A beginner’s guide to international tax worries

As I noted last week in my post on the current partial amnesty offered by the IRS for those with hidden overseas assets, the flexibility of web work can encourage cross-border collaborations and contracts or allow location independent workers to live abroad for a period of time. Taxes, predictably, get complicated.

It’s impossible to provide specific advice for any given situation, but are there general tips for web workers worried about international tax issues to make sure they find a quality professional to help them, and keep that relationship running smoothly? Fred Corso, head of the international tax services group at Marcum LLP, has some basic tips to help you navigate your tax stresses:

  • Personal connections make the difference. Corso suggests you turn first to your personal and professional network to find someone to help you with your tax issues. In an area as broad as tax law, someone with experience in your particular industry or region is often best, and friends and colleagues are a likely route to finding such a person. And it’s not just your network that is useful; your tax professional’s is as well. “Become familiar with the practitioners’ professional network. It is impossible for an individual to know everything about United States tax law in the area of cross-border taxation. You can imagine the challenges of becoming familiar with the local law of one or more foreign jurisdictions,” says Corso. “A practitioners’ capabilities are only as good as the strength of his or her network of professional resources overseas.”
  • Stay loose.  You won’t know exactly what details of your case are relevant to your new tax pro, so following unexpected conversational alleys can pay dividends, according to Corso. “People often arrive with a preconceived notion of how their issue should be resolved. While trying to be well informed beforehand, be sure to keep an open mind. Common sense very often does not apply in international taxation, which is often shocking to people. Focus not only on the question as you see it, but inquire about other considerations that you would not necessarily have reason to know about.” And be aware that when it comes to international tax complexities, there is often more than one way to skin a cat, “so you want to have confidence that you will be comfortable with the practitioner’s general approach to tackling an issue.” Whatever approach you choose “be flexible and understand that the scope of a project will likely change to some extent as work is performed.”
  • Don’t expect miracles. “Leniency has been on the decline,” Corso warns, so don’t be taken in by other people’s stories of dodging their tax bills. “Be wary of cocktail party advice. If it sounds too good to be true it probably is. ‘Everyone else is doing it’ is not a sound basis for making a decision in international tax.” And understand that extreme efforts to reduce tax are not always cost-effective. “Although businesses often employ tactics and structures that help reduce taxes, such methods are usually not cost-effective or lack business sense for small to mid-sized businesses,” Corso concludes.

Image courtesy Flickr user alancleaver_2000, CC 2.0