Liberty and justice for all United States persons abroad

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Please note this thread is an archive and no longer current.  The conversation is continued here:

Expat Taxes and FBAR

 

Please ask your questions here about US Expat tax and FBAR.


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578 thoughts on “US expat tax and FBAR: Discussion thread (Ask your questions) Part One”

  1. *A very scary and disturbing video. Taxation seems to get more complicated once you add a non-US spouse into the mix.   One comment I’d like to make regarding Estate tax (death tax), my understanding is that it is only applied to individuals who have in excess of 5 million dollars (for year 2012) in their estate.  I’ve called the IRS on this one.  They told me that only individuals who die with an estate over the specific threshold for the year need to file the Estate tax return.  If your estate value is under that threshold, your assets move tax free to your heirs/children/etc.  I don’t think it should make a difference whether my spouse or children are US citizens.  In the event of my death, I don’t see my Canadian husband calling the IRS to offer up part of our joint assets because he is not an American.

  2. @Marie…

    The video wasn’t posted to scare, but educate.  The more that people understand the complications of Citizenship taxation, as practiced by the US, the better the chances are of a backlash that ‘might’ stimulate change.  

    For years, most Americans abroad have been oblivious to all these issues, and it is only since 2008 and the UBS initiated IRS jihad, using the FBAR as their penalty vehicle of choice, followed by FATCA, that these issues finally began to reverberate in the Expat community.  

    In the Homeland Community, these issues are of no concern or interest, until the blowback begins to effect them.  I think eventually it will as I argued in this comment on Forbes Tax Blog today.  Maybe I am just blowing smoke, and engaging in unrealistic speculative hope!  But, we should all be encouraging our representatives to question the IRS and what they are doing with their IGAs like Congressman Reichert did recently.  We need this to become a chorus. 

    As for your questions, I can’t really comment specifically your Death Tax issue. Not my area of expertise, but maybe there is a good Practitioner that can answer.   

  3. *I would encourage everyone to write to their representatives in the U.S., as well as their country of residence.  With today’s technology it’s easy.  You don’t even need a pen and paper.  A few key stokes and you can fire off an e-mail within minutes explaining to your representatives how this situation will have severe negative consequences on your life abroad.  As a small bunch, we are of very little concern to the United States (except when it comes to collecting our taxes).  If we don’t speak up, we will go unheard.  As the video described, this tax situation threatens every aspect of our lives abroad.  Let’s speak up and be heard!

  4. Chief of IRS Criminal Investigation Divisions Comes After Those No Disclosing Foreign Accounts and Assets
     On October 18th, the chief of the IRS’ Criminal Investigation Division, Richard Weber, stated that his 4000 special agents will continue to focus on unreported foreign bank accounts.

    Speaking before a New York CPA group, Weber said that the IRS and Department of Justice would soon be announcing a new round of indictments involving unreported accounts. These prosecutions will involve banks outside of Switzerland.   The IRS has posted CID special agents around the world.  One indication is that they now have a field office in Panama which was a popular place for US taxpayers to hide their money and income.

    and, of course, Don the attorney and CPA wants your business! 🙂

  5. @all- it looks like the Communists, Maoist and Nazis aren’t the only ones who know how to create a seemingly legitimate national public interest service pretext for confiscating private property. Only now the Americans have added a new twist to goverment oppression by going after property that is not just inside of the nation proper by using its expat citizens as a cancer to legitimize confiscating the wealth of sovereign, and innocent third party nation states.

    What an honor it is to be exploited by the only nation on planet earth that counts.

    I guess that all expats should be looking out to hear the goose stepping black boots of the IRS coming to their door.

  6. *@Recalcitrantexpat, I’d imagine the IRS will start doing a lot more audits to expats abroad by mail rather than literally knocking on one’s front door, unless one’s country of residence makes special exceptions to their sovereignty in this regard.  It could partially explain why the IRS uses such threatening wording because they want to terrify and bludgeon expats into compliance.

  7. Thought I would post these 3 Robert Woods posts, which many of us are tired of hearing, but they do make a good reference source.   Also, rather than just demonize the messenger, or question the motives for the commentary, I would encourage you to read the comments and his answers to some of them.  Remember the demographic that he writes for is Forbes, which really probably not Minnows, generally speaking.

