Expat Tax Preparation Service Companies

Expat Tax Preparation Service Companies

Several times each year, our international tax law specialist team is approached by taxpayers who previously utilized an expat tax preparation service for offshore tax non-compliance, such as Streamlined Procedures; IRS Voluntary Disclosure Program; Delinquency Procedures, and Reasonable Cause/Penalty Abatement — and were not happy with the results. Either because the work performed was not done correctly or there were hidden fees and charges, these taxpayers end up being in a worse tax position than they were in when they first started. While some tax preparation services that handle expats may offer good services for current year returns, oftentimes taxpayers are disappointed with the outcome on more complicated prior-year noncompliance issues. Here is an important list of key considerations to help you determine whether an expat service company will provide you with the level of service you seek.

No Attorney-Client Privilege Confidentiality

There is no attorney-client privilege with a non-attorney. While there is something referred to as Kovel Letter — that is very specific and does not typically apply in most situations. While there is not necessarily an attorney-client privilege for tax preparation, courts are split as to whether or not other legal information and strategies provided by an attorney in the realm of tax preparation would be covered. Therefore, if confidentialities and privilege are important to you, then you may have a much higher probability of having information related to tax analysis and strategy protected if you are working with a dual-status tax attorney team than you would have by just working with an accountant or CPA.

“Attorneys on Staff”

One way some of these cross-border expat service companies try to compete for offshore disclosure is by advertising that they have an attorney on staff. Oftentimes, this is not the case (they just have an attorney on “speed-dial”). Then, when it comes time for the client to want to speak with the attorney — it is actually an outside attorney who charges an additional hourly fee and sometimes has a minimum hourly requirement (for example, 5-hours at $500 per hour). Therefore, if part of the allure of using one of these expat tax service companies is because they claim to have an attorney on staff, be sure to work through the logistics of that before engaging the firm.

Self-Purported Experts

It seems like anyone can prepare a handful of tax returns or streamline submissions and then tell themselves as an expert. The closest any tax professional will be to becoming an expert is becoming a Board-Certified Tax Law Specialist. Even then, most Board-Certified Specialists do not purport to be experts because they know just how complicated tax law can be. But, by working with a Board-Certified Tax Law Specialist (Tax Preparation and Legal Representation) you will put yourself in the best position possible for a successful outcome.

Incorrect Tax Advice

In addition to purporting to be experts, oftentimes taxpayers will come to us from expat tax preparation services companies with incorrect information they garnered along the way. For example, foreign pensions do have to be reported for FBAR & FATCA; foreign life insurance policies with surrender values are reportable as well, and delinquency procedures are no guarantee of a penalty waiver, especially with the DIIRSP changes in November 2020.

Missed Reporting Requirements

Another common scenario we find with Taxpayers who utilized an expat tax service company is that the goal of the company is to get the project done as quickly as possible and oftentimes it may involve cutting corners. For example, even if foreign mutual funds do not distribute any income, they are generally reportable unless very limited exceptions apply. In addition, joint accounts with non-US persons are also reportable.

Hidden Fees with Streamlined Procedures

This tends to be one of the more frustrating aspects of using a company that touts a “low-fee structure” for preparing a streamlined procedures submission. While the fee may start out relatively low (such as $1500) to do the entire package when it turns out the taxpayer’s requirements are more complicated (PFIC, 5471, etc.) the company starts charging on a per form basis. In addition, if the taxpayer wants to speak with an attorney they get charged at an hourly rate upwards of $400 to $600 an hour. As a result, you can easily see how a $1,500 Streamlined Procedures submission can quickly turn into a $10,000 headache — which is the same price you would have paid to a specialist tax and legal firm for flat-fee, full-service tax and legal representation.

Not Standing by Their Work

By time taxpayers reach out to us after having utilized an expat tax service company, it is usually because not only are they unhappy with the quality of the work — but now the company refuses to go back and make the changes to resolve the issues that they made in the first place. For example, if a streamlined submission was made without including certain pensions or life insurance policies it should be that company’s responsibility to go back and fix it.  Unfortunately, most of these services do not resolve these issues, but rather just ghost the client — who now has to retain new representation and start from scratch.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax and specifically IRS offshore disclosure.

Contact our firm today for assistance.