International taxpayers who owe U.S. taxes often believe that living abroad limits the IRS’s ability to collect. In reality, U.S. tax obligations follow taxpayers worldwide, and unresolved balances can grow quickly through penalties and interest. This guide explains the IRS collection and resolution options available to international taxpayers, including the Offer in Compromise and alternative payment arrangements.
Can the IRS Collect from Taxpayers Living Abroad?
Yes. While collection logistics may differ, the IRS can pursue collection actions against taxpayers abroad, including levies on U.S. accounts, passport restrictions, and coordination under tax treaties.
What Is an Offer in Compromise (OIC)?
An Offer in Compromise allows eligible taxpayers to settle tax debt for less than the full amount owed when paying in full would create financial hardship or is unlikely.
Eligibility Requirements for an Offer in Compromise
Eligibility depends on income, expenses, assets, and overall ability to pay. International income and assets must still be disclosed and analyzed as part of the OIC process.
Types of Offers in Compromise
The IRS recognizes different bases for an OIC, including doubt as to collectibility and effective tax administration. Each requires a detailed financial analysis.
Installment Agreements for International Taxpayers
When an Offer in Compromise is not appropriate, installment agreements may allow taxpayers to pay balances over time. Living abroad does not automatically disqualify a taxpayer from these arrangements.
Currently Not Collectible Status
In cases of extreme financial hardship, taxpayers may qualify for Currently Not Collectible status, which temporarily halts collection efforts while financial conditions persist.
Common Mistakes in International Tax Resolution
Common errors include underreporting foreign income or assets, misunderstanding eligibility criteria, and attempting resolution without proper documentation.
Why Professional Representation Matters
International tax resolution involves complex financial analysis and negotiation. Professional representation helps protect taxpayer rights and improves the likelihood of a successful outcome.
Final Thoughts from Alberto Luna Jr., CPA
Resolving international tax debt requires realistic planning and a clear understanding of available options. In my experience, the best outcomes come from early engagement and honest financial disclosure. With the right strategy, even complex international tax liabilities can be managed and resolved.
