Why I Fired My CPA And Started Doing My Own Offshore Taxes

I’ve been preparing U.S. taxes since I was in high school.

My first office job as a teenager was working for a small CPA firm in Phoenix, Arizona. That group trained me, over the three years I worked for them, in the basics of tax prep. Before I left that job, I had helped to set up their in-house income tax processing system.

Over the decades to follow, I was involved in preparing taxes for many different groups of American clients. One year while living in Chicago, I volunteered to do taxes for low-income workers.

It was that experience that introduced me to the earned income tax credit.

Bottom line, I’ve known my way around a U.S. tax return since an early age.

Because I knew as much as I did know when my wife Kathleen Peddicord and I moved out of the United States nearly 20 years ago, I decided, our first year living in Ireland, to engage Kathleen’s U.S. tax accountant to prepare and file our tax return for us.

Thanks to my volunteer experience in Chicago years earlier, I was familiar with the idea of an earned income exclusion, but I’d never filed for the Foreign Earned Income Exclusion (FEIE) before. So it seemed safer to enlist the help of a pro.

Surely a CPA whose focus was individual tax prep was better suited to file our first tax return as Americans overseas than I was… right?

Well, you’d think so.

As it turns out, that CPA should have been embarrassed by how unfamiliar he was with the rules and concepts associated with an offshore American’s obligations to Uncle Sam.

The first tax return he sent back to me didn’t include the FEIE for either Kathleen or me.

He thought it was “safer” to file without it, he told me.

Safer maybe, I guess, because he didn’t know how it worked.

The second tax return he sent me took the FEIE for Kathleen but not for me.

When asked why he didn’t include my FEIE in the second return, he told me he couldn’t because Schedule C filers aren’t eligible.

I knew he was simply wrong so I had him prepare our tax return a third time.

He finally got it right… and sent his bill.

I was shocked by what he charged. It was three times what he had charged Kathleen the year before.

Yes, our tax return was more complicated (with the FEIE and the Schedule C) than hers had been, but the real reason for the bill was all the hours the guy had spent learning how to do what he needed to do to prepare our return properly.

He was asking us to pay him for the on-the-job training I was providing.

After that, I went back to preparing my own tax return, as I have continued to do ever since.

Lesson learned. “CPA” after a guy’s name doesn’t guarantee that he knows anything about offshore taxes.

This is why, as support for your activities and investments offshore, you need to educate yourself at least well enough so you can make sure that your CPA (or whoever you use to prepare your tax return each year) knows what he’s doing.

He’s the only thing standing between you and a bigger-than-it-needs-to-be annual tax bill.

U.S. tax code is layered and complicated, creating both opportunities and risks.

A tax preparer can file a return that is compliant and acceptable to the IRS (because it follows the relevant tax code) but that costs the client (that is, you) tens of thousands of dollars in unnecessary taxes because it doesn’t take advantage of every possible legal tax-saving strategy given the particulars of the situation.

The more complicated your situation, the more important it becomes to consider every alternative filing option. You could have several options… all 100% compliant.

To state the obvious, you want the option that has you paying the least amount of tax.

Again, the better educated you are, the greater your chances of making sure you’re not paying a dollar more in tax than you’re legally required to do.

After decades spent addressing the ever-more-onerous tax-filing obligations of the American abroad, I’ve adopted an existential perspective.

That is, it is what it is. U.S. taxes are part of the landscape for an American living, investing, and doing business offshore.

Rather than ranting and raving against the machine, I focus on being as informed as possible about all options and opportunities for legally minimizing my overall tax burden.

I recommend you take the same perspective.

Lief Simon