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*Dazed. Your accountant is a wise person. Even if the rules don’t change. There is no need for you to be fearful. There is no need to avoid going south. I presume you were born in Canada. If so, travel on your canadian passport. Nothing bad will happen. There are far too many scary scenarios that are simply not going to happen being bandied about. take a deep breath, relax, ask yourself if the US gov. has the resources or inclination to bother with someone in your position. . A recent GAO report strongly advised the IRS to shift more of its’ resources to returns of those with > $200,000 in income. They are hardly going to devote time to a Canadian they don’t know about.
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@abpat
It really bothers me that the Immigrant dilemma gets less attention in the media that the meager attention U.S. Citizen expats get.
I hope you do not have signing authority on the accounts your parents opened for you. If you don’t then I don’t think you have a problem. If you do, and the amounts exceed the $10K aggregate in any year, and haven’t been filing FBARs and/or didn’t file the FATCA form this year, it will not be a happy time for you as you try to figure out how to be compliant without paying exorbitant penalties. The best route for accomplishing that is not a simple answer.
It would be very hard to give you advice here with that set of facts. I know of several Indian immigrants who have been ‘reamed out’ in the 2009 OVDP programs. I know of another who entered thinking he would be meekly treated. I don’t think that was the case. So, would be very cautious about even considering it. You might want to read this blog post about the arguments for and against Quiet Disclosures instead of any of the IRS OVDPs. One attorney,who used to post here, advocates Noisy Disclosure as an alternative to OVDP. That may or may not apply to you, again depending on your facts.
You may need professional advice, but that is a Buyers Beware world too. Sadly, the IRS practices do not make your road to compliance easy or cheap!
@HKGS
Petros probably provides the best advice that can be given in a blog context. It is impossible to fully analyse and advise via posts, and you would be a fool to take advice from a blogger as gospel anyway, but I think you know that. 🙂
This old post with lots of back and forth between competent attorneys might be helpful for you. As you can see even the so called “experts” disagree as to the best path to pain free compliance. Actually, I don’t think there is such a route, as any decision comes with risk, anxiety and LCU cost if not out right US “dollarette” cost.
Sorry Eric ruined your blissful ignorance. I was once in such a state, so I know how it seemed better at the time!
@Dazedandconfused
I see your one question wasn’t answered.
Yes, the IRS came out with Low Risk VD program if you meet certain technical requirements. The devil is in the details. It was blogged about here and here
Thanks for all the replies and leads. I’ve done a lot more reading tonight as I dive into this problem (there is actually some urgency to file as part of my wife’s green card application – a whole other story – otherwise I would wait until my normal June filing date). It is a bit interesting in that I’ve gone and plugged in the increased income from employer contributions plus gains within the retirement account, and the tax hit is less than a thousand bucks (even with grossly inflated gains)… hopefully not someone for which the IRS is actively hunting. I’m also wondering if the penalties might just be less if I just get caught and plead ignorance (vs. QD or OVDP). Hell, the rules say I’m unqualified for SFP, as I’ve filed returns, and I think by extension that means I can’t do the OVD’s either. It really is a joke… if you ignore your responsibility to file, then you can join our nice easy program. However if you filed and made a mistake/didn’t know (forget trying to willfully lie) then you’re stuffed. Believe me, if I didn’t have kids I’d just stay in Hong Kong… but it’s not a kid-friendly locality.
@Just Me
Thank you for the quick reply. I have already started talking with my CPA to resolve this issue. Also I would request you to give me some feedback on the following finer points of the matter.
1. I was F1 till Oct 2011 and have been in US only since 2009. So as I understand I am in fault for only the tax returns that I filled in 2012.
2. The Public Provident Fund investment is a retirement fund in India and it will mature in 2017. I have not put in any money in it. He puts money in it on his own accord and operates it. How do I know if I am the signing authority.
3. LIC is the life insurance policy. Again my dad operates it and they have not matured so I dont think it has any income.
I completely understand that this information is not complete but I am trying to know as much as I can before I sit down with the CPA.
@abpat
I really am not an expert on the finer points of these immigration visas and tax requirements, but generally speaking, if you are a U.S. Persons, for tax purposes, than the requirements of FATCA and FBAR apply to you. Key, to your exposure, is if those accounts are yours are in your name, and you have authority over them. If so, they have to be reported. But, your CPA, if they are a qualified tax practitioner should be able to answer that for you. If you are only at fault on 2012, then probably an amended return with reasonable cause letter would be his advice, I would think, but again, I don’t know enough to be sure. Don’t let him talk you into something you don’t understand fully.
