2016 taxes, US preparer costs high? Need UK tax preparer advice please

As usual, as a US citizen living in the UK, my tax status is complicated.

I moved to the UK in 1996 and never filed US tax returns or FBARS. I finally cleared this up with my 2014 return, paying FBAR penalty so I would be 100% sure I was clear (had been advised a "silent" filing would probably be OK, but I wanted to be sure). I got my return and penalty accepted letters in 2016, yay! This was done with a US atty and US accountant.

The same accountant filed my first normal FBAR and tax return for 2015, and I JUST got the invoice - for $1,950! He did probably have to look into whether my pittance of an early NHS pension was taxable in the USA (he concluded it was) and he did advise me how much IRS withholding I should have for an US annuity beneficiary payout, that took him about 3 minutes. I have some dividend interest in the US, but this is all beautifully summarised on a Merrill Lynch annual statement. There were some exceedingly short emails back and forth. We supplied all FBAR amounts via spreadsheet, but he did the filing. He ignored my telling him my overseas filing extension was automatic and filed one. Does this invoice seem as excessive to you as it does to me? It already has a mystery $990 discount applied to make it $1,950 (my parents and I have been customers for years). I will be asking for a more detailed accounting.

I had been considering finding someone to do my taxes for me in the UK as I no longer spend any time in the US. I need tax advice on leaving investments in the US or moving them to the UK, and I need a general financial advisor as well as we would like to move and prepare for retirement. Perhaps that should be separate? I can see there is a list of UK agents available on the IRS website, but how to choose? Does anyone have any personal experience or recommendations?

Many thanks in advance for your help, sorry if this is a repeat request for "agent" recommendations, but I did do some searching before posting this.

Added: We live in the East Midlands if that makes any difference

Any advice you require would be better carried out within the UK.

I agree that you would be far better using a UK based tax service for US expats. I worry that your US advisor is not correctly taking the UK side of things into account. As a UK resident HMRC is your primary taxing authority (in most cases) and with FEIE and/or FTCs your US tax bill should probably be $0 or close to that.

If you have US based investments then the UK tax side of things could be complicated. Have you or your advisors filed any UK self assessments?

As far as investing is concerned a big flag for me went up when you mentioned Merrill Lynch; what type of investments do you have with them and do you know the fees and expenses they charge? If you are a US citizen living in the UK I would recommend that you invest in US Vanguard ETFs as they are inexpensive and tax efficient in both the US and the UK. But you will need to understand how to distribute the tax on dividends and capital gains between the US and the UK.

Sally - this is a very, very unusual set of circumstances. You mentioned in a post in 2011 that you had learned of your obligations. Your mother was ill at that time, so you probably had reasonable cause. You have now posted saying that you paid an FBAR penalty - which you presumably did by entering the OVDP - which is really only ever used by criminal tax evaders who end up paying an OVDP penalty to keep them from jail.  Any advice you require would be better carried out within the UK.

Yes, we filed via OVDP (or maybe streamlined?). I admit to doing my best to block the memory because I'd really wound myself up over it and found it very traumatic. My holdings in the UK were fairly insignificant, so the interest penalty was worth paying to get a guarantee that the matter would be closed. It wasn't the draconian penalty, isn't that something like 40%?

I agree though that I'm better getting advice here in the UK now (probably should have before), hence my request for UK recommendations.

Yes, we filed via OVDP (or maybe streamlined?). I admit to doing my best to block the memory because I'd really wound myself up over it and found it very traumatic. My holdings in the UK were fairly insignificant, so the interest penalty was worth paying to get a guarantee that the matter would be closed. It wasn't the draconian penalty, isn't that something like 40%?

I agree though that I'm better getting advice here in the UK now (probably should have before), hence my request for UK recommendations.

OVDP is sadly not a guarantee of anything aside from avoiding jail. Signing an OVDP contract gives the IRS the right to continue to ask questions of you, forever.

Streamlined filing comes with zero penalties and zero agreement by anyone at the IRS, which is not what you said had happened.

Your future preparer will need to know how you approached the IRS to know what was agreed if you entered into a contract. 

OVDP typically takes several years to close while an IRS agent is assigned.

I do have copies of all submissions to supplement my poor memory, thankfully.  I have had a letter back from the IRS stating that they accepted my filing, agreed with the penalties we had paid and no further payment was required.

