The Long Reach of the IRS

Filing taxes isn’t fun for anyone, but I am an idiot when it comes to forms. So for years Matt handled our taxes using Turbo Tax. I would review them, make a few corrections (Turbo Tax isn’t perfect) and generally the process was pretty painless. Then came 2013 – the year we moved abroad.

The United States and Eritrea (no clue where that is) are the only two countries in the world that impose income taxes on the foreign income of non-resident citizens. To the surprise of many expats, this means that even if you have lived abroad for many years and have made no money on US soil, your foreign income is subject to US income tax and you have to file a tax return.

I will spare you the tax details, but in general if you are an expat you are allowed to exclude a certain amount of your expat income from taxation if you meet one of two foreign residency tests. One of the tests – physical presence – we couldn’t meet in 2013 because we spent too much time in the US that year so we had to get an extension to file our 2013 taxes in 2015 – after we lived in Peru for a calendar year.

So last December I sat down to work on the 2013 taxes we would be filing in January. I gathered all of Matt’s Davy pay stubs, actually figured out what everything meant on them, pulled up our W2s from our US jobs in 2013 and logged onto Turbo Tax. Denied! No computer system is available for taxes after October of the filing year, even though we had an extension. Thus began about 80 hours of reading tax forms, IRS guidance, and occasionally IRS regulations all in an effort to figure out how to determine our stinking taxes. I discovered that given our situation of both US income and Peruvian income I actually needed to figure out our taxes using 3 different methods. By hand. It was worth it because under one method we owed about $6,000 and under another, we had a $1,600 refund. Guess which one I chose!

We don’t have a printer here, so at one point in this process, I decided to go to an internet cafe to print off the forms and some of the tax instructions because I needed to complete the various worksheets on them. I had never been in one because we have internet in our home, but they are usually packed with kids playing computer games. This day was no exception although the occasional businessman stopped in, presumably to check email (or surf porn, who knows). It took me awhile to figure out the process, but in the end I had to download the documents I wanted to a drive and then go up to the clerk and ask him to open and print the documents for me. At one point he had to send a kid out for more paper and the kid returned with about 100 sheets – not a full ream, mind you! After about an hour I had about 60 pages of what I needed and called it a day.

Once in Wisconsin, I finished up the Wisconsin return and then encountered my next glitch – the paper size in Peru is slightly different than in the US so scanning and copying wasn’t working properly. After several meltdowns the returns were in the mail. But the fun wasn’t done.

First, the Wisconsin Department of Revenue ignored both the address on our tax return and the cover letter indicating our address and sent our refund to our old home, which we haven’t owned for over a year and a half! Thankfully, the kind new owner tracked me down via social media and got the check sent to Matt’s mom’s house for us. Today, after being on hold for over an hour, I learned that the IRS decided to mail our refund to us in Peru despite the fact that I provided bank information for direct deposit and a cover letter indicating that any correspondence should be sent to Matt’s mom’s house. ARGG. It’s anyone’s guess whether we will ever see that check because mail does not get delivered here, so now we will have to periodically trek to the post office to see if it has arrived. Only after a month can we ask the IRS to “investigate” what happened.

But I did learn from all of this. Our 2014 taxes were filed using Turbo Tax today. It was still several hours of work to tell the IRS we don’t owe them any money, but at least is is done. I hope.

7 thoughts on “The Long Reach of the IRS

  1. great story. But yet another reason why we should be able to file our income taxes on a postcard. No loopholes for anyone, no crazy deductions, nothing. Fill it out, return back your 10 or 15 or 20 percent of whatever it is, and that’s that. It’s way over complicated and too many people on both sides of the aisle are allowed too many loopholes. Make it simple.

  2. You have my sympathy. I am feeling quite smug having married a tax accountant, but without Annie’s help, I don’t know what I would do regarding tax. Tax avoidance is currently big news in the UK, with various politicians suddenly waking up to the fact that many UK citizens have secret Swiss bank accounts for some reason! The US systems sounds quite a lot simpler than the UK mess. Cheers, Peter

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