I came across this today over at the ACA web-site.
[Editor’s note] In this post, ACA cites a law article:
Professor Allison Christians, of McGill University Montreal, has published in the July 9, 2012 issue of International Tax Notes an excellent article on FBAR and FATCA filing entitled “Could a Same-Country Exception Help Focus FATCA and FBAR?”
@christophe
Sometimes you have to trust your intuition. It’s the uncertainty (even within OVDI) that kills you. I look forward to your updated response from TAS.
I don’t see that a real solution in the end. People are diversified internationally these days for many good reasons such as to spread their institutional or sovereign risk or even just because they have worked and lived in more than one country. The real solution is to base everything on residency.
*I agree, Michael, that basing taxation on residency would make things so much simpler for us all! It’s just that the cross-border professionals and US politicians have a vested interested in maintaining the status quo. Let’s hope though that there will at least be some relief offered to expats and recent immigrants! 🙂
@monalisa1776, why just recent immigrants? I only learned about FBARs earlier this year, and none of my immigrant friends knew about them. Some accountants don’t even ask you about foreign accounts, even if they know you’re not from the US.
Where do we draw the line? 5 years? 10 years? 15 years?
That would be like saying only long term American expats are elligible for relief but not recent ones, because they should know with all the noise the IRS made about it since 2009.
Or only US citizen who emmigrated before the date they added that you’re required to file US taxes in the American passport.
I apologize if I am a little bitter in my response. Nothing personal, but I’ve seen that in several posts here and in other sites, and I disagree.
@Christophe
I have been reading your comments for some time now. My impression is that your problem is that because you didn’t know about FBARs, that you you have not been filing FBARs. Is there something more here?
Would you help me with an answer to this question. Why don’t you just file the dam FBARs and include a “reasonable cause” letter, get on with your life, lose the weight you say you have gained, either repair the relationship with your wife …
You cannot continue to exist in this horrible state of limbo and uncertainty. Is there some other factor here?
Here is another way of looking at this. You said that you were concerned about the issue of FBAR, taxes, etc. on your immigration status. These things might have a bearing on your immigration status if the issues escalate into “willfulness”. If you file these things, how can they say that you have “willfully” failed to file anything? Their chances of carrying their burden of proof on “wilfullness” are remote (and this is assuming that they have it in for you).
You should NOT enter OVDI – that strikes as a great example of “Homelander Cross-Border Professional Self-Serving Stupidity”. (Unless there is something else here that I am not seeing.)
Anyway, I know this is NOT my business, and what I am saying is obviously not legal advice or any other kind of advice. It’s just that I can feel your pain!
A final way to look at this:
The law requires you to file an FBAR. So, what are you going to do? Let the IRS (because of their threats of penalties) force you to NOT COMPLY with your legal obligations? Why don’t you just obey the law, even though the IRS is making it difficult for you to do so?
Finally, the IRS does not have the statutory jurisdiction to impose an FBAR penalty if there is “reasonable cause”. So, …
The statute of limitations on FBARs is 6 years – so file 6 years worth.
Re: The “reasonable cause” letter – this is something you should get professional help with, is probably worth spending some money here. The reason is that “ignorance of the law” is NOT in the absence of other factors good enough.
I am going to stop now.
@Renounce, Christophe, Please read FAQ 17 of the recent OVDP publication of the IRS. The question comes down to how much tax liability went unreported. Certainly if that amount was substantial, let’s say over $5,000 or $10,000, perhaps the IRS may consider a non-wilful fine. If it was in the hundreds of thousands, perhaps something a more substantial. But the IRS must avoid excessive fines. If the tax liabilty is low and you pay all the fines on that, a large FBAR fine would be a violation of the 8th Amendment, and it would be a type of double jeopardy. I think that Renounce is right, but should be qualified: it is probably a good idea to do as he suggests if your (Christophe) tax liability is minimal.
@Petros
@Christophe
Okay, here we go. @Christophe you need to get legal advice here. But, I do want to make a comment or two on this.
Q. 17 and Q. 18 appear in the context of the FAQs for the OVDP initiative/program. This is a subset of the traditional voluntary disclosure practice (which still exists). Q. 17 reads as follows:
“The purpose for the voluntary disclosure practice is to provide a way
for taxpayers who did not report taxable income in the past to come
forward voluntarily and resolve their tax matters. Thus, if you
reported, and paid tax on, all taxable income but did not file FBARs, do
not use the voluntary disclosure process.
For taxpayers who reported, and paid tax on, all their taxable income
for prior years but did not file FBARs, you should file the delinquent
FBAR reports according to the instructions (send to Department of
Treasury, Post Office Box 32621, Detroit, MI 48232-0621) and attach a
statement explaining why the reports are filed late.
The IRS will not impose a penalty for the failure to file the
delinquent FBARs if there are no underreported tax liabilities and you
have not previously been contacted regarding an income tax examination
or a request for delinquent returns.
Non-resident taxpayers should also review the Filing Compliance Procedures for Non-Resident U.S. Taxpayers if they do not qualify for the procedures described in this FAQ.”
What this is saying is that if there is NO unreported income then do NOT use this particular program (2012 OVDP), file the FBARs with explanation, refer to Q. 17 in your explanation, and you get a pass. This does NOT mean that if there IS unreported income that you MUST use OVDP. It also does NOT mean that if tax is owing, that you automatically get an FBAR penalty.
The existence of at least three IRS programs/bulletins underscores this point:
1. The December 2011 FS does contemplate (read carefully) the possibility of tax owing and no FBAR penalty.
2. The June 26/12 announcement that Q. 17 links over to the new thing that we will learn about on August 31, 2012.
3. Traditional voluntary disclosure that clearly contemplates that tax is owing (that’s the only reason you would use it).
