Taxpayer Advocate on U.S. expats’ tax burden in Annual report to Congress

By Gina Gatchell, Founder/Director

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. The TAS’ objectives include to ensure that every (U.S.) taxpayer is treated fairly, and to promote taxpayer rights.

Part of the TAS’ functioning involves the preparation and presentation of an Annual Report to Congress (Report). The 2022 Report on the IRS cites a list of the ten most serious problems for the IRS.

Problem number ten in the Report is overseas taxpayers.

Taxpayers Outside of the United States Face Significant Barriers to Meeting Their U.S. Tax Obligations.

“All taxpayers face barriers to accessing information and services from the IRS, a situation only exacerbated by the COVID-19 pandemic. At all times, however, overseas taxpayers face additional burdens at virtually every step of the process in complying with their U.S. tax obligations.

This group includes U.S. citizens and resident aliens living or working abroad, as well as foreign individuals and businesses with U.S. tax obligations. These taxpayers are subject to highly complicated rules for determining whether they need to file a U.S. tax return, and, if so, the correct amount of their U.S. tax liability. They also face barriers in obtaining Taxpayer Identification Numbers (TINs) electronically filing tax and information returns and accessing assistance from both the IRS and private industry.” [1]

“U.S. citizens abroad and foreign persons with U.S. tax obligations must navigate a landscape of complex rules, nuanced analyses, and exceptions to exceptions.” 

“At the same time, these taxpayers have limited access to IRs support and resources.” [2]

[1] Source: Taxpayer Advocate’s 2022 Annual Report to Congress, page 157

[2] Source: Taxpayer Advocate’s 2022 Annual Report to Congress, page 157

The statistics

By the U.S. Department of State’s estimates, roughly nine million U.S. citizens are abroad. This estimate includes U.S. citizens residing overseas. It also includes U.S. citizens who are either stationed at a U.S. military base overseas, working for an Overseas State Department, or attending a non-U.S. education institution.

The majority of U.S. citizens abroad are located in Canada. The United Kingdom, Israel, France, and Australia follow. No statistics on the amount of U.S. citizens present in New Zealand are readily obtainable.

The problem

The report discusses a variety of issues for people trying to comply with their U.S. tax obligations. This includes complicated rules for determining filing requirements and the correct income tax liability. From a tax administration perspective, obtaining a Taxpayer Identification Number presents endless challenges, given that these numbers are issued only in the strictest of circumstances.

Other issues raised in the Report include:

  • Complex tax laws and inadequate service make compliance challenging even for conscientious taxpayers.
  • The Laws Applicable to U.S. Taxpayers Abroad Are Very Complicated.
  • Penalties for failure to file international information returns including Form 8968 Statement of Specified Foreign Financial Assets and FBAR can catch people who do not know that they have a requirement to file these forms unaware.
  • Overseas taxpayers have little support in understanding complicated tax laws.
  • Taxpayers abroad have very limited support from the IRS, especially since the last tax attaché offices closed in 2015.
  • Taxpayers Living Overseas Face delays in obtaining taxpayer identification numbers.
  • Overseas taxpayers face barriers to electronically filing their income tax returns.
  • Customer service challenges are magnified for taxpayers abroad.
  • There is one phone line for international.
  • Overseas taxpayer face challenges receiving and responding to IRS postal correspondence. Delays can prevent the taxpayer from responding within the designated period or otherwise taking timely action. The report acknowledges that mail sometimes arrives after the response deadline.
  • Taxpayers face challenges cashing cheques mailed to them by the IRS.


The Report recommends that the IRS take the following initiatives.

  • develop a comprehensive agency-wide customer service strategy for both U.S. citizens and resident aliens abroad, and foreign individuals with U.S. tax obligations.
  • build on existing informational resources, including forms, publications and FAQs that can be helpful for overseas taxpayers and create a true “one-stop shop” for taxpayers outside of the United States.
  • form a partnership with the Department of State to more effectively connect with taxpayers who need tax information.
  • proactively assist overseas taxpayers electronically file their return.
  • conduct a study which includes outreach to private industry to better understand why overseas taxpayers are efiling at such low rates.
  • Implement customer call back on the international line.
  • do more to provide face to face customer service.
  • build on the success of existing programmes including VITA and TCE

All matters raised by the Report are matters that we deal with and encounter with all aspects of U.S. taxes for expats. Especially problematic for U.S. expats here in New Zealand is the payment of federal income tax due, and the receipt of cheques issued by the Department of the Treasury. The IRS’ website does not give adequate guidance to U.S. expats in respect of making payments. When it comes to cashing a cheque issued by the Department of the Treasury, U.S. expats without a U.S. account with a financial institution come to a dead end, since New Zealand financial institutions no longer are accepting foreign cheques.  We have information on our website about how to pay the IRS, (please scroll down the FAQs), and options for the receipt of a refund cheque when a U.S. expat no longer has a U.S. account.

If you are a U.S. expat or their advisor reading this, the most important piece of advice we can offer in respect of the issues above is to set up an online IRS account if you haven’t already done so. That way, you will have real-time access to your IRS account. You will be able to view IRS correspondence, set your communication preferences and go paperless, and view your account balances. You will have the opportunity to respond to IRS correspondence (letters and/or notices), by the due date. We are aware of the difficulty U.S. expats encounter when attempting to set up an online account. However, it can be done in New Zealand.

Non-U.S. persons travelling to the U.S. often face issues when trying to obtain a U.S. Taxpayer Identification Number. We will expand on that matter in a forthcoming article. From our years of experience, many more problems are occurring. We are committed to supporting our clients through these stressful experiences when dealing with the IRS.