# How can IRS verify my foreign income if I have no w2



## LC3622

I live abroad for many years. I need to file and even pay some tax (which is really pathetic as I do not travel to the US and do not use any of its infrastructure, etc). My foreign gross income is above FEIE, around USD 200,000. However, my foreign employer does not provide W2, which I need to attach to 1040? What should I do if there is nothing to attach? do I just attach statement in own words that I work for the foreign employer which does not provide W2? What happens if the "examination" comes - how do I prove the income? How will IRS verify it? Thanks


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## ForeignBody

lucenet said:


> I live abroad for many years. I need to file and even pay some tax (which is really pathetic as I do not travel to the US and do not use any of its infrastructure, etc). My foreign gross income is above FEIE, around USD 200,000. However, my foreign employer does not provide W2, which I need to attach to 1040? What should I do if there is nothing to attach? do I just attach statement in own words that I work for the foreign employer which does not provide W2? What happens if the "examination" comes - how do I prove the income? How will IRS verify it? Thanks


There is no supporting document. You need to be sure that you can justify the figure you enter if you are asked eg with payslips. Remember you have to enter figures for the US tax year ending December 31, not the UK tax year.


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## Bevdeforges

You don't even attach a statement. For us foreign residents, the IRS kind of has to take on faith whatever we report to them. In theory, I suppose, if they suspected you of hiding Big Bucks they could potentially check the figures coming from your banks (assuming, of course, that the bank has reported your accounts under FATCA - though that only really started in earnest about 2014). 

But the chances of them examining your accounts are pretty much "slim to none" unless you do something to come up on their radar. (Think Boris Johnson bragging about the sale of his home - and even then someone would have to know that he has US citizenship.)
Cheers,
Bev


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## LC3622

ForeignBody said:


> There is no supporting document. You need to be sure that you can justify the figure you enter if you are asked eg with payslips. Remember you have to enter figures for the US tax year ending December 31, not the UK tax year.


Thanks. If there is an examination, what information will they request? Payslips? Bank statements? Is it legal for them to request bank statements , which contain all expenses i have (including not related to IRS) - this is invasion of privacy, no? Will they require payslips or a letter from employer with salary details? Can they contact employer directly to verify the figures?


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## LC3622

Bevdeforges said:


> You don't even attach a statement. For us foreign residents, the IRS kind of has to take on faith whatever we report to them. In theory, I suppose, if they suspected you of hiding Big Bucks they could potentially check the figures coming from your banks (assuming, of course, that the bank has reported your accounts under FATCA - though that only really started in earnest about 2014).
> 
> But the chances of them examining your accounts are pretty much "slim to none" unless you do something to come up on their radar. (Think Boris Johnson bragging about the sale of his home - and even then someone would have to know that he has US citizenship.)
> Cheers,
> Bev


I thought the banks report only the year end balances , not the transactions? I am just shocked how invasive US government has become. 

I understand the chances are "slim to none", yet i read in many articles that expats are now more likely to be audited than US residents. I mean, my income is middle class - I will take FEIE and housing exclusion in the HCOL area (London) - IRS may well audit me, so I need to understand what supporting evidence I should have. There is no way my employer can produce W-2. I can prepare the statement myself explaining how the figures are calculated - but I am not sure if this is necessary? 

It is scandalous. Really time to renounce.


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## ForeignBody

lucenet said:


> Thanks. If there is an examination, what information will they request? Payslips? Bank statements? Is it legal for them to request bank statements , which contain all expenses i have (including not related to IRS) - this is invasion of privacy, no? Will they require payslips or a letter from employer with salary details? Can they contact employer directly to verify the figures?


In the unlikely event of the IRS asking, it is impossible to predict what they might want. You need to be able to justify the figures you have entered. Having payslips for the year which total to the figure you have entered should be sufficient.


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## Bevdeforges

At the moment, the IRS is severely understaffed and underfunded. Most audits they undertake are done based on an estimate of the potential "recovery" - so if you can show that you're reporting all (or most) of your overseas income and are making a good faith effort to comply, chances are very, very small that you'll be audited.

Since FATCA (including reporting by foreign banks) has only been going on since 2014 or so, we really don't know to what extent the IRS is following up on obvious "discrepancies" between what the taxpayer reports and what the banks report. Taxpayers report the "high balance" and the banks report year-end balance. And in most cases, there is no cross checking.

