International Taxation

International tax issues can show up in more places than most people expect. A U.S. citizen who inherited a foreign bank account, a business owner paying contractors overseas, a professional who spends part of the year in another country, or a family that holds real estate abroad may suddenly face complex reporting rules, unexpected penalties, and IRS scrutiny. When international tax obligations are missed, the situation can escalate quickly, especially when the IRS believes the issue involves unreported offshore income, undisclosed accounts, or incomplete information returns.

Frazier Law helps individuals, families, and businesses navigate international taxation with a focus on practical risk management and strong defense. Led by principal attorney Charles R. Frazier and certified public accountant (CPA) Rick Miller, the firm has assisted clients since 2009 with tax controversies and IRS defense. Charles is a former IRS agent and holds an advanced graduate degree in taxation. He is also a Chartered Financial Consultant (ChFC). With a multi state practice and federal authority, and licensing in Tennessee, Michigan, and Texas, Frazier Law handles complex federal tax matters regardless of where you live.

International tax is rarely just a filing question. It is often a strategy question, a documentation question, and a timing question, all at once. The right approach can reduce exposure, correct errors efficiently, and help you move forward with confidence.

Why International Tax Problems Become High Stakes

International tax rules are layered. In addition to income tax reporting, many cross border situations trigger separate information returns. Those information returns may not increase tax by themselves, but the penalties for failing to file them can be severe. On top of that, the IRS has multiple tools for learning about foreign assets, including third party reporting, treaty exchange of information, and bank compliance programs. Waiting can make the problem harder to fix and more expensive to resolve.

International tax matters also tend to involve records that are harder to obtain. Foreign banks may not provide statements in the format the IRS expects. Documents may be in another language or reflect different accounting conventions. If the IRS questions your position, you need a clear narrative supported by reliable documentation, not just a best guess.

Just as important, cross border issues often impact multiple years at once. One missed filing can turn into a multi year compliance gap. A careful plan can reduce unnecessary amendments, avoid inconsistent statements, and address the full problem in a way that holds up under scrutiny.

U.S. Taxation of Worldwide Income

The United States generally taxes U.S. citizens and resident aliens on worldwide income, even when the income is earned abroad and even when it is taxed by another country. That framework surprises many taxpayers, especially those who have lived outside the country for years or who assumed foreign earnings were outside the IRS system.

U.S. Tax Residency and the Substantial Presence Test

For non citizens, U.S. tax residency often depends on the substantial presence test. The calculation looks to days present in the United States over a three year period using a weighted formula. A person can become a U.S. tax resident without intending to, which can trigger reporting obligations for foreign income, foreign accounts, and foreign entities. Even when a person is not a U.S. tax resident, U.S. source income may still be taxable and may require withholding and reporting.

Sourcing Rules and Why They Matter

International taxation relies heavily on sourcing rules. Interest, dividends, wages, business profits, royalties, and capital gains can be sourced differently depending on facts and on the governing rules. Sourcing affects whether income is taxable in the United States, whether a foreign tax credit is available, and whether treaty provisions may apply. It also impacts withholding obligations for U.S. payors and foreign persons receiving U.S. source income.

Common International Tax Situations We Handle

International tax problems look different for each client, but certain patterns appear again and again. Frazier Law routinely helps with scenarios such as foreign accounts that were never reported, overseas employment income, foreign rental properties, foreign inheritances, cross border business structures, and investments in foreign corporations or funds.

Foreign Bank Accounts and Offshore Reporting

If you have signature authority or a financial interest in foreign accounts, you may have reporting obligations that exist separately from your income tax return. The most well known is the FBAR, filed electronically through the Financial Crimes Enforcement Network. Many taxpayers miss this filing because it is not submitted with the return.

FATCA reporting can also apply through Form 8938, which is attached to the income tax return when foreign financial assets exceed certain thresholds. Form 8938 and the FBAR overlap, but they are not the same filing, and one does not replace the other.

If you are behind, the key is to avoid panic and avoid self diagnosing. The best solution depends on whether income was unreported, whether the failure appears willful or non willful, and whether other international forms were also missed.

