options, then save that info and put as much as possible into another efile service and file it for free.  I usually just use TaxACT and fill it with a bunch of bogus info if there’s any problem.  They don’t want a full street address? Fine, here’s a street name that fits and a number that doesnt mean anything.  Phone number? Ok, here’s a google number that I never use.  Done.

17. *I suspect now that the IRS is promoting US CPAs and Tax Lawyers. It seems to be the only way to understand what they are doing to us.

18. @Dan, speaking of phone numbers, that’s another minor issue, but I’d have to do more research to write on it…

    The number for overseas taxpayers is (267) 941-1000.link

    Google Voice is only supported in the United States and a mobile phone
    with a US number is required in order to use it. Users outside of the US
    can use Call Phone in Gmail to make international calls at our affordable rates. link

    Many Americans abroad are required to call the US, but can’t use some US phone services without IP spoofing.  The cost for the IRS to have a local number in each country is usually no more than $5/month.

19. *Internet information also provides these additional telephone numbers for teaching the IRS by phone:
    International Services

    Tax Help for US Taxpayers Residing In
    Canada
    (215) 516-2000.

    Telephone Assistance for people who live outside the United
    States
    (215) 516-2000 fax: (215) 516-2555
    IRS will answer your tax questions and
    help with account problems. Telephone assistance is available Monday through
    Friday from 6:00 a.m. until 11:00 p.m. Eastern time (non-toll-free numbers).

20. *I have called the 215 number many times. They will not discuss anything that is not in their publications. They only repeat what is there. When I asked why Americans in France did not have to pay IRS from the French pensions and I had to do it, the answer was simply “because this is the law and each country is different”.

21. *@MarkPineTree, It likely has to do with the tax treaty executied between the US and France.  As you well know, self-employed US persons in France are subject only to French social security taxes whereas in Brazil, self-employed US persons must pay social security taxes to both Brazil and the US.   Not all US tax treaties include this provision.  Each one has its differences as negotiated by the two governments. 

    There is no tax treaty between Brazil and the US. I understand that the reason is that Brazil has indicated it has no interest in any such treaty with the US. That makes it tough for persons in your shoes because you are hit umercifully by this double social security taxation.

     

22. I have found anyone on the other end of an IRS number, if you can get through, is unable to answer any questions that US persons abroad would have. When I have talked with anyone by phone or by email, the only advice they could give me was to engage a professional tax lawyer or accountant. They are not at all equipped to help any expat, to my mind.

23. * Yes calgary411 I have also written to the IRS, and after months I did get responses telling me to engage a professional tax lawyer or accountant. Roger, you are right, I would love to find someone in my situation and it seems that I am kind of unique. You know, but let me repeat. As self employed, at 79 years old I must pay SS Self Employed Tax in both countries. But there is more: different from Americans in France, me and my wife must pay US Tax on our SS Income in Brazil that are not taxed here. Then we have to pay US Tax on Savings Accounts Interests that are not taxable in Brazil. This seems to me like intrusion, that is Brazil does not tax me but I have to pay tax in the USA. The worse part is filling the forms and papers. For instance in Brazil the banks in the end of the year do not specify how much I paid of taxes on my dividends. They only say that it was deducted from my account. Now I have to go to each bank (I don´t with this to anyone, to go to a Brazilian bank) and spend hours trying to find out to fil my FBARs. It is a nightmare. I don´t know yet how much my CAP in NYC is going to charge me and I still do not know how to comply with the IRS demands. I know that sooner or later I will have to decide how I am going to live my life under this pressure. Even the IRS advised me to Renounce my Citizenship but I have family and investments in the USA. I never invested one US cent in Brazil. Everything I invested in Brazil I earned here. In the thirty years I lived and worked in the USA I never had to file Income Tax in Brazil. 

24. *@Markpinetree,  Unfortunatley “fairness” is not what the US taxation of its citizens living abroad is all about. There are such vast difference between the tax systems of other countries and that of the US that invariably the US citizen comes out on the short end of the stick. 

    This citizenship-based taxation can best be described as a Sin Tax for the non-crime of living in another country with a tax system that does not mirror that of the US. 

    US citizens who live in countries which do not levy an income tax, but generate their tax revenues strictly through consumption taxes, are the worst of off all.  They cannot claim even one panny of what they pay abroad in consumption taxes as a foreign tax credit. It is not deductible either in calculaing the US tax obligation.  So they are fully double-taxed.

    hat’s why only 9% of the tax returns are filed from countries like that and account for 100% of the tax revenue collected by the IRS from US persons abroad.

     

    As you were advised by the IRS, in effect the only way you can survive in Brazil as a self-employed person, is to renounce your US citizenship which, most undertandably you are most reluctant to do since your children, now adults, are US citizens living and working in the US, and that’s where the bulk of of your retirement savings are.

    As a US citizen and US resident, I find the way our tax citizen treats our non-resident citizens nothing short of a violation of their basic human rights.  That is not what our founding fathers intended nor is it what the US should stand for.  Having to renounce US citizenship in order to survive living an working abroad is just not freedom.

25. *Here is what I just received:

    

    Dear
    Democrats Abroad member,

    Your
    FBAR/FATCA Task Force has been working steadily to seek relief for overseas
    Americans facing onerous tax reporting burdens. This is an update on
    developments related to taxation of overseas Americans and on our advocacy
    work.

    A New
    IRS Program for those who have not filed

    The
    Internal Revenue Service has made a significant concession to overseas voters
    who present little or no risk to tax avoidance. On Tuesday June 26, 2012, the
    IRS announced it will provide a new option to help some U.S. citizens and others
    residing abroad who haven’t been filing tax returns and provide them a chance
    to catch up with their tax filing obligations if they owe little or no back
    taxes. The new procedure will go into effect on Sept. 1, 2012. See these
    postings on the IRS website for the details of the new program:

    http://www.irs.gov/businesses/small/international/article/0,,id=256772,00.html
    and

    http://www.irs.gov/newsroom/article/0,,id=258431,00.html
    and

    (Note:
    the above urls are correct, but if you cannot open them directly when you lick
    the hyperlink, simply copy and paste the addresses in your browser
    window.)

