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THE TRANSATLANTIC MAGAZINE

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IRS Data Book 2019 Reveals Expat Tax Trends

Among the interesting statistics, only 34% of expats file their tax returns electronically, with 66% filing paper returns

Published on July 6, 2020

The IRS Data Book 2019 was released last week, offering an insight into some of the statistics surrounding annual US tax returns. Whilst reinforcing concerns that overseas Americans continue to be subject to more audits than their US-based counterparts, this year's Book also offered some curious trends relating to the use of e-filing among American expats.

In recent years, the Data Book has indicated that overseas Americans tend to be on the receiving end of more audits that those based in America. Researching 2019's Data Book, US Expat Tax firm Bright!Tax have revealed that nearly 1 in 10 expats were audited last year, continuing the trend that expats are more likely to be audited.

The firm's research also found that 3% of tax revenue from expats was comprised of interest and penalty charges. The firm report that "Of the $12.6 billion the federal government received in US tax from expats in 2019, around $400 million, or 3%, was from penalties and interest from folks who didn’t file or pay on time."

Interestingly, among those who did file, Bright!Tax found that between October 1 2018 and September 30 2019, only 34% of expats e-filed, as opposed to the remaining 66% who paper filed their returns. Whilst the firm note that this is partly due to the circumstances, for example "Expats married to a foreigner that doesn’t have a US tax identification number can’t e-file if they don’t use a tax professional", they expressed surprise at the high percentage who continue to paper file, particularly as "many expats live in countries that don’t have reliable postal services, while posting a return back to the US is also an additional cost from abroad."

Particularly with the Covid-19 pandemic causing delays in international post, it'll be interesting to see if the 2020 Data Book sees a change in the number of those who have e-filed.

Bright!Tax also found that many expats still aren't filing, explaining that "The State Department estimates that there are around 9 million Americans living overseas, of whom Democrats Abroad estimates that there are 6.5 million expat adults. But the IRS only received 1,705,656 income tax returns from abroad last year. Even allowing for many being married couples, and those who earn below IRS minimum filing thresholds, there are still a lot of expats who should be filing but aren’t." Responding to this particular statistics, the firm said "This is surprising because the IRS has several amnesty programs for these expats, such as the Streamlined Procedure, which allows those expats who weren’t previously aware of the requirement to file from abroad to catch up without facing any penalties. Most don’t end up owing any US tax, either."

Bright!Tax partner and managing CPA Katelynn Minott went on to say that "Filing from abroad is often challenging, but with expert advice, the process can be painless, and as long as expats claim an IRS provision to avoid double taxation when they file, most don’t end up owing any US tax."

For more information on the IRS Data Book - click here for Bright!Tax's research, or click here for the full Data Book for 2019.

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