    Oct 26th..

    Should U.S. Citizens Abroad Pick Streamlined IRS Program Or OVDP?

    Oct 31st

    IRS Notice Snafus? Yes, Even With Offshore 

    Nov 4th

    AccountsUndisclosed Foreign Bank Accounts? They’re Even More Explosive Now

     

  8. *Sounds like Mr. Woods moonlights for the IRS.  Why is it that these articles never go into what could happen to a dual citizen who has no income or assets in the US?  A person like myself who has never worked in the US.  Or a dual citizen who lives exclusively in Canada, a country that has already stated that it will not collect taxes and penalties on behalf of the IRS. 

  9. @Marie…

    I say the same thing about every member of the FATCA Compliance Complex. I too complain about it.  However, I understand their perspective.  They just report on the Statues and the consequences of non compliance for laws they did not write. It is up to others to judge the risks of non compliance, or whether their warnings are self serving, or just due diligence.  And am sure Robert’s response would be, “Don’t shoot the messenger.”

    Also, you must remember he is writing for the Homeland Whales that read Forbes, and not specifically directed at minnow dual citizens in Canada whose risks are different than the homeland evader. 

  11. @Just Me & Marie

    Robert does show our comments and I almost felt a bit of compassion when he concurred when I asked “who would have ever expected this could happen?” If Whales are reading Forbes then some are seeing our point of view.

  12. Hello, I renounced my U.S. citizenship this week.  I am under the impression that next tax season I will fill out taxes and FBAR as usual up to the date of renunciation as well as form 8854.  I understand it could take up to a year to receive my CLN so I was just wondering what happens if they reject my renunciation after I file the 8854?

    Thanks.

  13. @Shaggy Z

    The experts on this subject, which is not me, often respond on this thread.  So, if they don’t notice the question here, then you might put it over there and I am sure you will get a response.   Welcome to Isaac Brock!  Sorry the US Congress, FATCA, FBAR and stupid IRS implementation policies are creating this dilemma for you.  It isn’t right, but you are responding rationally. 

  14. @Shaggy Z, don’t let Just Me kid you, he is definitely one of the experts, but not on everything.  Just Me has the distinct experience of being to OVDP hell and back, being saved from its gates only by the intervention of the tax advocate service, but not without losing a pound of flesh in the process (or what he calls, LCUs, life credit units).  But then all of us only know what we know. 

    I don’t understand why a person’s renunciation would be revoked on the basis of filing form 8854.  That form only deals with how much your assets are worth and what you have historically paid in taxes (last 5 years), and thus, whether you are a “covered expatriate” or not.  It is not typically determinative of your citizenship status and what is more the IRS is not qualified to make an assessment of your citizenship or lack thereof.  Some of us would argue that the State Department is dubiously qualified to do that, but then, we have to live with State’s tyranny in matters of citizenship.

  15. *I think Shaggy is asking, what happens if he fills out the final tax forms including 8854 and then finds out that his renunciation/relinquishment is rejected by the DOS. His final tax  is due in less than a year and the CLN is probably a year away. I’ve wondered this myself. You could get an extension to October of 2013 on filing the tax. Not very likely that a renunciation will be rejected. More likely that a relinquishment could be rejected. Even then it seems to be rare.

  16. @Shaggy,

    Rejection by Washington is really really rare (Consulate staff told two or three Brockers who asked, that they’d never seen a rejection). The only cases I could find were rather odd, most definitely not what I’d call straightforward “everyday people” like we guys are.

    It appears that unless something is really wonky, Washington accepts the CLN package as sent by the consulate. Renunciation is quite cut-and-dried — your decision — they just want to be sure you understand what you’re doing and are acting voluntarily. If the consular officer thought something was irregular, s/he would have indicated it to you, as they did in requesting you to send them another document before they forwarded the file.

  17. @Shaggy

    Approval of renunciation is not a discretionary decision by the state department, you lost your citizenship when you stated the oath in front of a consular official. They have no right or ability to judge your motives or intent.

    The ONLY reason that it could be rejected is if you performed the oath under duress or you commit some act to show that you did not actually intend to renounce. Voting, or applying for a US passport after you renounce would qualify in that regard.

