Deadline to File for Taxpayers Abroad Rapidly Approaches


If you live or work abroad, today (June 15) is the last day to file your federal income tax return for 2016. This includes those with dual citizenship. You can digitally request an extension if you can’t meet the deadline. The extension is granted to those who attach a statement explaining why they should be qualified – typically for those living or serving on the military outside the United States.


Do you need to file?

Filing obligations are linked to personal income such as wages, salary, commissions, tips, consultancy fees, pension fund, alimony, U.S. or foreign social security, interest, dividends, capital gains, rental property, farm income, royalties, inheritance or payment in kind in the US or abroad.

What are your options?

According to Publication 54 of the IRS, you don’t have to file on paper. “Electronic filing” is the fastest, easiest, and most convenient way to file your income tax return electronically.

Do so by using your personal computer, with the help of a volunteer or contact a tax professional who can do it for you. This would offer an accurate, safe, and fast alternative to filing on paper. IRS computers quickly and automatically check for errors or other missing information.

You can reduce your US tax by a substantial amount through two methods: “Foreign Earned Income Exclusion” or “Foreign Tax Credit.” None of them excuse you from filing if your income was above the filing threshold.

What information do you need?

The requirements for determining who must pay estimated tax are the same for a U.S. citizen or resident abroad as for a taxpayer in the United States. For current instructions on making estimated tax payments, see Form 1040-ES.

If you had a tax liability for 2016, you may have to pay estimated tax for 2017. Generally, you must make estimated tax payments for 2017 if you expect to owe at least $1,000 in tax for 2017 after subtracting your withholding and credits and you expect your withholding and credits to be less than the smaller of: 1. 90% of the tax to be shown on your 2017 tax return, or 2. 100% of the tax shown on your 2016 tax return. (The return must cover all 12 months.)

If less than two-thirds of your gross income for 2016 and 2017 is from farming or fishing and your adjusted gross income for 2016 is more than $150,000 ($75,000 if you are married and file separately), substitute 110% for 100% in (2). See Pub. 505 for more information.

Now what?

It’s not too late to figure it out – make sure to request an extension, even if you just need more time to do research. Make sure your numbers are in order and all information is accurate prior to filing.

If you need help choosing a software provider, go here.


Scam Alert: Taxpayers Beware

It was recently brought to our attention that scammers are still on the hunt … this time asking taxpayers for 8821 and 2848 forms.

Prior to releasing such documents, which authorizes the release of your tax information and the power of attorney (POA) and declaration of representation respectively, taxpayers should verify it’s authenticity.

If you are currently facing tax problems with back taxes, you may have received a call requesting a copy of the aforementioned documents. In this case, we urge you to contact those currently holding the POA immediately.

The hand-off of this information could put you at risk of credit card fraud and identity theft. Trusted tax professionals can assist in this situation by confirming whether or not the release of data is necessary.

See our previous post on identifying IRS scammers for more tips on spotting cons and avoiding the stress. Call Tax Defense Partners if you need help. We offer free consultations and are the nation’s leading experts in tax negotiation and mediation.

Image of a young angry couple having argument about money at home

What To Do If Your Spouse Owes Back Taxes

Your spouse owing money back on taxes could cause significant tax problems. You can fix the situation by changing the number of exemptions when filing, utilizing the innocent spouse or injured spouse option or by filing separately.

How do you know if you qualify for spouse relief? You may do so if you file a joint return and all or part of your refund is applied against your spouses’ past-due federal tax, state income tax, child or spousal support or federal nontax debt, such as a student loan.

The International Revenue Service offers relief in either of the below cases:

  1. Innocent Spouse Relief provides you relief from additional tax you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits. You must first submit a completed Form 8857.
  2. Separation of Liability Relief provides for the separate allocation of additional tax owed between you and your former spouse or your current spouse you’re legally separated from or not living with, when an item wasn’t reported properly on a joint return. You’re then responsible for the amount of tax allocated to you.
  3. Equitable Relief may apply when you don’t qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return and generally attributable to your spouse. You may also qualify for equitable relief if the amount of tax reported is correct on your joint return but the tax wasn’t paid with the return.

To prevent losing a refund to back taxes, a Married Filing Joint return will produce a lower tax liability, than two Married Filing Separately returns. A lower tax liability will mean a greater tax refund.