Hi all! Me again. I’m beginning to wonder if I should sign “Old and Increasingly Paranoid”.
Trying to catch up with all the info on this site that might help me understand my situation as a low-asset, old relinquisher without a CLN, I’ve been reading the postings on the proposed IGA between Canada and the US both here and the feedback to the Globe article. I have sent emails to Harper, Flahery, my MP and the MP of his party in charge of finance and revenu questions.
Some questions:
1. I get the feeling from the feedback that people are assuming that the IGA would include collection by the CRA. Is this a legitimate fear?
2. Would the account threshold criteria be maintained or would the IGA mean all accounts must be checked for US persons? Would there be an active search for Canadian-born USPs?
3. And to be really pessimistic, if the CRA is to do collections, wouldn’t backdated CLNs become useless as we could presume the CRA would apply the IRS’s criteria of date of notification to the US consulate?
After reading the Deloitte accounting firm’s FATCA compliance brochure (which I posted yesterday on the FATCA thread), my feeling is that the best we could get as an IGA deal would be what they consider to be already the case, i.e., thresholds and no drastic change in Know Your Customer procedures, as well as continuing the no-collections against Canadian citizens policy.
The worst would be totally searching out all USPs and collecting fines and taxes according to IRS interpretations.
Here is a new method for compliance
Mexican Drug Smugglers Now Using T-Shirt Cannons To Fire Soup Cans Full of Marijuana Over Border
http://www.brobible.com/life/article/mexican-drug-smugglers-t-shirt-cannons
Just one more question (opinion surely) for those who may have read about my case above. I think I’ve sorted most of the issues but am left with one dilemma, capable of being addressed by following one of the two imperfect paths. When we purchased our foreign home we were assigned a clearing account by the mortgaging bank… I never thought much of it but technically this is a checking account and it should have been FBAR’d. We have two other bank accounts that have been FBAR’d for years. When we sold our home, the proceeds were deposited in that account (I probably should have just put them into my previously FBAR’d one, but what a tangled web we weave…) Now I have two choices:
1) FBAR this mortgage account including it’s large balance, and hope I don’t get audited solely for it’s sudden appearance, and asked why I didn’t FBAR it for the last three years (even though it didn’t really hold money for more than a short period). The income will be included on my 2012 return already, so I can show all the income… I’m just afraid it may get flagged. So the payoff is honesty (albeit having to also cry ignorance) if I do get audited, at the cost of perhaps making it more likely that I will.
2) Write myself a check from the non-FBAR’d mortgage account, deposit in the old FBAR’d account, and close the mortgage account (now that the home is sold, it’s not needed). In this case it may look more on the up-and-up on the surface, but if I DO get audited for another reason, they can ding me on both not FBAR’ing the old account AND trying to cover it up (though it’s not really illegal to write yourself a check, it wouldn’t look good)
Choice 1 does seem better, but the whole FBAR posse has got me so worked up about failure to report a single account that it’s clouding my judgement. They really do have a great racket going between IRS and practitioners… no wonder my Dad did well as a CPA.
1) non-willful
2) willful
Try a simple letter of explanation.
Thaks bubblebustin. The CPA I spoke to (actually my father’s old partner) advised to just FBAR the mortgage account this year w/o amending past ones. Would you say any letter of explanation needs to be accompanied by amended FBAR’s since the account was opened? The max balance of that account before the home sale was about 2k USD, but that’s beside the point. The CPA feared that amending would be noisier than the small risk of just including it from scratch starting this year. What I DON’T know is what makes FBAR alarm bells go off… is it sudden new accounts, or sudden new accounts with large balances?
Actually if the IRS compared my return (including 8938) they could see they money came from a home sale… but I heard they can’t/don’t compare the documents. Figures… it would only make sense.
@HKGS
Sorry, I’m not meaning to be glib, but you should go on your CPA’s advice because I’m pretty sure you can blame it on them for advising you to not amend you FBAR’s. It wouldn’t hurt to get advice from an accountant who specializes in cross-border taxes. I would think that you should only give a letter of explanation is it’s warranted. My experience is that the IRS is shifting sands, but that being said the Internal Revenue Manual offers guidelines on FBAR’s:
http://www.irs.gov/irm/part4/irm_04-026-016.html
I don’t understand why you folks, if you are even going to comply with FBAR in the first place (which is not a good idea in my view), don’t just open a couple dozen ING accounts/President’s choice free savings accounts. That way you can just tick 25 accounts and then give the IRS no information at all at all.
