Location, location, location – not just a phrase related to real estate purchases. Your location may impact the way you are taxed. If you’re a U.S. citizen residing in a tax home in a foreign country, you may be taxed differently than the citizen permanently living on American soil. And if you’re a foreign citizen, your taxation rate is impacted by your status as a resident or non-resident alien. In both cases, the Internal Revenue Code gets complicated, and the number of IRS audits related to U.S. residency is steadily increasing.
U.S. citizens who pay taxes to foreign countries may be eligible for the foreign tax deduction or the foreign tax credit. Close analysis must be made to determine which you should take, as in recent years, U.S. citizens abroad have been faced with increasing difficulties involving tax audits by the IRS, especially if they work in countries which have previously been considered tax havens, but which recently have begun cooperating with the IRS by disclosing private information about the taxpayers’ assets.
And if you are an alien working in the U.S., you may face equally challenging circumstances regarding your taxes. As an income earner, you are classed as either a resident alien or a non-resident alien. How you are classified is determined by several complicated factors, including the amount of time you live in the United States. Once your classification is decided, then the IRS assesses different factors to determine whether or not you must file a tax return. If you are required to report your income to the IRS, youneed to decide which income to report, which forms to file, and when and where to file. If the forms are not properly completed, or if there are questions concerning your alien status, you may be hit with an IRS audit. You also must deal with notifying the IRS when you leave the U.S. as a departing alien.
If you are facing an audit because of residency issues, consider consulting a tax attorney, who can help ease the stress related to taxation problems and help ensure that your rights as a taxpayer are protected. IRS issues involving residency usually prove to be very complex and difficult to resolve without knowledgeable, competent guidance.
As a tax boutique, Law Offices of Christy Lee, P.C., can assist you with all your IRS matters involving residency, from advising you about your rights and obligations to defending you during an audit. If your case has reached the appeals stage, we provide informed, knowledgeable counsel, so that you don’t have to face the IRS alone. And finally, we offer sound advice regarding future residency issues, the better to ward off IRSaudits down the road.