I know the IRS probably looms large in your thinking, but you have not mentioned anything about how you've dealt with your Merrill Lynch account for UK taxation. Were you over limits or taxed in a way that would have required you to file a UK self assessment for those foreign assets?

While owing interest is unusual, the IRS do require interest to be paid with a streamlined filing, but never penalties.

Does it make any difference that I was in the US more than UK due to taking care of an ailing parent?

Sally - if you spent too much time in the States you would not have qualified for the IRS streamlined procedures, but you could still have used IRS traditional voluntary disclosure (which can include reasonable cause). Do bear in mind that OVDP sits outside of the statute; reasonable cause conversely is built into US law.

Nothing to stop anyone using OVDP if the lawyer suggests this is the best way of avoiding going to jail for tax evasion. In practice no-one using a lawyer located outside of the States would use OVDP for someone with strong reasonable cause unless there were indications of criminal behaviour.

Hi Sally, it sounds like you've been badly advised. US expat taxes are a specialist area, but most people who suddenly become aware of their obligations end up paying very little due to the amnesty programs. I'd recommend that to get everything sorted out you contact a US expat tax specialist firm. The big name accounting firms over charge. Good luck!

Edited to remove self-promotional links.

Most UK based individuals who do not feel confident handling their own tax returns will want to check that any proposed tax adviser is qualified with at least one professional accounting or tax professional body in the UK as well as in the United States so that they know that the adviser is adequately regulated in the UK and handles every day many of the complexities of the foreign aspects of the United States tax system.  Indeed, more broadly, for most UK based individuals there are often considerable advantages in having a UK based adviser who can jointly advise on both US and UK tax issues and (possibly) handle both sets of tax returns in the UK.

These include:
1.   The client and the adviser being located in the same time zone.
2.   Client documents and workpapers being held outside of the United States; which many people perceive as providing additional protection in the event of IRS audits.
3.   Advisers outside of the UK are unable to offer the protections to clients provided by the UKs Proceeds of Crime Act, which requires all tax professionals offering services in the UK to be regulated and supervised for anti-money laundering protection purposes.  Here in the UK it is a criminal offence to offer tax advice unless the adviser is supervised. Quite unlike within the UK, there is no requirement for mandatory regulation of tax advisers in most of the United States. 
4.   The fact that although there are roughly one million paid tax professionals within the United States, that there are naturally only very few amongst these who understand enough about the US reporting of foreign based taxpayers.
5.   Most tax advisers outside of the UK are not bound by the UK ethical standards that govern UK qualified advisers; which set out fundamental principles of integrity, objectivity, competence and care, confidentiality and behaviour (http://www.tax.org.uk/professional-standards/professional-rules/professional-conduct-relation-taxation).
6.   The opportunity in the unlikely event that things ever go wrong to get issues addressed through a supervisory body that is closer to the client than an adviser located several thousand miles away.

This thread seems to have run its course, so time for a slight deviation to the subject matter.

I agree with the general consensus, a taxpayer seeking assistance needs:
1. A tax advisor who is aware of the pitfalls in both the US and UK systems, their interaction, and therefore knows how to avoid potentially toxic positions in either country.
2. Or, a US tax advisor and a UK tax advisor who will work together (talk to each other) and consider the taxpayers unique circumstances to arrive at avoiding toxic positions in either country.
Most assets held in either country are not illegal in the second country, but many can be toxic.

You know where this is going: financial advice for the US citizen abroad.

The issuance of financial advice in the UK is regulated by the FCA (Financial Conduct Authority). A tax advisor may be able to tell an individual which investments to avoid, but do they have FCA certification allowing them to give financial advice and tell the taxpayer which specific investments the taxpayer should consider? Or, at least an array of options? Are they able to discuss the best investments for the USC in the UK, or do they have an FCA approved contact who is equally knowledgeable in the investing pitfalls for such a taxpayer? I understand many UK chartered accountants are FCA registered, but does this allow them to give financial advice also (FCA registered, FCA authorised, the Financial Services and Markets Act)?

We're aware of lists of dual US/UK tax preparers (some qualified US/UK, some less so) but is there a list of qualified FCA registered financial advisors knowledgeable in US/UK investing, and which toxic investments to avoid, for the USC resident in the UK? For example, we're told individual UK stocks or shares may be alright for US tax reporting, but which? And, which are performing well for the long term and which aren't? Posters on UK-Y may comment on the problems one may encounter with an interest only mortgage (988) but who can advise on the best alternative?