At some point you have to make a leap of faith if you're doing a good faith effort to file your forms as you think you should be doing. The audit rate is incredibly small as it is, and since the end of last year, the IRS has no more overseas presence (i.e. all 4 overseas IRS offices have been closed and the staff transferred back to the US). If your returns warrant sending IRS agents overseas to investigate, they may do so. But otherwise, it depends on how much tax you appear to have avoided/evaded.
Cheers,
Bev


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## LC3622

Bev, I understand this, but I do not trust IRS, especially with all the intimidation comments they make even on their website. I have no intention to evade or anything and will swallow paying taxes, even though I believe the current tax arrangements for expats are unfair. All situations are different. I will be taking both FEIE and housing exclusion, which is rather large as I live in extremely high cost of living area. The amount of the housing exclusion may well be a red flag for the IRS as my rented flat in London is indeed expensive, especially when you translate GBP into USD. My employer also does not issue W-2 and the paycheck is split among two bank accounts. This is why I believe there is a chance there might be an examination and was just asking what they will ask if there is no W-2 attached to the tax returns. If there is no W-2, there are several ways they can check my income:

1 - asking me to provide some sort of W-2? Or bank statement? My bank statement has a lot of personal transactions such as food, entertainment, services, etc in addition to the paycheck - if requested, I am not sure I want IRS to know where I sleep, where I eat and what I do during weekend. 

2 - checking bank accounts via FATCA banks? I am still not clear what the banks have to report them - year end balances, transactions, etc? I am not sure the banks have my social security number. The have my name, address, but do they have SS number?

3 - contacting employer directly?

My understanding is that they do not have to send anyone overseas. The way they work - they send you a letter with million questions/request and it is your job to prove that all the numbers are true. I understand how they do it in the US - the employer sends the same figures to the IRS and they can check. How do they check expats?



Bevdeforges said:


> At the moment, the IRS is severely understaffed and underfunded. Most audits they undertake are done based on an estimate of the potential "recovery" - so if you can show that you're reporting all (or most) of your overseas income and are making a good faith effort to comply, chances are very, very small that you'll be audited.
> 
> Since FATCA (including reporting by foreign banks) has only been going on since 2014 or so, we really don't know to what extent the IRS is following up on obvious "discrepancies" between what the taxpayer reports and what the banks report. Taxpayers report the "high balance" and the banks report year-end balance. And in most cases, there is no cross checking.
> 
> At some point you have to make a leap of faith if you're doing a good faith effort to file your forms as you think you should be doing. The audit rate is incredibly small as it is, and since the end of last year, the IRS has no more overseas presence (i.e. all 4 overseas IRS offices have been closed and the staff transferred back to the US). If your returns warrant sending IRS agents overseas to investigate, they may do so. But otherwise, it depends on how much tax you appear to have avoided/evaded.
> Cheers,
> Bev


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## Bevdeforges

The simple truth of the matter is that they don't check or cross check the information from expats - except for any income that is reported via W-2, 1099 or other standard US documents.



> 1 - asking me to provide some sort of W-2? Or bank statement? My bank statement has a lot of personal transactions such as food, entertainment, services, etc in addition to the paycheck - if requested, I am not sure I want IRS to know where I sleep, where I eat and what I do during weekend.


Only a US employer is required to provide W-2s. If they were to question your salary information, they would only be able to ask for something "reasonable" like your payslips or other standard types of documentation. In practice, this rarely happens, and any audit they might initiate would most likely be the result of some US source income where they had the standard bits of official paperwork from a US source.



> 2 - checking bank accounts via FATCA banks? I am still not clear what the banks have to report them - year end balances, transactions, etc? I am not sure the banks have my social security number. The have my name, address, but do they have SS number?


Your foreign bank only has your US SSN if you have given it to them - usually on a W9, but sometimes on a bank-created form or document. The best they can do is to run a computer comparison of the year-end balances the bank reports (by SSN) against your FBAR filing to note any "unusual" discrepancies - but don't forget, what you report on the FBAR is the high balance for the year, not the year-end balance.



> 3 - contacting employer directly?


Sure, they could do that. And the employer could also tell them to go pound sand, or that the company's privacy policies would not permit them to snoop around in company records. Overseas employers are not bound by US tax law. The way the US has gotten the foreign banks to comply with the FATCA rules is by threatening the banks with revocation of their US banking licenses. Hence you will notice that small banks that do not do much in the way of international business are specifically exempted from the FATCA reporting.

The IRS has to prioritize its resources and in the matter of audits, they do focus on those returns where there is the potential for recovering the most in back taxes and penalties. If you are filing reasonable returns without glaring discrepancies (usually between income declared and your obvious lifestyle), it's highly unlikely you'll ever be questioned. Or even if you are, the question will be quickly and simply resolved by postal mail. 
Cheers,
Bev


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