I got a letter in the mail from the IRS stating that a request for transcript of tax return could not be processed because of my address across the sea. So, I called to correct the address, corrected it and then later got another letter from the IRS stating that my non-US address still didn’t match their records, which is still the case today.
Well, while correcting the address that is corrected but is still incorrect, I guess, even though mail is sent to me with it, I was informed that it was very extremely super endlessly important that I file tax returns for the years 2008 and 2009. Of course, I didn’t file such years because I was told that I couldn’t because of my address, the required form used or the AGI given. Living abroad as a US person means finding tricks to file tax returns, such as inventing an address, skipping forms or creating an imaginary AGI of $1 to prevent one’s tax return from being denied submission. That’s the wonderful technology Americans buy when they spend $20 billion on the government!
Over the last decade the IRS has spent nearly $20 billion on information technology. Taxpayers deserve to know if they are getting their money’s worth.
The Committee on Ways and Means
Nevertheless, I accepted the challenge of filing a previous year tax return, because I had never dreamed of doing so at any point in my entire life! What this means is submitting a basic 1040 since the expat double-tax penalty deduction gives me an AGI of $0. That’s so simple, one would think. So, where does one go when they tax need help? Free File Fillable Forms! Or, maybe not.
My journey then took me to TaxACT, where I clicked around until I finally stumbled upon the screen which stated $22.90. That’s $9.95 for TaxACT 2009 Online Deluxe and $12.95 for 1 years of 2009 Data Archive Service (DAS). Now, for $22.90 I insist on having more bells and whistles than just E-filing. Yet, TaxACT offers everything that I don’t need. I don’t want delux or to print, store or plan, but only to submit and free of charge.
Thank God there’s FreeTaxUSA to the rescue! Yet, with USA, they must really mean USA and only USA because their territorial-based taxation doesn’t extend beyond US borders, similar to that of the IRS.
For fellow stateside Americans reading this blog, this means that the State where I live is not available among the given choices and a letter will not reach me when the country is not listed. But, no worries. I’ll just add the additional details to the city. Oh, but it doesn’t like the comma and insists on having a State. So, let’s invent a State. How about Hawaii? I always thought that it would be cool to live in Hawaii. I then removed the comma and replaced the “d” which got stripped from the country name. Oh, my zip code is 4 digits and it says that it must be 5 digits. Easy enough, let’s prefix it with a ‘0’. That makes sense. Now it is telling me that my zip code is not valid in the state of Hawaii. Of course it’s not, dufous, I live in Switzerland, duh! Well, a google for my zip code states that it is assigned to Vermont. So, Vermont it is. Bingo! That did the trick.
The next part is my favorite part, where I get to select all the “no’s”. No this, not that, no, no, no, no, etc. Oh, now it says that I have $0 income and a $0 refund. That’s almost right, but it’s missing something somewhere. Where could that be? It’s not “Other income”. It’s not a W-2 form. Let’s try tax help and type in the magic number: 2555. I knew it! USA is a territorial-based tax system, for all eyes to see. It’s a proven fact!
Yet, the IRS still insists that it is super duper endlessly important that I snail mail to them the AGI of $0 in 2009 which is the same as in 2010, 2008, 2007, 2006, 2005, 2004, 2003, 2002 and 2001?
In day two, I’ll further explore the concept of filing previous tax returns.
Is there a centralized resource, for expats who want to do the right thing and file their US return, to know what software supports it, or which forms do expats actually need to file, without having to pay the big bucks for a cross border professional?
If not, it might be a good resource to add to this site. Even though this site is advocating against citizenship based taxation, since there is little chance it’s going away anytime soon, we might as well explain people to do it right.
To my knowledge, there is no such thing and very many people are confused about it. For several years, I didn’t file because I got frustrated with the errors when trying to do so. That’s why I created this thread and its main reference which I wrote earlier:
Myth: EVERYONE is Eligible to Free File!
