With just two weeks to go until the first expat tax deadline in 2018, it’s a timely moment to look at the most important factors expats should consider when choosing an expat tax accountant.
US Taxes for Expats
All Americans abroad who earn over $10,000 (or just $400 of self-employment income) are required to file US taxes reporting their worldwide income, irrespective of whether they live in the US or abroad.
There are however a number of exemptions available that expats can claim to reduce their US tax liability (such as the Foreign Earned Income Exclusion and the Foreign Tax Credit), in many case to zero, although they still have to file to claim them.
Some expats may also still have state tax filing obligations, or they may be able to claim a provision in a tax treaty, or thanks to a Totalization Agreement relating to social security contributions.
All in all, filing US taxes from abroad is typically more complex than filing from the US, which is why many expats choose to employ an expat tax expert accountant.
Why use an expat tax accountant?
America’s complex tax system means there are always different approaches to filing an expat’s US tax return, and only an expert has the experience to file in the way most beneficial for each expat’s particular circumstances.
As a result, most often, using an expat tax accountant saves expats more than they cost, while also saving them the time and hassle of doing it themselves (up to days of time!), minimizing the risk of penalties from getting something wrong, and providing peace of mind in knowing you’re in expert hands.
How to choose an expat tax accountant
“It’s important to carefully choose who prepares your tax returns — because regardless of who does it for you, you are ultimately responsible for the contents of your return.” – CNBC
Not all expat tax accountants are equal however, so it’s of paramount importance that expats do their research and choose the one who will serve them best. In particular, you should ask about and compare the following factors:
– Qualifications, experience, and credentials of your tax preparer
If it’s a firm (which is normally preferable, as a lone accountant can become overburdened in peak times), who exactly will be preparing your taxes? What are their credentials (are they a CPA or just a lesser qualified EA, for example), professional qualifications, and experience? Will you be able to contact them directly and easily when you have questions during the process? If a firm doesn’t give you specific answers to these questions, steer clear!
– Expertise, time in business, and record
Next, do a little research on the firm. Ensure that they have been in business for at least a few years, as some firms pop up in time for tax season and disappear again shortly afterwards, leaving expats in the lurch. Then, has the firm been recognized with any awards or other commendations? A little internet research alongside a look around their websites should give you a better idea. Reviews
What do other clients say about them? Often by reading a selection of client reviews you can get an idea about the general character and strengths of a firm, whether they were fast, efficient, personable etc.
Reputable firms are transparent about their fees.
They should advertise their fees online, and while they may need to know more about your circumstances to provide a final quote, at that point they should commit to their quote and confirm that there will be no hidden ‘extras’ added on later on for any reason.
Furthermore, be sure to check what exactly the fee includes so you know that when you are comparing firms you are comparing apples to apples, rather than apples to oranges.
– Audit protection
It’s important to ask what your expat tax accountant would do if you were audited after having filed.
Expats who are three or more years behind with their US tax (or FBAR) filing because they weren’t aware of the requirement for American expats to file from abroad can catch up using an IRS amnesty program called the Streamlined Procedure.
Expat who are just one or two years behind meanwhile can simply back file their missing returns, so long as the IRS hasn’t contacted them yet.