An injured/innocent spouse claim will give the IRS enough data for them to split the refund between the two contributing parties which will protect the non-debtor’s refund from garnishment to pay the debts of the debtor spouse. See Form 8379 for necessary information regarding innocent spouse allocation.

Some say the easiest way would be to adjust your exemptions. This means that the government would withhold more taxes out of each paycheck if the number is lowered, but less taxes are withheld if the number is increased.

Each has its benefits and potential pitfalls, so it is important to weigh out your options. We recommend seeking professional help for your tax services.


How to Identify IRS Scammers

Here’s what you should know in order to avoid falling for the fake trap set by potential scammers who claim they are from the Internal Revenue Service (IRS):

  • When requesting information, the IRS would never initiate contact with taxpayers by email, text messages or social media channels.
  • Enforcement action is not used as a threat by the IRS; this includes lawsuits or imprisonment.
  • The IRS does not aggressively approach the conversation on the phone, whereas scammers are typically persistent and malicious regarding your IRS tax problems.
  • Scammers demand payment via debit or wire transfer, but the IRS would mail a bill to notify taxpayers who owe taxes.
  • The IRS will not bring in local police, immigration officers or other law-enforcement to have you arrested.
  • In the event of an IRS visit, two forms of identification must be provided by the representative to prove their credentials.
  • Payments must only be sent to United States Treasury.

Make a constant effort to protect yourself by protecting your data. It is also important to know that your rights are as follows, detailed by the IRS here.

  • Be Informed
  • Quality Service
  • Pay No More than the Correct Amount of Tax
  • Challenge the IRS’s Position and Be Heard
  • Appeal an IRS Decision in an Independent Forum
  • Finality
  • Privacy
  • Confidentiality
  • Retain Representation
  • Fair and Just Tax System

We urge you to be on the lookout and address confusions with IRS officials, as always the Tax Defense Partners is here to help!


Write Off Business or Personal Trips on Your Taxes

With summer just around the corner, it’s time to start thinking about a much needed vacation. It might sound too good to be true when you know work will just keep piling up, but what if you knew how to use the trip as a tax write off, without facing tax problems?

There are several ways to have a guilt-free getaway and still use it to your advantage when it comes to filing taxes. The first is if you are traveling solely for business which means all costs accumulated can be deducted as long as they are properly documented and accounted for.

Based on your time management, you can still have personal vacation hours on business days. While you may have to answer work-related emails or take phone calls, you’ll likely have time to explore.

The IRS defines deductible costs as “ordinary and necessary” – most commonly categorized as meals, travel, lodging and entertainment expenses. Travel and lodging are the safest bet if evidence of work being conducted can be shown. If the primary purpose of your trip is business-related, you can also write off your transportation, laundry, dry cleaning and personal grooming costs.

If you plan on working during a personal vacation, you can still write off some costs. Publication 463 by the IRS states that “you can deduct any expenses you have while at your destination that are directly related to your business.”

Meals and entertainment usually earn 50% deductibility, but they must be work-related. You won’t be able to deduct your family’s expenses, however, if they acquire additional costs than what you would have already spent money on. They can legally tag along during the car ride or stay in the same room, if space permits it.

Keep in mind that location matters; things can get a little more complicated when venturing outside the United States. In this case, you’d have to allocate the costs between your business and other activities to determine your deductible amount.

As long as you follow the tips above, you are good to go on a mini-vacay. As always, keep your receipts … The IRS doesn’t require them for costs less than $75, but you should be keeping a log of the date and time for all transactions.


Truck Crash Causes Temporary Power Outage


Tax Defense Partners will be temporary closed due to a power outage in the area. According to CBS Local News, the power outage occurred after a truck slammed into a pole in Van Nuys.


Offer In Compromise Explained By The IRS

An offer in compromise is a settlement for taxpayers who cannot afford to pay their tax debt. Below are some things a taxpayer should know before applying for an offer in compromise:

  • If a taxpayer can afford to pay what is owed, the IRS cannot accept a settlement offer.
  • In order for the IRS to consider a tax settlement offer, the taxpayer’s required tax returns must be filed.
  • There may be a payment required to apply for a settlement offer.

Read more

Do you qualify for an offer in compromise? Contact Tax Defense Partners today for further assistance.


