{"id":8308,"date":"2016-12-20T15:00:46","date_gmt":"2016-12-20T20:00:46","guid":{"rendered":"http:\/\/www.escapeartist.com\/?p=8308"},"modified":"2020-09-21T13:28:58","modified_gmt":"2020-09-21T18:28:58","slug":"expat-tax-debt-mistakes","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/expat-tax-debt-mistakes\/","title":{"rendered":"Expat Tax Debt Mistakes"},"content":{"rendered":"

As an expat, the IRS has tremendous leverage over you. If you owe more than $50,000, the U.S. government can <\/span>revoke your passport<\/span><\/a>. You also have the risk of an error on your foreign bank account reports or foreign asset statements. The penalties for an error can be quite severe, so you can\u2019t afford to run afoul of the Service. <\/span><\/p>\n

When you have a tax debt, the IRS already has the advantage. \u00a0Don\u2019t make things worse while negotiating and give them more leverage. \u00a0You need to be aggressive and push back against the great collector. \u00a0<\/span><\/p>\n

Here are <\/span>six tax debt mistakes commonly made by U.S. expats<\/b>.<\/span><\/p>\n

1. Don\u2019t put up with an unreasonable or incompetent revenue officer.<\/b><\/h2>\n

Battling with the IRS is stressful enough. When the RO won\u2019t see reason, or has no idea what he\u2019s doing, dump him. \u00a0You can always escalate the issue and settle your tax debt with his manager or appeals.<\/span><\/p>\n

So, if you think you are being mistreated, or he\u2019s just a rude jerk, don\u2019t let him push you around. \u00a0Don\u2019t be victimized by an unreasonable tax collector. \u00a0Ask to speak with his manager. \u00a0Discuss with her your concerns and mention that you are thinking of filing a formal complaint.<\/span><\/p>\n

You\u2019ll be surprised how this little push will get the RO in line. \u00a0If he sees you\u2019re not someone who will just grab your ankles and take it, he\u2019s likely to be more reasonable.<\/span><\/p>\n

If the first call with the manager doesn\u2019t resolve the matter, give it two meetings and demand another conference. \u00a0At this one, request a new agent be assigned to your case. \u00a0If you have a reasonable basis for the request (not just to delay), it will be granted.<\/span><\/p>\n

Another trick is to ask to meet with the regional manager (the agent\u2019s boss\u2019s boss). \u00a0Escalate things past the first level and you will get results. \u00a0In my experience, managers often attract people like themselves to their 5 or 6 person team. \u00a0If an RO is a jerk, it is likely his manager is cut from the same cloth. \u00a0But, you can get past the manager by demanding a conference with the regional manager.<\/span><\/p>\n

I\u2019ve seen this taken so far as to demand the group manager and manager attend any audit meetings. \u00a0This usually means the top person is driving from afar, and will really get the RO\u2019s attention. \u00a0If you take it this far, you\u2019d better be in the right.<\/span><\/p>\n

If you disagree with the manager\u2019s decision, and the filing deadlines haven\u2019t passed, you can appeal liens, levies and seizures under the Collection Appeal Program. \u00a0You can also request a CDP hearing with Appeals after a tax lien is filed or after a final levy notice is sent. \u00a0Both of these are great ways to dump the RO and resolve your tax debt with someone more professional.<\/span><\/p>\n

Finally, if none of these methods resolve your issue, you can contact the Taxpayer Advocate Service for assistance. \u00a0The TP Advocate will be on your side and will work with you to move through the IRS system \u2013 and help you escalate the matter if necessary. \u00a0If your complaint is valid, the TP Advocate will be a valuable resource. \u00a0If you are just trying to drag things out, they will ignore you.<\/span><\/p>\n

While ROs must be tough to be effective, they must also follow all kinds of procedural rules. \u00a0When they\u2019re meeting with you, rather than an experienced representative, they often cut corners and resort to threats or levies. \u00a0Remember, you always have the right to escalate the matter and EVERYONE in the IRS has a boss.<\/span><\/p>\n

 <\/p>\n

2. You must know where you are in the process.<\/b><\/h2>\n

Keep track of all IRS deadlines and appeals dates. Open IRS correspondence and read your account transcript or record of account. \u00a0You have many rights and tools to help you resolve your tax debt, but they\u2019re time sensitive. \u00a0Miss a deadline and you lose your rights.<\/span><\/p>\n