Last year, on the advice of my Dad, I contacted a tax preparation software vendor in the U.S. This was my experience:
1. The support staff I talked to swore up and down that since I lived and worked outside the U.S. I didn’t have to file a U.S. tax return. I kept saying, “Yes, I do and look at the IRS website.” They kept saying, “No, you don’t” and then finally, “Maybe you do…”
2. Moving on (and trying a different angle) I asked if their software supported forms like the 2555-EZ (http://www.irs.gov/pub/irs-pdf/f2555ez.pdf). They never heard of it.
3. I was on the phone for nearly an hour. I was calling long distance. From France. This probably made my phone company (Orange) happy but for me and the U.S. software company it was a total waste of everyone’s time and money.
I had a pretty good experience with TaxAct and it does deal with Expat tax provided it is below a certain threshold. Also, you have to pay a nominal fee to use previous years’ programs. Swisspinoy listed a few strikes against TaxAct. A tax lawyer warned me in an email severely about my method of calculating the Foreign Tax Credit or doing my taxes using software, said I was putting a target on my back.
@Victoria: I was calling long distance. From France. This probably made my phone company (Orange) happy…
Skype. Completely free calls to 800 US numbers from anywhere in the world.
I do my own tax returns, based on advice I’ve been given by a couple of accountants. Maybe I’m crazy, but anyway, I do it. When I did my “past year” tax returns it was in 2010. At that point it was easy to get all the forms etc on the IRS website. The was a page of “prior year forms” You just clicked the year, and they were all there.
Recently, I was trying to figure something out that required some information from a previous year information guide. I tried to find the page. It was not there, and nowhere else on the IRS pages that I could find despite over an hour of searching.
It struck me as odd, given the IRS push to get “non- compliant non-filers” back into IRS compliance, that something as vital to doing so as the prior year forms had been made unavailable. It also struck me that someone who tries to do now what I did 3 years ago, is now forced to go to an accountant (who hopefully still has access to those forms) with all the costs associated.
I can’t figure out if this is incompetence. (it’s hard to imagine how that could be) or intentional. Maybe they figured it would force people to go through OVDI??? I have no idea, but it seems ludicrous to me.
I can only be thankful I did it when I did, and and very sorry for people who find themselves in the situation today
“A tax lawyer warned me in an email severely about my method of calculating the Foreign Tax Credit or doing my taxes using software, said I was putting a target on my back.”
Do you recall what he was talking about when he said that? I read through the whole thread, but couldn’t get any details. You figured out your FTC exactly the same way I did. I can’t figure out how else one would do it? Or was it something else about it that bothered the accountant?
@CanuckDoc, this is relevant part of the email said,
But afterwards, I consulted the guidelines and determined that my method was pretty much correct (not including certain expenses that I did not have).
I have been able to retrieve past years’ returns whenever I needed to find them. This past year I needed to amend several prior years’ returns as a result of having been given errant instructions by my US specialized accountant many years prior when I had my past years’ returns prepared by this this individual. The link that I believe has past years forms currently available is:
* @ CanuckDoc
Sorry, I just reread your post and noticed that you were referring to Publications not filing forms. While they list many Publications, they may have pulled some from previous years’ because they contain instructions that have been modified. Just a theory.
*Victoria, do they have a web page? I can maybe add them to part (day) 2 of my journey. This stuff sure consumes a lot of time.
That’s what i was looking for. I recall seeing that page, but there was very limited stuff on it, although it seemed obvious that was where it ought to have been. I was looking for the 1040 instructions for 2010, which wasn’t there at the time. I am glad to see it is now. Maybe I just caught it at the wrong time in the transition, when they hadn’t gotten it all set up yet. Good to know they’re at least still available.
*As far as I can tell, I’m in a similar position to you. Professional corp, large RRSP, problems with pfics, (who knew?) etc.
Almost entered OVDI. It would have cost far too much so we are on to plan B. In your shoes, I would simply fill in returns to the best of my ability .
My basic premise now is that they will never get a penny. Actually, I don’t see how they could.