Taxpayer Bill Of Rights

When dealing with your taxes, it is important to be cautious of small mistakes that could break the rules and result in a tax audit, tax problems or some involvement by the IRS. However, the IRS is also responsible for following rules that are set for them as well.

Ratified in 2014, the IRS issued a Taxpayer Bill Of Rights which lists the rights of a Taxpayer by way of the tax code, giving a better understanding of what the IRS can and cannot do.

NerdWallet provides the following list of fundamental Taxpayer rights that you should be aware of when dealing with the IRS:

  • The Right to Be Informed;
  • The Right to Quality Service;
  • The Right to Pay No More than the Correct Amount of Tax;
  • The Right to Challenge the IRS’s position and Be Heard;
  • The Right to Appeal an IRS Decision in an Independent Forum;
  • The Right to Finality;
  • The Right to Privacy;
  • The Right to Confidentiality;
  • The Right to Retain Representation; and
  • The Right to a Fair and Just Tax System.

“The first principle here is, these aren’t rights that are granted by the IRS, but they’re simply recognized by the IRS, and they all come down from the law that’s either made by Congress or made by the courts,” says Fred Daily, a tax attorney in St. Petersburg, Florida.

Although taxpayers have the advantage to these rights, there are still limitations. They may help you defend yourself in a conflict, however, it is not effective when resolving problems with a specific IRS employee.

Read and explore more about your rights here –


IRS Working Hard To Detect Fraudulent Tax Returns

According to a new report from the Treasury Inspector General for Tax Administration (TIGTA), the IRS has improved their investigation methods in detecting identity theft related fraudulent tax returns. Yet, the IRS needs to be more factual with their identity theft estimates.

To determine the efficiency of the IRS when it comes to detecting and preventing identity theft, tax problems, and how they collaborate with other agencies and tax industry partners to coordinate information, the TIGTA performed an audit.

Through this report, they found that 568,329 undetected fraudulent tax returns were filed with refunds. These refunds totaled more than $1.6 billion for tax year 2013, which was a drop of more than $523 million from the previous year.

To reduce the fraudulent activities, the TIGTA believes the new January 31st deadline for employers to file their W-2 forms with Social Security Administration will be helpful. This allows IRS to utilize the Form W-2 for comparison to the tax return sooner for potential identity theft.

Here are six recommendations that the TIGTA provided from investigating the audit, sourced from Accounting Web:

• Include all accelerated W-2s to compare with tax returns for possible identity theft;
• Identify and evaluate potential fraud in tax returns by creating a principle;
• Use state lead data to help evaluate tax returns;
• Use tax return data to find the refund amount associated with electronically filed tax returns that were rejected when computing revenues;
• Review revenues to ensure that duplicate tax returns are deleted; and
• Tax returns with mismatched income because of duplicated income documents should not be considered for potential identity theft.


Is The IRS Calling, Or Is It A New Scamming Approach?

As the tax season is approaching, so are an increasing number of IRS scams. According to WBIW – a radio station broadcast, the Washington County Sheriff’s Department is reporting a significantly higher number of scams with newer techniques and advanced technology. The scammers are using threats and fake caller IDs to mislead people.

Sheriff Roger Newlon states, “One of the more common scams involve callers, who threaten to arrest or prosecute if money is not immediately paid.” In other cases, scammers might attempt to use technology to mask a caller ID to make it seem like the call is coming from the IRS. The majority of these calls come from overseas phone services.

There are a variety of ways to avoid being scammed. Scammers may use cunning means to deceit you, however, their approach does not reciprocate to actual IRS demands. Therefore, it can be an obvious catch if you observe the following signs:

The IRS will Never:

  • Call to demand immediate payments for back taxes.
  • Call about taxes owed without first having MAILED you a tax bill
  • Deny you an opportunity to question or appeal their claim for IRS tax relief.
  • Require you to use a specific payment method for paying your taxes such as iTunes cards, Greendot Pre-paid cards or wire services such as Western Union or MoneyGram.
  • Threaten to bring in the local police or other law enforcement groups to have you arrested for not paying.
  • Ask for your banking information over the telephone.
  • Send you an email.

Once you are aware of these signs and you encounter one of these attempts, it is important to immediately hang up and contact the IRS at (800)829-1040. You can also report the incident to your local law enforcement agency, as well as file a complaint with the Federal Trade Commission. This will assist in the goal to eliminate these scammers.