At least that’s my best guess of what they’re trying to do, based on the rather strange contents of (and omissions from) their latest guidance to U.S. Persons abroad. Patrick Martin of Procopio, Cory, Hargreaves & Savitch LLP reports on recent State Department efforts to communicate with the diaspora about their IRS obligations. State sent out an e-mail blast, and posted the same message on the websites of various U.S. consulates and embassies, for example Tokyo, Bern, and Athens. The guidance was prepared by the IRS rather than State; State is merely the messenger.
Here’s the IRS’ complete answer to the question “What Forms May I Need” (I eliminated references to instructions and Spanish or “EZ” versions of forms):
1040, U.S Individual Income Tax Return
1116, Foreign Tax Credit
2350, Application for Extension of Time to File U.S. Income Tax Return (for U.S. citizens and residents abroad)
2555, Foreign Earned Income Exclusion
4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return
8802, Application for United States Residency Certificate
8938, Statement of Specified Foreign Financial Assets
14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures
Form 8802 is only useful to you as an individual if you have a credible case for tax non-residence in the country where you are present, and a claim that such non-residence should exempt you from local taxation on some of your income which the U.S. also does not tax under its own system.
The mention of Form 8938 notwithstanding, this e-mail doesn’t appear to be aimed at accidental Americans or long-term emigrants who conduct all their finances locally — the largest category of non-resident non-filers who have assets which could be subject to fines and actually might owe U.S. taxes in unusual years (e.g. on the sale of a house). None of us have any claim to U.S. residency under a tax treaty. If the IRS were aiming at us, it would have been far more relevant to mention Forms 3520 and 8621 than Form 8802.
Nor is this e-mail likely to be aimed at short-term corporate assignees — who might be able to benefit from Form 8802, but in general have Big 4 assistance as part of their overseas assignment package and so are far likelier than average to be compliant with their U.S. tax obligations (thus artificially driving up the average income of FEIE users). Rather, the IRS seems to be trying to contact people to whom Form 8802 is relevant and who currently have a low rate of compliance. My guess is that means students, teachers, and researchers, in particular young graduates teaching ESL classes.