I won't even get into the different types of FAs (IFAs, mortgage, investment, pension, brokers, etc.), but I do cringe every time I receive a mailer from a bank or building society inviting you to come in for a visit with their friendly financial advisor for an 'investments tune-up'. I pity the unaware accidental American or unaware USC who may sign up for this service (even if the first time is free). 

For example, we're told individual UK stocks or shares may be alright for US tax reporting, but which? And, which are performing well for the long term and which aren't? Posters on UK-Y may comment on the problems one may encounter with an interest only mortgage (988) but who can advise on the best alternative?

I won't even get into the different types of FAs (IFAs, mortgage, investment, pension, brokers, etc.), but I do cringe every time I receive a mailer from a bank or building society inviting you to come in for a visit with their friendly financial advisor for an 'investments tune-up'. I pity the unaware accidental American or unaware USC who may sign up for this service (even if the first time is free).

Well any individual stock or bond is "non-toxic" in the US and UK because it isn't a PFIC or a non-reporting fund. Then deciding on which ones to buy is the same numerology as with any investment. You might stick to large cap stocks or risk small caps. Buying single stocks is a gamble on a single company and can also lead to some complex paperwork and accounting........which is why mutual funds were invented.

My opinion is that people should keep things as simple as possible and only ever buy inexpensive index tracking funds....to do this in a non-toxic manner they just buy US Vanguard ETFs. You can buy these in the UK through UK brokers.....although I don't think the qualify for ISAs....but that's a bit moot anyway if you are a US citizen.

For mortgages avoid endowments and interest only, stick with a simple repayment mortgage.

Nun, you were very much on my mind when I made the above post. You (and others on this site) have a superior understanding of investing. It's also worth pointing out that for the younger USC abroad, making the effort to acquire a higher level of understanding of investing has become a matter of financial survival. Having said that:

You might stick to large cap stocks or risk small caps. Buying single stocks is a gamble on a single company....

A safe bet would be there are a number of USC's abroad to whom this is pure gibberish. BTW, that isn't a comment on your comment, but on the level of comprehension of the terms. They may feel the need to understand, but they just can't quite muster the concentration (or interest, even though it's a matter of financial survival) to follow through.

US expats are no different than the general US population, and as you've pointed out, this is "why mutual funds were invented". Another safe bet would be that a number of folks, both in the US and abroad, have placed a lot of trust in their neighbourhood Merrill Lynch type 'local, friendly, guy down the block ' advisor. They don't do on-line trading and need the assurance of someone they can talk with. (And as always, I may be wrong about that. Things may have changed considerably in the past few years.)

Both here, and on BritishExpats, or ER.org, or Bogleheads, there are many who are knowledgeable and comfortable discussing the topic, but how many viewers read those posts and feel terribly inadequate? (Empathy nun, empathy!)

My opinion is that people should keep things as simple as possible.....

Hear, hear. Too bloody right.

....just buy US Vanguard ETFs. You can buy these in the UK through UK brokers.....

Great. Safety in numbers. Is there a list of who one may call or meet with to discuss their investing needs? Is the broker a safe pair of hands?

The point of my post was to determine if there is a menu of firms or individuals who understand the limitations of USC's? We're always telling folks to check out a tax advisor and to make sure they're qualified to handle US/UK tax. The suggestion is for equal direction when talking about investment advisors. Vanguard, Schwab, etc......but I've often heard you mention to others about various advisors (especially UK) with unreal joining, transaction, and yearly fees.

Many rely on trusting the advisor to do the right thing. Where do they find such an advisor when a USC abroad? Is it wise to select a tax advisor solely from a google search, or flipping a coin? When asked, friends and family in the UK will send you to their local bloke who makes a sterling effort (for solely UKC's!). Like the search for a qualified, reasonably priced tax advisor, where does one search for a qualified (US/UK) investment advisor with reasonable pricing?

Or, after all my waffle, are you saying it doesn't really matter? Just buy Vanguard from someone, anyone, and rest easy? Select any of the latest offerings of the many mortgage types available from your local bank/building society friendly salesperson, (especially when that individual has targets to sell mortgages which are 'sort'a' like a repayment mortgage) as long as they're not an endowment or interest only, and you'll be alright for US reporting?

Not doubting your advice, nun, but many may be a bit timid concerning investing and need reassurance from a qualified individual. Some of us do our tax returns ourselves. Others need the assistance and reassurance of the on-line tax package or professional to do it for them.