Foreign Employment, Self Employment, and Expat Tax Planning

Working abroad raises questions about foreign wages, housing, social taxes, and U.S. reporting. Many taxpayers are familiar with the foreign earned income exclusion, but that exclusion has strict requirements and is not always the best option. The foreign tax credit may be more beneficial for some, especially where foreign tax rates are high or the income is not eligible for exclusion.

Self employed individuals face additional complexity, including how to treat foreign business income, whether a totalization agreement may affect social tax exposure, and how to structure foreign operations to reduce risk. Planning matters here because small errors can create large reporting consequences over time.

Foreign Real Estate, Rentals, and Sale Transactions

Owning foreign real estate can create recurring reporting obligations. Rental income must generally be reported in the United States, and deductions must be supported with records. Depreciation rules may differ. Currency issues can affect the calculation of income and gain. When the property is sold, foreign taxes and transaction costs may factor into the U.S. result, and timing differences can create surprises.

Inheritances, Gifts, and Foreign Trust Issues

Receiving money from abroad is not always taxable income, but it can still be reportable. Large foreign gifts and inheritances can trigger information reporting. If a foreign trust is involved, the rules become significantly more complex. Certain trust related filings carry especially aggressive penalty structures.

If you received distributions, were named as a beneficiary, or served in a role involving a trust, careful review is essential. The goal is to determine what was required, what was filed, and how to correct any gaps without making unnecessary admissions or creating inconsistent filings.

International Business Structures

Cross border business activity can involve foreign corporations, foreign partnerships, U.S. entities with foreign operations, and foreign owners with U.S. operations. The tax consequences depend on ownership percentages, control, and the type of income.

For U.S. owners, controlled foreign corporations may trigger Subpart F income and the global intangible low taxed income regime, commonly called GILTI, even when cash was not distributed. Foreign partnerships can trigger separate information returns. U.S. businesses paying foreign persons may have withholding and documentation requirements. The structure that made sense for business reasons can create a tax reporting system that requires proactive management.

Information Returns and International Reporting Requirements

A frequent source of international tax trouble is the failure to file the correct information returns. These forms often require specialized analysis and accurate supporting data.

Commonly Filed International Forms

Depending on your situation, the international compliance picture may include forms such as Form 8938 for specified foreign financial assets, Form 5471 for certain U.S. persons with interests in foreign corporations, Form 8865 for foreign partnerships, Form 8858 for foreign disregarded entities, Form 926 for transfers of property to a foreign corporation, Form 3520 and Form 3520 A for certain foreign trust events, and Form 8621 for passive foreign investment companies, often called PFICs. Not every client needs these filings, but when they are required, accuracy and consistency matter.

PFIC Reporting and Why It Is Often Missed

PFIC rules can apply to foreign mutual funds, foreign pooled investments, and certain foreign holding companies. Many taxpayers invest in products marketed outside the United States without realizing these are treated differently for U.S. tax purposes. PFIC reporting can be burdensome, and the default tax treatment can be unfavorable. Early identification and planning can prevent years of compounding complexity.

Foreign Tax Credits and Treaty Coordination

Paying tax abroad does not automatically eliminate U.S. tax. Foreign tax credits can reduce double taxation, but they must be computed correctly and categorized properly. Tax treaties may offer relief, but treaty positions can require additional disclosures and must align with the underlying facts. Treaties do not override all reporting requirements, and treaty based strategies should be coordinated carefully to avoid unintended consequences.

IRS Enforcement in International Tax Matters

The IRS takes international compliance seriously. Certain international issues can trigger automatic notices. Others can lead to examinations where the IRS requests foreign bank records, entity documentation, and transaction histories. These cases require disciplined communication and strong control over the narrative.

Avoiding Missteps During an Audit or Investigation

International examinations often move from general questions to targeted allegations. A casual statement can be misconstrued. Inconsistent filings across years can become a focal point. If you are contacted by the IRS, the priority is to understand the scope, preserve documents, and respond strategically. Frazier Law helps clients manage IRS communications, prepare documentation packages, and protect their legal position at every step.