     

  19. Does anyone know where that link is to Shadow Raider’s presentation?  I have a vacation day tomorrow, and 2 Senator’s and 1 rep have open offices that are only 50 miles away from me.  If I can get a ride, I envision to pay a visit, armed with the taxpayer advocate’s report to Congress and some backup info.

  20. Shadow Raider

    August 22, 2012 at 5:52 am

    I turned my draft into the text of a real bill. It is now ready to be presented to Congress. I also changed the title to “Residential Taxation Act”. The link remains the same:
    https://docs.google.com/file/d/0B7VqDyDIAgW2Ukhaam0xNzhpbFE/edit

    This bill removes every use of citizenship in the Internal Revenue Code, and bases taxation of individuals on residence only. It also repeals the exit tax, FATCA (but keeps form 8938), FBAR, and the Reed amendment.

    Now the real battle begins. I’ll contact ACA to see if we can set up a meeting with a congressman.

    Here is a link to the Shadow Raider’s actual PP presentation — I can’t get it to work Now I can, Try this:

    https://docs.google.com/file/d/0B7VqDyDIAgW2aWc0cFBhR1ZQNFU/edit
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    Shadow Raider
    Submitted on 2012/10/18 at 7:26 pm

    Thank you for all your encouragement. Today I had a meeting with Rick James, senator Mike Lee’s tax legislative assistant. To enter the senate office building, I had to go through security similar to an airport, but it took only a few seconds. The building is very big but organized, and there are many young people working there. I arrived at the senator’s office and there was a family of tourists there, I suppose from Utah which is senator Mike Lee’s state. The secretaries were very nice, and Rick James soon came and led me to his office, which is also large and elegant. I was impressed.

    Since the meeting would be short, I prepared a presentation in my laptop, so I would be concise and remember everything I wanted to say. You can see this presentation here https://docs.google.com/file/d/0B7VqDyDIAgW2aWc0cFBhR1ZQNFU/edit . Rick James looked like he already knew a lot of what I was saying, but he also took many notes. He said that he was aware of Eritrea.

    Now here is the interesting part. After I finished my presentation, he thanked me for all the information, and said that he agrees with everything that I said. He said that he surely agrees that Americans abroad should pay taxes only to their country of residence because that’s the country that provides services to them. He said that consular services have fees, so Americans abroad do not receive any free benefit from the US, and accordingly should not pay taxes to the US. He also said that the tax code is way too complicated and ends up creating “criminals”, who are simply not aware that they have to file forms. Wow. He said these things by himself, I hadn’t included all of this in my presentation.

    Then he explained senator Mike Lee’s current budget plan, called “Saving the American Dream”, which includes comprehensive tax reform. The tax reform part would replace all current federal taxes with a tax on “consumed income”, which excludes any income saved, to encourage investment. You can read all about the plan here http://www.lee.senate.gov/public/index.cfm/saving-the-american-dream and here http://www.savingthedream.org/ . Great, but I asked who would be subject to filing and paying taxes under this plan. He said that only income generated inside the US would be taxed. I said that I was aware of proposals for territorial taxation of corporations, but he confirmed that the senator’s plan makes territorial taxation for individuals too. I was surprised, but it’s true, as you can see from senator Mike Lee’s proposed budget here http://thomas.loc.gov/cgi-bin/query/z?c112:S.CON.RES.44: (see section 504): “Individuals and businesses would be subject to taxation solely on income generated within the United States.” He said that therefore there would be no requirements to report foreign income or assets, consistent with the principle of territorial taxation. I responded that therefore senator Mike Lee’s tax reform plan would also solve all the problems that I described, and more.
    …

  22. @mark,

    Here is a link to the Shadow Raider’s actual PP presentation — I can’t get it to work Now I can, Try this:

    https://docs.google.com/file/d/0B7VqDyDIAgW2aWc0cFBhR1ZQNFU/edit
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  24. anybody remember where that profile of americans overseas is at?  I am searching around the flophouse and haven’t found it in there yet, as I can’t remember what month it was

  25. I went through all of the headings til April and didn’t find that pleasant posting about why US citizens live overseas, so I am using a substitute.

        As I see it, pension accounts must be filed on the FBAR?  Is there anything in the new 8938-3520 series which is for (non-Canadian) pension accounts? 

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