    We
    believe our submission to the IRS, Joe Green’s testimony at the IRS hearing
    and our joint advocacy with other organizations of overseas Americans were at
    least in part responsible for the new IRS program. It seems that some of our
    concerns are being addressed.

    FATCA
    has come into effect

    FATCA
    reporting has come into effect for the current filing year; i.e., to be
    submitted with the 2011 US tax return. The good news is that the threshold for
    reporting under the FATCA regime (Form 8938) has been raised from $50,000 to
    $200,000 for individual-filing Americans living abroad (to $400,000 for
    Americans living abroad filing jointly). That will bring relief from this
    filing obligation to a significant number of overseas Americans.

    Many of
    us living outside of the U.S. will likely need to continue to seek professional
    help for filing the various tax forms required of us. We have heard some pretty
    horrendous stories about Americans being fleeced by unscrupulous tax preparers,
    so we urge that you use caution in finding professional financial
    help.

    Overseas
    Americans Surveyed for FBAR/FATCA impacts

    Â

    As you
    know, in April of this year, Democrats Abroad issued a survey for overseas
    Americans to establish data around the impacts of existing and new tax reporting
    requirements. The survey results through to May have been analyzed and they
    paint a rather bleak picture of the struggles we face dealing with tax and
    foreign account filing requirements. As a result, they have been very useful
    in our discussions with government!

    They
    suggest that too many of us:

    ·
    understand too little about our tax filing obligations;

    ·
    harbor considerable fears about fines and penalties that the U.S.
    government agencies responsible for tax reporting and collection have imposed
    and are proposing;

    ·
    are negatively impacted by the fact that that, in a growing number of
    countries banks, brokers and other financial institutions are refusing to open
    new accounts for American citizens and, in some cases, closing existing ones;
    and

    ·
    may choose to remain or go ”underground” in relation to tax
    filing, or even consider giving up cherished American citizenship.

    None of
    the respondents, most of who insist on anonymity because of their fears, believe
    that our government’s serious attempts to root out fraud, money laundering and
    tax evasion are unwarranted. Indeed, expat Americans cheer such efforts.Â

    The
    survey results are compelling and we thank Gary
    Suwannarat and
    Amanda Klekowski von Koppenfels for their excellent work preparing the survey
    report. The survey is still open and we welcome you a) to participate if you
    have not already done so and b) to send the survey to other overseas
    Americans. This is the link to the survey:

    http://surveymonkey.com/FATCA_FBAR

    Overseas
    Tax Filers invited to submit their Expat Tax Stories

    The
    stories told on our Expat Tax Stories website (http://www.expattaxstory.us) give
    personal expression to data in the FBAR/FATCA survey. Thanks to Alex Sirota
    for building the website which is creating a flesh and blood record of the
    experience of overseas tax filers. The website is still live and we encourage
    you to use it to tell your individual story about US tax compliance or read the
    stories submitted by others.

    Our
    advocacy work

    In our
    discussions with political and bureaucratic officials we go to great lengths to
    express our support for the Government’s crack down on money launderers and
    tax cheats before explaining the adverse impacts and outlining our
    recommendations for making FATCA less harmful to overseas Americans.

    Democrats Abroad has recommended the following reforms to FATCA to
    offer relief to law-abiding citizens living abroad and to enhance FATCA’s
    intended function as a tax evasion deterrent:

    1. Define a
    foreign or offshore account as an account in a country other than one’s
    country of residence or the US, thereby recognizing the legitimate need for
    local banking services;

    2. Raise
    the FATCA reporting threshold to $1 million to put the focus on taxpayers with
    wealth sizeable enough to justify the costly and complex investment structures
    normally used to conceal assessable earnings;

    3. Index
    the reporting threshold to inflation so that it goes up every year just as the
    Section 911 income exclusion does;

    4. Add a
    provision that excuses anyone who does not owe taxes (because of the Section 911
    exclusion or any other exemption or a tax treaty) from the obligation to file
    form 8938, regardless of the threshold reporting;

    5. Merge
    the FBAR reporting requirement with the developing FATCA legislation to
    eliminate duplication in filings; and

    6. Offer
    amnesty to overseas Americans who are delinquent taxpayers, inviting them to pay
    what they may owe and restore their status as tax-compliant citizens. (See our
    opening remarks for our success in this area.)

    So,
    ladies and gents, while we have made some progress in in ameliorating the toxic
    (or is that “tax-ic”) issues that the Task Force was created to address, we
    continue to discuss our concerns with the governmental bodies that are charged
    with implementation. When the time is right (not in the midst of the federal
    election campaign), we are optimistic that we will achieve more – or perhaps all
    – of our goals. And, when appropriate, we will get back to you with specific actions that you may be
    able to take.

    But, as
    we move forward toward November 6, please bear in mind that, as troubling as our
    tax issues are now, conditions would be much worse (taxes and way beyond) with a
    Romney presidency, a tea party House and a Senate without a filibuster-proof
    majority. Imagine a right wing activist Supreme Court for thirty years
    (despite the welcome news about the President’s historic health care
    initiative)!

    Let’s
    Get Out The Vote!

    Your
    DPCA FBAR/FATCA Task Force,

    Joe
    Green (Canada) Chair, Stanley Grossman (UK), Maureen Harwood (Canada), Carmelan
    Polce (Australia), Maya Samara (Switzerland) and Joe Smallhoover
    (France)