Good idea Petros. Screw the IRS Under their own words.
I had an attorney once who told me not to apologize for something prior to really being accused of something or being questioned for something. The explanation gave them reason to apply a penalty—-something like how a cop acts when he pulls you over for speeding.
@Petros
I don’t understand having a dozen accounts would exempt one from filing FBAR’s, splain, pleez.
@HKGS
The compliance question with the myriad of options is hard to get ones head around. It is all about risk assessment and ones tolerances, if your decision is to be compliant. It sounds like you have already decided that.
I can understand the CPA advising just a go forward compliance now that you are aware, and then play the audit lottery if you are pulled for examination later. I have not fully understood your facts, so this is not advise, but in that scenario you could play the reasonable cause argument with all the agent discretion that is available in a normal examination, if or ever an audit does happen.
Before you decide on your option, you might want to read @USCitizensabroad post here. Maybe there is something that will help you… I would read the comments too, as I just put something up related to the “quiet disclosure” that your CPA feels would be too noisy. He could be right or not. The IRS certainly doesn’t make it easy, especially when they are in the hunt for penalty revenue.
one dozen accounts with $9999 and no FBARs
one dozen accounts with $49,999 and FATCA bank software doesn’t find you to narc on you
Sorry bubblebustin, I thought everyone knew that if you had 25 or more accounts you, can just say so on the FBAR and then you don’t have to provide further information unless they audit your form. That means you don’t have to provide any account information at all.
This means that if you just open up a few online accounts at ING, Presidents choice, etc. you can easily exceed have 25 or more accounts. I wonder if you can also include things like Air Miles, Aeroplan, Petro Points, etc. as “financial accounts” and then just give reasonable cause in case of audit and they get on your case about adding trivial “accounts”.
@mark twain
Accounts equaling $10,000 in aggregate trigger FBAR’s.
@Petros
I’ve never heard of such a thing! What are the chances of not getting audited with such a cute manoeuvre?
@Mark Twain
Guys, I would be careful here. I am not an attorney, as you know, but there is a concept called “structuring” that allows the IRS to “get you”, so maybe I would not advocate for such schemes.
Yes bubblebustin’s “cute” comment is an ideal way to describe the anxiety I’m feeling of taking the wrong approach, which could raise a red flag and trigger an audit. Basically I’m saying “Hey IRS, here’s a new account I have (which in fact is NOT new) which just happens to have 600 grand inside, within the span of one year… if you want to check my return you can see where I got it.” However I am not sure they will do the checking… rather just sound the alarm. By amending I’m saying the above, plus “oops… forgot to tell you that that same account had a max of 2k for three years prior… my bad.”
I’ve tried really hard to find evidence – whether emperical or anecdotal – that describes in what conditions a red flag will be raised… is it a new account… a new account with a bunch of new money… ten new accounts with no money… etc, but there is very little out there. This might be a good thing in that it just illustrates that the IRS is in over their heads at gathering any sort of meaningful into via the FBAR process. Their move to paperless FBAR is surely a way to corral the beast a bit – and a guarantee that I’ll be filing paper forms until I am forced not to.
The net of this all is what other’s have said… it’s a damned shame that the majority of people being punished are those that are trying to do the right thing. Just like gun control laws, the tax regime only serves to punish the innocent. Career tax evaders will find workarounds to FATCA (and so could I if I was so motivated, and had anything substantial to hide).
The Hong Kong tax return is a grand total of four… FOUR… pages long, and takes maybe 30 minutes tops for any idiot to prepare. Hong Kong is awash in cash and all without a sales tax, and most rich people only paid in capital gains (which are not taxable). I guess I could argue that HK doesn’t have to worry about spending money on policing the world, but that’s a whole other argument.
I was just joking of course. Yes, google “structuring” and you will find horror stories—I saw one in the Swedish newspapers once where he had moved Money within the EU and his wire transfers were confiscated by the IRS.
Anways, anyone who is within 10 years of retirement is high on the IRS risk register—they are too responsible to have saved assets for their retirement—thusly they need to be audited. You might not be a 99%’er.