US expats hit by missing IRS letters and more scrutiny

Published:  11 Feb at 6 PM
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As increasing numbers of US citizens opt for expat life abroad, the IRS’s incompetence is causing serious problems with tax returns and compliance.

US expats living and working overseas seem nowadays to be the undeserving targets of endless tax-related crackdowns and rule changes across the board, with compliance campaigns aimed at expats as well as outdated methods of communication which leave expats unable to be compliant however hard they try.

In the age of internet communications, the US tax authority is still committed to contacting taxpayers by letters and notices, in spite of the fact that a majority of expat mail is being returned as undeliverable. For several years now, reports have confirmed that one out every 10 US taxpayer letters is sent overseas, in spite of the fact that 65 per cent of international mail was returned as ‘undeliverable as addressed’. This means a high number of US expats paying tax to the authority are getting delayed access to refunds, not getting important notices and are open to the risk of their sensitive personal information getting into the wrong hands via misdelivery.

Reasons for difficulties with delivery to overseas addresses are many, including unreliable or underdeveloped postal services in many countries, changing postal regulations overseas and problems with the addresses themselves. IRS internal systems are in the main incompatible with most foreign addresses as international mailing addresses tend to be longer than those allowed in IRS systems and use different formats than those in the USA.

The issue is becoming increasingly serious for US overseas taxpayers as the IRS is now increasing the numbers of audits of international taxpayers. Two new campaigns against expat taxpayers have been recently announced – the ‘foreign-earned income exclusion campaign’ and the ‘individual foreign tax credit campaign’. Expats who’ve claimed either in the past are now far more at risk of an audit. If an IRS letter hasn’t been delivered, the first indication there’s a problem may be a levy or lien, an unpleasant shock for law-abiding expats who’ve no idea the IRS is targeting them. Some may well consider that ‘making America great again’ should include dragging the US taxman into the 21st century!
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