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IRS Audits of Expatriates: Section 965 Transition Tax, Exit Tax, Non-Filers, and the Examination Process

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, October 31, 2023

Recorded event now available

or call 1-800-926-7926

This course will discuss IRS examinations of taxpayers living abroad. Our expert panel will guide tax practitioners through the examination process and explain best practices to withstand the on-going scrutiny of these taxpayers' returns.


The IRS has and continues to audit a higher proportion of expat tax returns. The IRS 2019 Databook revealed that approximately 10 percent of expatriates' tax returns are selected for audit. Considering the complexity of the returns, this should not be surprising.

The rules for these nonresidents are often the reverse of those for residents. The filing status Married Filing Jointly can require a special election, self-employed taxpayers often are not entitled to deduct expenses, and simple presence in the U.S. for 183 days can trigger capital gains. Remarkably, two-thirds of expats paper file these complicated returns.

In April 2023, the IRS Large Business & International Division released its list of currently active compliance campaigns. A dozen of these issues include campaigns targeting international taxpayers. These audits include expats who filed Form 8854, Initial and Annual Expatriation Statement, as well as those who did not.

Included on the list is its compliance campaign focusing on Section 965 transition tax payments. The Service required these payments by U.S. shareholders of certain foreign corporations on unrepatriated (untaxed) earnings as part of the 2017 Tax Act. The IRS stated that these audits could be expanded to other issues, particularly those relative to the 2017 Tax Act.

Tax professionals and advisers working with individuals who have relocated abroad must understand the issues triggering these IRS audits, prepare clients for these audits, and know how to handle these demanding examinations.

Listen as our panel of foreign tax experts explains the current IRS campaigns targeting expatriates.



  1. Expatriates: introduction
  2. Common expat audit issues
    1. Non-filers
    2. Filing status
    3. Unreported capital gains
    4. Information reporting returns
    5. Unallowed business deductions
    6. Other areas
  3. Latest IRS expat compliance campaigns
    1. Section 965 transition payments
    2. Exit taxes and unsubmitted Forms 8854
  4. Examination process
  5. Best practices


The panel will cover these and other critical issues:

  • Which expatriate returns are being targeted by the IRS?
  • How to best handle unfiled returns, including FBAR filings
  • When should a taxpayer consider an appeal?
  • What additional issues are being reviewed during Section 965 examinations?
  • How can expats and tax advisers best prepare for IRS examinations?


Giordano-Lascari, Thomas
Thomas M. Giordano-Lascari

Greenberg Glusker Fields Claman & Machtinger

Mr. Giordano-Lascari is a Partner in the Private Client Services Group with nearly two decades of experience...  |  Read More

Stein, Michel
Michel R. Stein

Hochman Salkin Toscher Perez

Mr. Stein specializes in tax controversies, as well as tax planning for individuals, businesses and corporations. For...  |  Read More

Toscher, Steven
Steven (Steve) Toscher

Managing Principal
Hochman Salkin Toscher Perez

Mr. Toscher has been representing clients for more than 35 years before the Internal Revenue Service, the Tax Divisions...  |  Read More

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