Taxes for Expats – Top 10 Questions to Ask Your US Expat Tax Preparer
Choosing a US expat tax preparer is a decision that can potentially cost or save you thousands of dollars.
All Americans living abroad who earn over around $10,000 (or just $400 of self-employment income) are required to file a US federal tax return, regardless of where in the world they live or in which country (or countries) their income is sourced.
Filing US taxes is often more complex for expats than for Americans living in the US, due to extra filing requirements under FATCA and FBAR, and claiming exemptions such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, where applicable, and sometimes including small business reporting alongside personal income information.
Half the battle is determining which strategies are best given the expat’s particular circumstances, and for this reason most expats choose to employ a specialist expat tax preparation firm rather trying to do it themselves or perhaps employing a US based accountant who has little experience of filing taxes for expatriates.
Choosing an expat tax preparer can be daunting though, as the consequences can be significant. Below we have provided a list of questions you should ask potential US expat tax preparers before employing them, along with what you should be looking for them to say.
Q1 – Are all of your tax preparers American CPAs?
CPAs are the best qualified US accountants, and the only type of accountant qualified to offer the strategic advice crucial to minimizing most expats’ US tax liability. Many expat tax firms however also employ lesser-qualified EAs (IRS Enrolled Agents), or other less credentialed tax preparers.
Q2 – What makes your online platform secure?
“All CPAs are accountants but not all accountants are CPAs. To qualify as a CPA, candidates are required to pass an exam. Most states also require an ethics exam or course, as well as continuing education credits.” – Forbes
Are they using off-the-shelf communications software, or is their infrastructure proprietary and exclusively and securely built to serve expat clients?
Q3 – How much of the work to prepare my taxes will I need to do myself?
Many firms, once you agree to work with them, will send you a long generic client questionnaire (up to 15 pages), much of which may not be relevant to your circumstances, and that may take you almost as long to fill in as if you were to do your tax return yourself. You may also find that you have little human contact to support you through this process. The firm hopes to just transfer the information you provide to a tax return form.
Q4 – Will I be confined to a relationship where I am relegated to one tax preparer?
If so, he/she may become overwhelmed with work at peak times, and so liable to make errors or become unresponsive should you need to communicate with them.
Q5 – How may I communicate with my expat tax CPA on an ongoing basis?
Following on from Q4, it’s worth finding out how, after your initial call, you will be able to communicate with your tax preparer. Will you be able to call (or perhaps Skype) them, or will you be relegated to a relationship where you must send the firm a generic email and wait for up to 48 hours for a response?
Q6 – Are all your CPAs fully employed by your firm, or do you also use seasonal contractors?
Some expat tax firms employ seasonal contractors who might work with you now, but may have other priorities and loyalties that might detract from their ability to work with you on an ongoing and timely basis. Furthermore, they may not be available should you need to revisit their work in the future.
Q7 – Have any of your tax preparers ever been sanctioned for malpractice?
Clearly no reputable firm should employ any tax preparers with anything less than exemplary records, however some firms become overburdened and desperate during tax season and resort to taking on seasonal contractors without properly vetting them. In general, if an expat tax firm takes on seasonal contractors, they won’t be able to guarantee the quality of your tax return.
Q8 – Are your online Reviews for real?
Allegedly, some firms resort to tactics such as compensating individuals to provide their firm with reviews on sites like TrustPilot. If in doubt, ask to speak with some of the clients who have provided the reviews you’ve seen, to verify their authenticity.
Q9 – If I choose to work with your firm, will I need to redo / resubmit all my information each year (and all the work and time that this comprises), or do you hold my information so that it carries forward to next year?
Many firms will require you to complete their long initial client questionnaire from scratch every year. This will take you many hours of work in future years, compared to very little if they have perhaps an online Client Organizer that carries over your information for you to just update where relevant.
Q10 – Are you able to confirm your final fees before I begin to work with you?
This is important, letting you ensure that you don’t find costs escalating, and that you don’t find yourself hijacked by hidden extras down the line.