National Taxpayer Advocate – Pushes for Positive Changes for Americans Abroad

The law requires the National Taxpayer Advocate (NTA) to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance, without any prior review or comment from the Internal Revenue Service.  The NTA Report for FY 2025 was just issued and includes various NTA advocacy objectives.

Two of the NTA Objectives are very significant for Americans abroad.  I tend to be a positive person and for me, hope springs eternal. However, these issues have been raised time and time again to IRS over the years without any positive change seen yet.   Too many Americans abroad feel they lack the wherewithal to keep going with a system that seems stacked against them in so many ways.

Addressing International Information Return Penalties

NTA seeks to improve the IRS administration of international information return penalties. This is sorely needed. The goal is for IRS to eliminate the systemic penalty assessments for international information return penalties, such as Form 3520.  Systemic assessment means the IRS computers automatically assess penalties for late information returns even if the taxpayer has submitted a “reasonable cause” statement that typically abates the penalty.  Such systemic assessment forces the taxpayer to pay the penalty up front and later sue for a refund in court.  A case in point from 2023 that is very worthy of note is discussed here.

Just to keep this issue in perspective, the Taxpayer Advocate specifically addressed these reporting penalties several years ago and categorized this issue as “Most Serious Problem #8: International” in the 2020 National Taxpayer Advocate Report to Congress.  Overseas taxpayers are still awaiting remedial IRS action.

In addition NTA will continue to discuss with IRS extending eligibility for first-time abatement waiver to all international information return penalties regardless of whether the underlying  return was filed late.

More detail on this initiative is available at Objective 8: Improve Administration of International Information Return Penalties by Eliminating Systemic Assessments, Offering a First-Time Abatement Waiver, and Increasing Taxpayer Awareness

Addressing Tax Compliance Challenges for American Overseas

NTA recognizes the litany of tax compliance problems faced by Americans living and working overseas and seeks to reduce the challenges faced by this underserved group.  NTA had pointed out the numerous problems in earlier years, but nothing much has changed.

Here is an excerpt from the FY 2025 Report.:

Taxpayers abroad face significant challenges in meeting their U.S. tax obligations. They are plagued by a complex tax code and declining levels of IRS customer service. They can be liable for severe penalties for failing to file or incorrectly filing their tax returns and complicated international information returns, of which they may not be aware. Yet, they have no access to in-person IRS assistance and almost no ability to access free return preparation assistance. Additionally, taxpayers abroad often encounter significant delays in receiving correspondence from or sending correspondence to the IRS and have insufficient timeframes in which to respond to key IRS notices, which causes them to lose critical administrative, due process, and judicial rights.

It will identify the compliance challenges for overseas taxpayers and make administrative recommendations.

More detail available at Objective 9: Reduce Compliance Challenges for Taxpayers Abroad

We have been hearing a lot about both of these problems for years, with no positive change yet.  Hope springs eternal?

Posted June 27, 2024

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