If you don\u2019t know what to expect, you are sure to be blindsided. \u00a0An RO will not volunteer information, so you must search it out on your own. \u00a0If the time for a bank levy is near, the IRS person will remain quiet and then slam your account without warning. \u00a0Only someone who understands the timeline will know how and when to protect against acts of aggression.<\/span><\/p>\n

Tip: Get all statements from the RO in writing. \u00a0Yes, they will lie about appeal dates and levies.<\/span><\/p>\n

 <\/p>\n

3. Never admit to a crime!!!<\/b><\/h2>\n

If an agent attempts to get you to admit to a crime, such as not reporting an offshore account, hang up or kick him out of your office. I can\u2019t stress this enough: \u00a0No matter what you think of the RO, he or she is not your friend! \u00a0If they can get you to admit to a crime, the next time you see them will be on the witness stand at your trial. \u00a0Don\u2019t be cute and try to talk your way out of it.<\/span><\/p>\n

And this goes double if someone from the IRS Criminal Investigation Division (IRS CID) or a Special Agent contacts you. \u00a0Don\u2019t speak with them under any circumstances and make a beeline for the nearest criminal tax defense attorney.<\/span><\/p>\n

How can you be sure it is a criminal matter: \u00a0If they show you a badge, have a gun, or recite your Fifth Amendment rights, you are in deep trouble.<\/span><\/p>\n

 <\/p>\n

4. Never ignore the IRS.<\/b><\/h2>\n

I know this is the most difficult rule to follow, but don\u2019t\u2019 bury your head in the sand. The IRS RO is happy for the various statutes and rights of appeal to pass without action, so he can have a free run at you and your assets. \u00a0Whenever the IRS is quiet, don\u2019t assume they\u2019ve forgotten about you. \u00a0More than likely, they are waiting on something and will come down on you like a ton of bricks when the deadline passes.<\/span><\/p>\n

If you get a letter asking for a call, phone them. \u00a0If they visit you at your office, talk to them or tell them to contact your representative. \u00a0Though, you should never volunteer any information\u2026 just give them a reasonable amount of cooperation.<\/span><\/p>\n

Of course, I am not saying you must do whatever they ask. \u00a0For example, if you\u2019re not comfortable meeting at your office, tell them to get lost and schedule an appointment at theirs. \u00a0Remember, it takes a great deal of preparation and planning to resolve a large tax debt. \u00a0If you are not ready, you can put them off. \u00a0Just be sure to get your financial house in order immediately.<\/span><\/p>\n

Of course, this rule assumes you\u2019re battling with the great collector without the benefit of counsel. \u00a0If you have retained an attorney, NEVER speak to the IRS. \u00a0If they come to your home or office, give them your lawyer\u2019s card and thank them for visiting.<\/span><\/p>\n

 <\/p>\n

5. Pay your taxes if you can afford to do so. <\/b><\/h2>\n

Note that I said, if YOU can afford to pay the IRS, you should do so. The IRS will constantly pressure you to sell your assets or borrow against them to feed the beast. \u00a0Considering interest and penalties, it\u2019s usually a good financial decision to pay the IRS first, before other creditors.<\/span><\/p>\n

If YOU can\u2019t afford to pay, don\u2019t let the RO pressure you into borrowing from a spouse, credit card, or family member. \u00a0You are not required to go into debt to settle with the IRS. \u00a0They will ask you to borrow from your parents or spouse, but they can\u2019t force you to do so. \u00a0They also can\u2019t refuse an installment agreement because you have wealthy family members who can pay your bills.<\/span><\/p>\n

The only assets at risk are those you own. \u00a0If you don\u2019t have the income or assets with which to pay, don\u2019t sweat it. \u00a0Just ask for an installment agreement. \u00a0If the RO is rude, see rule 1 and request a conference with his manager.<\/span><\/p>\n

This holds true for partial payments. \u00a0The IRS RO will often ask you to pay something and then negotiate an installment agreement. \u00a0Never pay any money unless you know how all of your tax debt will be satisfied. \u00a0Don\u2019t give them cash with the hope of building favor. \u00a0Demand an installment agreement before giving the collector one dollar.<\/span><\/p>\n

