US tax return giant H&R Block targeting expats

US tax return giant H&R Block targeting expats

H&R Block, the largest tax return preparer in the US, is ramping up its efforts this tax season to reach out to far-flung American expats with a new Expat Tax Services business, which it is operating “virtually” out of a newly-created international desk located in its Kansas City, Missouri headquarters.

Stateside Americans are expected to file their returns by 18 April this year, but expats have until 15 June to get theirs in.

New York Stock Exchange-listed H&R Block has been looking after the tax affairs of Americans abroad pretty much since the day it was founded in 1955. But until recently, these expats tended to be clients of the company’s US-based offices – most Americans are said to live within five miles of one – or of H&R Block facilities typically located on or near US military establishments overseas, company executives say.

According to the US State Department, around 8.7 million Americans are living outside of the US at any given time, but it is widely accepted that there are still millions of them who should be filing income tax returns each year but aren’t.

This is in spite of the fact that they are required to by law, if their income is above a certain threshold ($10,300 for a single person under the age of 65).

The need to file a return exists even if an expat doesn’t owe any US tax because they’re already paying taxes in the country in which they’re living, because the US is the only major country in the world that taxes on the basis of citizenship rather than residency.

‘Complex’ returns

Roland Sabates, pictured, director of tax operations for the new Expat Tax Services business, says H&R Block took the decision to launch a new division focused exclusively on expatriate Americans in 2013, after the company saw a massive increase in calls for help from the company’s in-house “SWAT Team”.

This team – or the Tax Institute at H&R Block, as it’s officially called – gets all of the complex, typically international tax return cases that the company’s individual tax specialists around the world don’t feel able to handle themselves.

The Tax Institute’s caseload began to grow after 2010, Sabates says, in response to the by-now-well-documented efforts by the IRS and US Treasury to crack down on those US citizens who had been failing to comply with a growing array of new and existing income and bank account reporting requirements – even though many expats were unaware these reporting obligations existed.

Other expats, who had been filing US tax returns annually, found themselves in the crosshairs of the IRS because they hadn’t also been filling in so-called Foreign Bank Account Reports (FBARs) for their non-US bank accounts, Sabates adds.

According to the IRS, FBARs must be filed whenever “the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported”.

“When we launched the expat service in 2013, it was still part of the Tax Institute, but sometime midway through 2014, we moved the business over to our existing international division, and we’ve been developing it there ever since,” Sabates adds.

Thus far, H&R Block’s US rivals for DIYers – including TaxAct Inc and TaxSlayer –have not made a point of going after the expatriate US taxpayer market specifically. For those who seek assistance, the major names Liberty and Jackson Hewitt have not gone after the expat market at the level of H&R Block.

A spokeswoman for Intuit, the parent of TurboTax, which provides tax-filing software for use by American and Canadian citizens, said it did “not proactively promote” its product to expats living outside its “core geographies, nor do we have any current plans to do more in this area”. However, she said expats could use TurboTax to prepare and file their US returns if they wished to, and that the company “[has] many long-time loyal customers who take the brand with them when they live abroad.”

Unlike H&R Block, though, TurboTax doesn’t provide tax advice to individuals, although its tax software is used by accountants who prepare tax returns for clients.

Closing tax-assistance offices

H&R Block’s move into the international market coincides with the closure in 2015 of the last three IRS taxpayer assistance centres, in the US embassies in London and Paris, and the US consulate in Frankfurt. At one time there were IRS staffers located in more than a dozen US embassies and consulates around the world, but by 2014, budget cutbacks had reduced the representation to four outposts, and in November of last year, the IRS’s Beijing office was closed.

The H&R Block international expansion also comes a year after what IRS Commissioner John Koskinen warned was “one of the most complicated filing seasons we’ve ever had”, in part because of the introduction of new provisions designed to fund America’s new national healthcare system, the Patient Protection and Affordable Care Act (PPACA).

Meantime, recent cutbacks by the cash-strapped US Government have slashed the IRS’s budget, even as the number of taxpayers has increased.

Of particular concern, Koskinen and others have said, is how these cutbacks will affect the IRS’s ability to answer taxpayers’ phone calls, an area it has been heavily criticised for neglecting in the past.

To visit the H&R Block website page for expats, click here.

For those living in the UK, the company has a single UK outpost, on the RAF Lakenheath base in Suffolk, where the US Air Force maintains a presence.

Additional offices are open in particular countries. For that list visit the site at:

H&R Block is listed on the New York Stock Exchange and generated revenues in the year to the end of April 2014 of $3 billion. It was founded in Kansas City in 1955 by Henry and Richard Bloch.

To read how H&R Block’s new Expat Tax Services business works, go to Page 2.

To read last week’s story about the US Internal Revenue Service’s online list of famous tax quotations, click here.

How H&R Block’s new Expat Tax Services business works

The tax preparation fantasy of many a taxpayer is being able to stroll around the corner to one’s local accountant, and leave with him or her a sack containing a year’s worth of tax-relevant documents, receipts, pay stubs and so on.

But as Roland Sabates, pictured, director of tax operations for H&R Block’s new Expat Tax Services business, explains, this is not a workable business model when one’s clients are spread out across some 100 countries around the world.

Instead, he says, although the company does operate a number of overseas outposts – in Sydney, Seoul, Panama City, and on some 25 US overseas military bases – H&R Block is counting on ensuring that its Kansas City-based expat team is sufficiently skilled and au fait with the minutiae of tax, mandatory retirement schemes and other details of all of the countries in which it has clients to be able to handle their tax-filing needs.

For example, four Expat Tax Services team members look after all of the company’s American clients who live in the UK, and therefore are familiar with such UK-specific financial documents as P60s and P45s, and what ISAs are and what ISAs are and whether and how American expats should own them, Sabates says.

Another team knows the ins and outs of how to file a US tax return if one is resident in Switzerland;  while still others, according to Sabates, could win a pub quiz with their knowledge of the tax-relevant trivia critical to filing returns for expats resident in Germany, the United Arab Emirates and China.

These team members communicate with their far-flung clients via the internet, fax, telephone, Skype and for extra security, via the company’s own secure server.

Although based in H&R Block’s Kansas City offices, Sabates will be in London on 8 February to participate in a day-long Corporate Relocation Conference & Exhibition, being sponsored by American in Britain magazine. Sabates is due to give a presentation on tax issues during the event, which is aimed at London- and UK-based expatriates. To read more about the event, click here.