IRS Letters: How Americans expatriates must reply to IRS notices

By ZM Ishmurzina

Receiving the IRS letter can ruin anybody’s day. American expatriates face another level of complexity. For example, the IRS notices can be sent to a prior residence address that the IRS has on file. Consequently, Americans living abroad will never receive the IRS notices if they did not forward their mail. The letters might arrive when the deadline to reply has already expired. Another scenario is the IRS letters can be lost. Americans expats can realize this issue only when the agency puts the IRS lien on a taxpayer’s bank account or property.

This is one of the latest tax issues that we resolved for our clients: Americans living abroad, non-residents and foreign nationals with US interests. The taxpayer received the IRS notices for several years. Specifically, the letters were sent by the California Franchise Board. The total tax due per this IRS letters was $4,450,000. We helped the client and the total amount of tax liability was discharged. Let’s review the key tips for American expatriates who received IRS letters or IRS notices.

How should American expatriates proceed when they get IRS notices?

  • Expats must carefully review the IRS letters. The most common IRS notices are related to a tax due or tax refund , a request to submit additional forms and past-due expat tax returns.
  • American expats must contact the IRS if they want to handle the case on their own. The purpose of this call is to prevent the IRS from any collection efforts. By calling the IRS, American expatriates will register their case and the IRS will not think that a taxpayer is not replying to their messages on purpose.
  • American expatriates must document the name and the badge number of the IRS agent. Additionally, it is important to add the date, time and the details of conversation.
  • Additionally, American expatriates must send a written reply to the IRS and enclose a statement about a phone call.

How to read the IRS letters?

  • IRS letters include a code in the right hand corner of the letter. This code determines a type of IRS notices. Let’s review different codes.
  • CP 501. This is the initial assessment of tax due. This IRS notice will indicate the total amount of tax due including penalties and interest.
  • CP 503, CP 504, CP 504B. These IRS letters are sent by the IRS after the first notice CP 501. The amount of penalties and interest will increase progressively.
  • CP 504B. This IRS notice is the most important because the IRS will state that the amount of tax due must be paid. Otherwise, the IRS will proceed with the IRS lien on the property owned by American expatriates. It is crucial to reply to this final notice.

Conclusion

American expatriates should answer the IRS letters on a timely basis. Expats are advised to contact an expat tax preparer/CPA that provides international tax services and has resolved successfully IRS notices for multiple clients. International tax experts at Artio Partners are here to help you. Please click here to learn more.