Many Americans use online tax preparation software such as Turbo Tax and H&R Block. Does this also work for Americans living abroad? And what should you watch out for?
Since 2015 Americans Overseas has been assisting US citizens living outside the US with information and knowledge about US tax returns. Due to the implementation of FATCA legislation, financial institutions, including banks, send letters to their customers about the SSN and the possibility of filing taxes in the US.
During these years, a frequently asked question is: can I easily file my tax return myself?
Answer: yes. Is it recommended: NO!
If you live and work in the US, you can easily file your tax return in the US. The IRS now has agreements with several companies that allow people with a certain low income to use the tax preparation software for free. However, if you live outside the US, it is not recommended to file your tax return yourself for the following reasons:
Online providers advertise with an attractive price, but soon it becomes clear in the process that additional necessary forms mean an increase in price. Taken together, it is quickly the price that you also need to pay a tax advisor.
Most online tax preparation software programs exist because they serve a certain mass. In 9 out of 10 cases, these are Americans who live in the US. The forms that the US Person needs to use to declare, for example, his deductions or already paid taxes are not available. Note that this is not always visible to the customer.
Platforms are used for large groups of people, the faster you can go through the pages, the better for the customer and the company. Therefore, online tax preparation programs leave out important questions or data, resulting in an incomplete US tax return.
The biggest risk of not filing or filing taxes incorrectly is a letter and fine from the IRS. This risk always exists, whether you file your tax return yourself or have a tax advisor do it for you. The only difference is that you are completely responsible yourself and therefore also have to bear the high costs to correct the mistake if you filed the return yourself.
If you have a tax return prepared by a tax advisor, the tax advisor requests information from you and asks for the corresponding documentation. This ensures that the tax advisor can see whether you have provided the correct information and that there is nothing missing from the documentation. The whole picture becomes clear. In many cases, no tax advisor looks at the documents in an online filing. The responsibility lies entirely with the customer, who is usually not trained in preparing a tax return.
The training for a CPA (Certified Public Accountant) or EA (Enrolled Agent) takes at least years. Most tax advisors still need many “flying hours” to gain experience in filing taxes for US persons living and working outside the US. Americans Overseas assists people who filed their own tax returns and were taken aback by the fines from the IRS. Therefore, we strongly recommend having a tax advisor prepare the tax return.
In the past 8 years, Americans Overseas has built a network of tax advisors who have experience in preparing tax returns for a US person living and/or working outside of America. A referral to one of our partners is voluntary and without any obligation.
The partners vary greatly; one specializes in simple tax returns with corresponding low costs, while the other partner specializes in extremely complex tax returns, such as those involving multiple businesses in different countries. This way, Americans Overseas can refer you to the right tax advisor.
Understanding the US tax system, the obligations, and all the additional terms can be difficult. Especially if one lives outside of America. Is your question not answered? Contact us.
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