High tax liability on a US expat tax return is sometimes the result of an improperly prepared or incomplete return. This is common for expats who either filed their own return or consulted a US based tax expert who had limited information about international tax rules and regulations. Whatever the situation, if you have a high US tax liability on your US expat tax return, you may be able to file an amendment return to add deductions or other details which may have been missed the first time around.
After an original tax return has been filed, it can only be changed by filing an amendment return on Form 1040X. An amendment return can be used to correct misinformation on Form 1040, 1040EZ, or 1040A. The following types of changes can be made by filing an amendment return:
Report additional income
Claim credits or deductions which weren’t originally claimed
Correcting the mistake of having taken credits for which the taxpayer was not eligible
Change filing status
Increase or decrease number of dependents
For American Expats, a complete review of your tax situations should take place, including the identification of deductions or exclusions which may have been available to you but were not elected. Some of these deductions may include the FEIE (Foreign Earned Income Exclusion), certain housing credits, or the FTC (Foreign Tax Credit).
It is also important to determine whether or not all required forms were submitted. For example, do you have foreign accounts bearing interest or dividends for which you should have filed Schedule B? Are you the owner of one or more foreign financial accounts which had an aggregate total of $10K or more at any point in the last year or so? If you are, you should have filed Form FinCen form 114 (FBAR) with the Department of Treasury.
If you are attempting to recover a credit or refund, you generally are required to file an amendment return no later than 3 years of your original filing date or within 2 years of having paid the balance on your tax liability. If you wait longer than a period of 3 years, you most likely will not be able to recover any losses.
There are a variety of taxpayers who are afraid to file an amendment return for fear of the IRS deciding to conduct an audit at some point in the future. This is always a possibility (roughly 2% of taxpayers are audited), but you could legitimately get back hundreds or thousands of dollars (depending on your situation) from the IRS.
If you feel like you didn’t get the best service possible when filing your US expat tax returns within the last couple of years, talk to us to see if there is a way for you to gain missed credits.