Tax professionals have differing levels of skills, education and expertise. There also are several different types of credentials. For 2013, any tax professional with an IRS Preparer Tax Identification Number is authorized to prepare federal tax returns.

An important difference in the types of practitioners is representation rights. Here is guidance on each credential:

UNLIMITED REPRESENTATION RIGHTS: Enrolled agents, certified public accountants, and attorneys have unlimited representation rights before the IRS and may represent their clients on any matters including audits, payment/collection issues, and appeals.

Enrolled Agents: People with this credential are licensed by the IRS and specifically trained in federal tax planning, preparation and representation. Enrolled agents hold the most expansive license IRS grants and must pass a suitability check, as well as a three-part Special Enrollment Examination, a comprehensive exam that covers individual tax, business tax and representation issues. They complete 72 hours of continuing education every 3 years.

Certified Public Accountants: People with this credential are licensed by state boards of accountancy, the District of Columbia, and U.S. territories, and have passed the Uniform CPA Examination. They also must meet education, experience, and good character requirements established by their boards of accountancy. In addition, CPAs must comply with ethical requirements as well as complete specified levels of continuing education in order to maintain an active CPA license. CPAs can offer a range of services; some CPAs specialize in tax preparation and planning.

Attorneys: People with this credential are licensed by state courts or their designees, such as the state bar. Generally, requirements include completion of a degree in law, passage of an ethics and bar exam and on-going continuing education. Attorneys can offer a range of services; some attorneys specialize in tax preparation and planning.

LIMITED REPRESENTATION RIGHTS: Preparers without any of the above credentials (also known as unenrolled preparers) have limited practice rights and may only represent clients whose returns they prepared and signed and only at the initial audit level.

NOTE: Registered Tax Return Preparers: Certain preparers became RTRPs under an IRS program that IRS is no longer able to enforce due to a District Court injunction. RTRPs passed an IRS competency test on Form 1040 tax preparation.

REMINDER: Everyone described above must have an IRS issued preparer tax identification number (PTIN) in order to legally prepare your tax return for compensation. Make certain your preparer has one and enters it on your return filed with the IRS. They are not required to enter it on the copy they provide you.

Yes, you can rest assured that all your personal and financial information shall be treated with the utmost confidentiality by your expatCPA accountant. Any information your provide to us will not be shared with any third parties unless you expressly authorize us to do so.

Communications and documentation between a taxpayer and a CPA are protected by the law, under US Code 7525, which reads as follows:

USC 7525 - Confidentiality privileges relating to taxpayer communications

(a) Uniform application to taxpayer communications with federally authorized practitioners

(1) General rule

With respect to tax advice, the same common law protections of confidentiality which apply to a communication between a taxpayer and an attorney shall also apply to a communication between a taxpayer and any federally authorized tax practitioner to the extent the communication would be considered a privileged communication if it were between a taxpayer and an attorney.

(2) Limitations

Paragraph (1) may only be asserted in:
(A) any noncriminal tax matter before the Internal Revenue Service; and

(B) any noncriminal tax proceeding in Federal court brought by or against the United States.

(3) Definitions

For purposes of this subsection:

(A) Federally authorized tax practitioner

The term federally authorized tax practitioner means any individual who is authorized under Federal law to practice before the Internal Revenue Service if such practice is subject to Federal regulation under section 330 of title 31, United States Code.

(B) Tax advice

The term tax advice means advice given by an individual with respect to a matter which is within the scope of the individual�s authority to practice described in subparagraph (A).

(b) Section not to apply to communications regarding tax shelters

The privilege under subsection (a) shall not apply to any written communication which is:

(1) between a federally authorized tax practitioner and
(A) any person,
(B) any director, officer, employee, agent, or representative of the person, or
(C) any other person holding a capital or profits interest in the person, and

(2) in connection with the promotion of the direct or indirect participation of the person in any tax shelter (as defined in section 6662 (d)(2)(C)(ii)).

If you are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad.

The self-employment tax is a social security and Medicare tax on net earnings from self- employment. You must pay self-employment tax if your net earnings from self-employment are at least $400.

For 2016, the maximum amount of net earnings from self-employment that is subject to the social security portion of the tax is $118,500. All net earnings are subject to the Medicare portion of the tax.

You must file a federal income tax return if you are a citizen or resident of the United States or a resident of Puerto Rico and you meet the filing requirements for any of the following categories that apply to you:

1. Individuals in general. (There are special rules for surviving spouses, executors, administrators, legal representatives, U.S. citizens and residents living outside the United States, residents of Puerto Rico, and individuals with income from U.S. possessions)
2. Dependents.
3. Certain children under age 19 or full-time students.
4. Self-employed persons.
5. Aliens.

The filing requirements apply even if you do not owe tax.

You must file a federal income tax return for any tax year in which your gross income is equal to or greater than the personal exemption amount and standard deduction combined (per the Form 1040 Instructions for the corresponding tax year). Generally, you need to file returns going back six years. This will depend on the facts and circumstances of your particular situation, which we will be glad to discuss upon your free consultation.

To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:

  • A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
  • A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
  • A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

Generally, the following four tests must be met for any foreign tax to qualify for the credit:

1. The tax must be imposed on you
2. You must have paid or accrued the tax
3. The tax must be the legal and actual foreign tax liability
4. The tax must be an income tax (or a tax in lieu of an income tax)

You cannot take a foreign tax credit for income taxes paid to a foreign country if it is reasonably certain the amount would be refunded, credited, rebated, abated, or forgiven if you made a claim.

You may be allowed an automatic 2-month extension of time to file your return and pay any federal income tax that is due. You will be allowed the extension if you are a U.S. citizen or resident alien and on the regular due date of your return:

  • You are living outside of the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico, or
  • You are in military or naval service on duty outside the United States and Puerto Rico

If you use a calendar year, the regular due date of your return is April 15, and the automatic extended due date would be June 15.

If you are not able to file your return by the due date, you generally can get an automatic 6-month extension of time to file. To get this automatic extension, please contact us for assistance.

Please note that a 6-month extension of time to file is not an extension of time to pay. You must make an accurate estimate of your tax and send any necessary payment to the IRS or pay the tax due by credit card. If you find you cannot pay the full amount due when you file for your extension, you can still get the extension. You will owe interest on the unpaid amount. You also may be charged a penalty for paying the tax late unless you have reasonable cause for not paying your tax when due. Interest and penalties are assessed (charged) from the original due date of your return.

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

United States person means U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

There are several exceptions to the FBAR reporting requirement. We encourage you to contact us, and we will be glad to discuss in further detail.

We welcome you to contact expatCPA for your FREE consultation, and we will be honored to answer any tax related questions you may have.

Additionally, please visit the following sites for alphabetized lists of tax topics and FAQs:

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