*@Vancouver Doc…what is plan B? How are you going to catch up on FBARs? I am interested in your strategy.
Therapist 604 is corect in her link. When in that page, enter “1040” in the FIND box, and you will see 1040 forms and instructions back to 2003 or so. These will either be fillable in pdf, or printable to be hand-filled in. It is my experience that very few of the basic US tax software programs have the capabilties for Form 2555, foreign earned income exclusion, or Form 1116 for foreign tax credits. IF they do, therea are several exclusions from E filing – past years’ returns, certainly, and in the current year, filnig separately when one’s spouse is a non -resident alien ( not a US citizen or resident) with no SSN. In the catch up situation, paper is still best.
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*I just learned that to do my IRS tax return from my country with an USA CPA who works with Americans Abroad will cost about $1000.00. Of course, a Tax Lawyers is around $300.00 an hour. I dont know of any software who will do my return. What a pain!
*Newb. Plan B = full ostrich. Not a word. Not a penny. Or since we don’ have pennies anymore, not a nickel.
@swisspinoy, You bet. It was Turbo Tax. Website here http://turbotax.intuit.com/
*Victoria, oh, so it’s your fault! Turbo Tax used to be a territorial-based system until earlier this year. It looks like that because of your call, they expanded their system to function beyond US borders. I hate you! That’s the catch-22 of this effort. One describes the many problems caused by citizenship-taxation, with the US attempting to fix the many problems that it creates instead of abandoning the actual cause of the many problems. I estimate that I’ll cover Turbo Tax on day 5 of this article. Right now, I’m on day 3.
@swisspinoy, Not sure what the appropriate response is here. I’m wavering somewhere between, “Oh joy!” and “Oh damn!”
But on the off-chance that my call did some damage/good, I’ll assume the consequences like a big girl. 30 lashes with a baguette (the hard-as-a-brick ones they sell at Carrefour, of course).
Looking forward to the next piece on tax software.
My journey through amendments and tax preparation overseas was via Turbo tax, the downloaded software client that sets on my computer and not online. I do not like online products for this activity. I always get the Oct 15th extension, and mail mine.
Now, I have tried to keep my life simple, since I made the wonderful discoveries of overseas taxation. I do not have to do a 2555 because I do not have Foreign earned income, but I do have to do the foreign tax credit form 1116.
The very first time I did one, I paid an so called ‘international tax” CPA to do it when I was going through the wonderful OVDP in 2009. He got it wrong, and could not explain it, as their were some glitches in the professional software he was using, but at my instance he finally got it all corrected. BTW, he was just starting to inform clients about the FBAR, and he refused to touch them.
I used his example for all the amended returns I did via Turbo Tax, and now have the process down pretty well, although occasionally it still takes some tweaking in the ‘forms section’ to get it right. However, I do have to do a lot of spread sheet prep work to do the 1116, and speaking of which, I have been procrastinating and need to finish that today now that I have all my NZ bank records. 🙂
I renounced in January 2013.
Didn’t fill any tax forms… I never filled one in my life before.
All information that I found everywhere was very confusing.
I know that I never had earnings so healthy that I own something to the IRS. Don’t have more than 2 millions neither.
Professionals for US taxation cost a lot.
Choosed the easy way??!!! Didn’t do anything…
Read in the web that tax forms older than 6 years are not criminally persecuted… so I’m waiting.
Don’t have any intention about going to the US. no close family there.
Maybe I’m being stupid…. more stupid was to not renounce when it was free….
Sounds like you followed your good COMMON SENSE in the decisions you made for yourself. I agree with your last sentence; I too missed the “free” renunciation so paid $US 450 for my freedom from this unjust absurdity.
Believe me, I made enough stupid mistakes in this so am relieved I was not stupid enough to wait until it increased to the now $US 2,350 fee — or how much higher ever it may be in the future.
Just what happened to good old common sense as a human trait?
More I age, more I understand that human kind doesn’t have common sense from birth… a lot more than we could believe.