While the tax filing season has ended for many US citizens and residents living abroad, Congress and the Treasury Department are hard at work initiating new tax legislation as well as writing regulations to define prior tax legislation.Foreign Bank and Financial AccountsReflecting the fact that this is an uppermost issue for the Internal Revenue Service, the Financial Crimes Enforcement Network of the Department of Treasury issued three notices in June with respect to the annual filing of Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts.The notices deferred the filing of the aforementioned Form for officers or employees of foreign corporation who have signatory authority, but not a financial interest in a corporate account. The notices covered regulated entities, those affected by an earlier deferral notice going back to 2009, those affected by the Bank Secrecy Act and investment companies registered with the Securities and Exchange Commission.2011 Foreign Bank and Financial AccountsIn addition to filing the 2011 Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts by June 30, 2012, certain individual will also now have to file Form 8938 (currently being developed by the IRS) as an attachment to their 2011 Form 1040. This requirement was brought about by the Foreign Account Tax Compliance Act (FACTA) which requires individual taxpayers holding an interest in a foreign financial asset to attach to their income tax return certain information (Form 8938) if the aggregate value of all such assets exceeds $50,000.The Internal Revenue Service is also revising Form 8621, Return by a Shareholder of a Passive Foreign Investment Company (PFIC) or a Qualified Electing Fund. The current instructions to Form 8621 enumerate those who must file a Form 8621, for example, upon disposition of stock in a Passive Foreign Investment Company. The instructions are being revised to increase the number of taxpayers who will have to file Form 8621.Do You Have A Money Market Account or Investment Account With A Bermuda Bank?If you do, and you are a US citizen or resident alien, it is likely that you should have been filing Form 8621, Return by a Shareholder of a Passive Foreign Investment Company (PFIC) or a Qualified Electing Fund along with your Form 1040.Standard Mileage IncreasesAs a reflection of the increasing price of gasoline in the United States, as of July 1, 2011 the Internal Revenue Service has increased the standard mileage rates for business use of an automobile from 51 cents per mile to 55.5 cents per mile, for medical and moving use of an automobile from 19 cents per mile to 23.5 cents per mile and for the charitable use of an automobile will remain at 14 cents per mile.Do You Earn More Than $1 million a Year?If so, your corporate employer is not allowed a corporate tax deduction for your compensation in excess of $1 million. Proposed regulations also clarify that qualified performance based compensation attributable to stock options and stock appreciation rights (SAR) must specify the maximum number of shares to which options or rights have been granted to each affected employee.Internal Revenue Service AuditsThe average US citizen has less than a one percent chance of being audited. This increases to five percent for US citizens living abroad and with the IRS increasing its resources on international transactions the examination has become more intrusive. All of the audits that we had in 2010 and to date in 2011 have required the taxpayer to verify every single item on the tax return.It starts with your name and address. Taxpayers are required to submit a passport and a birth certificate to prove who they are. The same goes for the children, a passport and birth certificate. In addition, the IRS will require proof that the children live with you and that you furnish more than half their support.So you will need to furnish notarised letters from the school your child attends and cancelled cheques to prove that you support them. The list goes on. In an IRS examination the burden of proof is on you, not the IRS. As most examinations take place 18 to 30 months after you filed the tax return you should be sure that at the time you file your tax return that you can document every single item on it, as getting receipts three years later does not always work.Conducting an IRS examination by yourself will likely yield the same results as my attempting to disassemble the motor in my car to replace the crankshaft. You may need to know more about the Internal Revenue Code than the agent examining your return to win your case. We have had recent incidences where the IRS agent could not define the term “Head of Household”, another who did not know that Social Security taxes paid to a foreign government could be taken as a credit against US income taxes in certain circumstances and another who did not know that a foreign spouse could make an election to be treated as a US taxpayer.Pursuant to the requirements relating to practice before the Internal Revenue Service, any tax advice in this communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties imposed under the United States Internal revenue Code, or (ii) promoting, marketing or recommending to another person any tax related manner.The tax advice given by this column is, by necessity, general in nature. You should, of course, check with your own US tax consultant as to how specific transactions affect you since tax advice varies with individual circumstances.James Paul Sabo, CPA, is the President of ETS Ltd., PO Box HM 1574, Hamilton HM GX, Bermuda. Questions should be sent to: jsabo[AT]expatriatetaxservices.com