Civil Penalties and Criminal Exposure

International penalties can include large civil assessments for late or missing filings, accuracy related penalties, and penalties tied to offshore reporting. In more serious cases, the government may allege fraud or willful failure to file. These situations require immediate, careful handling. The objective is to control the flow of information, correct the record when appropriate, and resolve the matter in a way that minimizes exposure.

Options for Catching Up on Offshore Compliance

Many clients seek help after realizing that prior filings were incomplete. The right path depends on the facts, including whether income was reported, whether the failure to report appears non willful, and what the IRS already knows.

Streamlined Filing Compliance Procedures and Other Correction Paths

For some taxpayers, streamlined procedures may be available to resolve past non compliance with reduced penalties, provided eligibility requirements are met. In other cases, delinquent international information return submission procedures may be relevant when tax was otherwise properly reported. There are also voluntary disclosure options for taxpayers who need to address willful conduct or substantial exposure. The correct strategy requires a careful, confidential assessment of your history, your records, and your risk profile.

Why Strategy and Sequencing Matter

International compliance fixes are not one size fits all. Filing the wrong package can increase risk. Filing quickly without reconciling currency, account activity, entity ownership, and prior return positions can create contradictions that are difficult to correct later. Frazier Law focuses on doing it right the first time, with a plan that accounts for tax, reporting, and defense together.

Expatriation and Exit Tax Concerns

Some taxpayers consider giving up U.S. citizenship or terminating long term residency. Expatriation can trigger special tax rules, including potential exit tax exposure for certain covered expatriates. The process also requires careful compliance, including certifications regarding prior tax years. This is an area where planning is essential because mistakes can have lasting consequences.

If you are considering expatriation, it is critical to evaluate whether you are compliant, whether you may meet covered expatriate thresholds, and how assets and entities should be treated before any final steps are taken.

How Frazier Law Approaches International Tax Representation

International tax issues require both technical skill and sound judgment. Frazier Law brings a combined legal and accounting perspective to complex matters, with a focus on preventing avoidable escalation.

Integrated Legal and CPA Insight

Charles R. Frazier leads the legal strategy and defense approach, informed by his background as a former IRS agent and his advanced tax education. CPA Rick Miller supports the analysis of records, reconciliations, and supporting computations that often make or break an international tax submission. This team based approach is especially valuable when the case involves multiple years, multiple accounts, foreign entities, or mixed categories of income.

Multi State Practice and Federal Reach

International tax issues are federal by nature, and many clients have moved across state lines or live outside the United States. With licensing in Tennessee, Michigan, and Texas and a federal practice focused on tax controversies, Frazier Law is positioned to handle complex matters regardless of location. The priority is to identify the relevant facts, develop a defensible plan, and communicate with the IRS in a way that protects you.

Focus on Documentation, Narrative, and Resolution

International cases hinge on details. The firm helps clients gather and organize the right records, translate complex account activity into clear schedules, and present the facts coherently. Whether the goal is to become compliant, respond to an IRS notice, negotiate a resolution, or defend against allegations, every step is designed to support a consistent narrative.

What to Expect When You Contact Our Firm

International tax representation often begins with a careful intake process. The firm will typically review the countries involved, the types of income, account history, entity ownership, and the status of prior filings. From there, the focus shifts to identifying legal exposure, penalty risk, and the best resolution route.

If you have not filed required international forms, it is common to feel overwhelmed. Many clients worry that they are already in trouble. The reality is that there are often viable options, but the first step is to stop guessing and start building a strategy based on facts.

Speak With Frazier Law About International Taxation

International tax problems can grow quietly for years, then become urgent when a bank requests tax forms, an accountant discovers missing filings, or an IRS notice arrives. If you have foreign accounts, overseas income, foreign investments, or cross border business activity, it is worth addressing the issue before it becomes a crisis.

Frazier Law has helped clients since 2009 with tax controversies and IRS defense, and the firm is prepared to assist with international taxation matters that require careful planning and experienced representation. Contact Frazier Law to discuss your situation, understand your options, and take the next step toward resolving the issue with a plan that protects your finances and your future.