For example, when your tax debt covers many years, the IRS agent might ask you pay one year (the oldest one) before setting up an installment agreement. \u00a0Even if you can afford to pay, this is usually not a good idea.<\/span><\/p>\n

The reason he is asking you to do this is that the penalties have maxed out on the older year and the 10 year collection statute might be on the horizon. \u00a0It\u2019s probably in your best interest to pay current year taxes, estimated taxes for next year, and then the most recent tax debt. \u00a0Only after this should you pay past debts.<\/span><\/p>\n

This is all to say, don\u2019t get scammed into paying before you know how the entire tax debt will be resolved. \u00a0It is almost never in your best interest to pay and then negotiate.<\/span><\/p>\n

 <\/p>\n

6. Don\u2019t extend the 10 year collection statute.<\/b><\/h2>\n

Unless your tax attorney or CPA tells you to extend, it\u2019s almost never a good idea to give them more time.<\/span><\/p>\n

Tip: The IRS has 10 years from the date of assessment (usually when you file the return) to collect your delinquent taxes. \u00a0When the 10 years are up, you can often walk away with a fresh start.<\/span><\/p>\n

If the 10 year collection period is near, don\u2019t do anything that will extend it. \u00a0This includes:<\/span><\/p>\n

    \n
  1. Installment Agreement with Form 900 Waiver<\/span><\/li>\n
  2. Filing an Offer in Compromise<\/span><\/li>\n
  3. Bankruptcy<\/span><\/li>\n
  4. Collection Due Process Appeal<\/span><\/li>\n
  5. Taxpayer Assistance Order<\/span><\/li>\n
  6. Absence from the Country<\/span><\/li>\n
  7. IRS Judgment or Litigation<\/span><\/li>\n
  8. Relief from Joint and Several Liability \/ Innocent Spouse Request<\/span><\/li>\n
  9. Military Deferment<\/span><\/li>\n
  10. Wrongful Levy Claim<\/span><\/li>\n
  11. Wrongful Lien Claim<\/span><\/li>\n
  12. Estate Tax Lien<\/span><\/li>\n<\/ol>\n

    Don\u2019t want to try to remember all of these? \u00a0The most common are the Offer in Compromise, Bankruptcy and filing a CDP hearing request. \u00a0Basically, any time the IRS is prohibited by law from collecting, the 10 year statute is on hold.<\/span><\/p>\n

    I hope this article on Expat Tax Debt mistakes has been helpful. \u00a0Remember that <\/span>the key to going into battle with the IRS is understanding your rights<\/b> and the timelines for the various filings. \u00a0If you miss these deadlines, you have significantly weakened your position. \u00a0Always try to take the high ground before talking with an IRS agent.<\/span><\/p>\n

    If you\u2019re going through an audit, we will be happy to refer an expat tax expert. You can reach us HERE.<\/a><\/strong><\/p>\n

    Guide to Foreign Tax Credit, Foreign Tax Treaties and Foreign Housing Exclusion<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

    As an expat, the IRS has tremendous leverage over you. If you owe more than $50,000, the U.S. government can revoke your passport. You also have the risk of an error on your foreign bank account reports or foreign asset statements. The penalties for an error can be quite severe, so you can\u2019t afford to […]<\/p>\n","protected":false},"author":686,"featured_media":42157,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","om_disable_all_campaigns":false,"footnotes":"","_jetpack_memberships_contains_paid_content":false},"categories":[1401],"tags":[127,24541,406],"yst_prominent_words":[15592,4921,15595,15602,4777,15600,4772,15598,4763,10322,4985,15597,15601,15596,15593,15599,2131,4769,15594,15603],"acf":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/www.escapeartist.com\/wp-content\/uploads\/2016\/12\/tax-debt.jpg","_links":{"self":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/8308"}],"collection":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/users\/686"}],"replies":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/comments?post=8308"}],"version-history":[{"count":8,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/8308\/revisions"}],"predecessor-version":[{"id":42158,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/8308\/revisions\/42158"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media\/42157"}],"wp:attachment":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media?parent=8308"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/categories?post=8308"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/tags?post=8308"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/yst_prominent_words?post=8308"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}