The following case took eight months to successfully complete, and spanned two continents. The member, who had moved to Europe in 2004 and lived in Switzerland, was being audited for the Foreign Tax Credit and Foreign Earned Income Exclusion by the Cincinnati office of the IRS for tax year 2012.
The first challenge was arranging to contact the member due to the nine hour time difference. Once the logistics of communication were established, obtaining the proper documentation was next. There would be quite a bit.
For the Foreign Tax Credit (Form 1116), I would need all prior year federal returns that included Form 1116 to establish the proper carryover amounts were being calculated correctly. For the Foreign Earned Income Exclusion (Form 2555), I needed his foreign return filed for the year under audit, proof of residency, employer letter, income statements and completed IRS Form 9209 (Bona Fide Residence/Physical Presence Questionnaire), 9211 (Foreign Earned Income Exclusion Questionnaire), and 9213 (Foreign Tax Credit Questionnaire).
Passports, residence card, home purchase and real estate tax documents would also be required to support his position.
The next challenge was that the IRS was requesting certified translation of all documents, and per the client this was going to cost him $50 USD per page. In addition, the taxpayer was extremely concerned about providing access to his personal and confidential information to another individual ─ the third party translation service. I referred him to the Form 9213, which states: “when submitting copies of foreign tax returns and/or documentation which is in a foreign language, please indicate which words are necessary to provide an explanation of the above items.” He decided to use this option and provided the English words alongside the German. I put the ownership on the IRS to request clarification of any document they couldn’t understand.
On April 22, 2015, I was able to assemble the following response package:
- Foreign Exchange Rates – IRS Table TY2012
- Swiss Tax Return TY2012
- US Federal Tax Return TY2011 and TY2013
- Swiss Resident ID Cards
- Swiss Property Tax Bills TY2011-TY2013
- Completed Forms 9209, 9211, and 9213
- Taxpayer Employment Contract.
- Taxpayer Employment Dates and Locations
- Spouse’s Employment Contract
- Spouse’s Employment Dates and Locations
- Taxpayer’s US Passport and Travel Dates Overview
- Wages for both taxpayers.
- Swiss State and Federal Tax Invoices and Payments
- The taxpayer’s prepared Forms 1116 for TY2004-TY2011
On May 19, 2015, I followed up with the examiner to ensure the package had been received and to answer any questions. He assured me he had received the information and would contact me once he’d had a chance to review it.
Five months later, on October 13, 2015, I was able to obtain a resolution on behalf of the member, with no additional tax liability and a small adjustment to his Form 1116 carryover amount. This is what he had to say when his audit was finally concluded:
“My audit was handled in a very professional manner. Jonathan made the audit a pleasurable experience, if you can say that in the same sentence. He was relentless to answer every single question and when he replied, the answers were clear and to the point. He would often answer the next question before I could ask it. I am a banking executive working in Switzerland and in my opinion Jonathan not only met my expectations, but managed to surpass them. In my environment we deal with complex government regulations, but he managed to explain the IRS complexity and requirements as easy to understand. I would recommend Jonathan and the services he represents at tax audit.”