My reading of this is that one can owe tax and still not be hit with FBAR penalties (arguing reasonable cause, etc.)
Now if tax is owing, the most the IRS can do is use the fact of tax owing (assuming it is tax owed on undisclosed accounts) as an interpretive aid (you did not report these accounts because it was your intention to hide income) to decide whether there is reasonable cause. Remember that the FBAR law is in Title 31 and the tax in Title 26. There is no legal/statutory connection between them.
Remember also that if one is talking about accounts and amounts of unreported income that have the following characteristics it will be helpful:
– all the income was legally earned and was reported in the home country (if it was required to be reported)
– the accounts were in a jurisdiction that the person lives in or resided in
– the accounts were in a jurisdiction that is not understood to be a “tax haven” (in other words low tax).
then this would presumably help on the “reasonable cause”.
@Christophe
I am not giving you legal advice of any kind. I just can’t stand to see you in such pain. My impression (but I don’t know) is that your facts are not particularly bad. The U.S. did not tell you about FBAR when you arrived. You are not married to an FBAR scholar. Please, for the sake of your sanity, talk to somebody about your specific facts and get beyond this!
Now, I did not say, just go talk to somebody. I said talk to somebody about your facts. This means that you need to find somebody who will take the time to understand your situation. If you go to somebody who without a fair analysis of the facts, tells you to go into OVDP, you are just dealing with an idiot. You do NOT have a tax problem (any accountant can fix that). You have a compliance problem (which requires some judgment). Also, get your tax information together and begin with a determination of whether you owe tax, etc.
@Marketpinetree
Does any of this apply to you?
Finally, we are now involved in a technical discussion, so I repeat this is NOT and cannot be construed to be legal advice. But, it would be interesting to hear from Michael and Steven on this.
But, whatever, you can’t continue to be frozen like a “deer in the headlights” so to speak.
@renounceuscitizenship, Thanks for your message.
Well, there’s a little more: like Moby, the wrong box is checked on my 1040, and I never declared the interests generated by those accounts (checking and a couple savings). Except for the year 2005, where I had a tax liability of about $3000, for the years 2006 till this year, the tax liability is around $120/year (account value at ~19000).
I declared everything correctly for 2011 (interests + FBAR).
I got all possible advice from the attorneys I contacted: from you have no choice but to enter OVDI, to quiet disclosure, to just go forward. So I haven’t done anything more than just filing correctly my last tax return and FBAR, but keep worrying about my green card not being renewed, possibly being charged for filing a false tax return for having the wrong box checked and being deported. My wife tells me I am paranoid.
@ Christophe: Did Hodgen say that 2005 just graduate from statute of limitations regarding FBAR?
Also, in the case of Williams, he checked no. He was big fish and the initial court said that did not establish wilfulness. I’ve check no all these years too. Not me, but my tax preparer. Having a tax preparer, as far as I know, make a mistake, counts towards reasonable cause–or maybe not.
@Christophe
Okay, so you are worrying yourself to death. Did you prepare these returns or did you use a tax preparer. If a tax preparer, did they not tell your about FBAR? They must have known you were from France (is that right)? Okay here is how I see this:
1. Forget the OVDP.
2. Emotionally you need to deal with these past issues.
So, the question is how to deal with the past. It looks to me as though you want to clean this up. Here is what I suggest:
1. Redo your taxes and see what your tax liability may be for each year.
2. Assuming small amounts, then decide how to get amended returns in and pay any tax owing and file FBARs. In this order:
A. file amended returns with an explanation (including payment of any tax owing);
B. then file the FBARs (you do this second because your reasonable cause letter can then say that no tax is owing from the undisclosed accounts).
Make it clear in the letter that you are letting the IRS know exacatly what you are doing.
If what you are saying is true, this really seems to me to be a simple “clean up” situation. Then you have absolutely protected yourself from any (remote as I believe they could be) charges that could affect your green card status.
What you need at this moment is a lawyer who is willing to spend some time with you – be prepared to pay a reasonable fee for this.
Once again, this is not legal advice, but it is advice to get legal advice.
Also, I believe I read that the issue of checking off the box on schedule B (or not) is just one factor. Who did your taxes?
Get unstuck!
I used Turbotax. I can only blame myself for skipping the foreign income section. Since I work in the US, I did not think I had anything to report there. Turbotax doesn’t force you to go through all the sections.
Geithner also used TurboTax (or so he said in a YouTube video). Hell, if it it’s good enough for him it should be good enough for an honest taxpayer like you. To be an honest taxpayer you don’t have to be a perfect taxpayer. Also, the fact that TurboTax did not guide you properly is all the more reason to get these things done property.
You have got tens of thousands of dollars of worry in this. Plus, if your marriage is on the rocks, the cost of divorce. So, get at it … But, get some help.
Also, you should check the default setting for the answer on schedule B on TurboTax. I suspect that there is a default setting of “No”.
Of course you have nobody to blame but yourself. But, that does not in and of itself mean that you are deserving of FBAR penalties.
@Christophe, I agree with the others that you are probably worrying too much. The only reason I said ‘recent immigrants’ is because I assumed that most countries tax residents on their worldwide income because the UK does (where I live). But of course, many countries may not for all I know…as for your situation, I believe the fact that you genuinely didn’t realize you had to report the overseas interest (especially if it had already been taxed) should be considered an understandable mistake. Furthermore, you would be approaching the IRS first rather than them finding out; you would thus be making a good faith disclosure. And thirdly, because the amounts we’re talking about are modest, I honestly don’t think they’re going to want to make a big deal over it. You might even find that with foreign tax credits that you may not even have any additional tax liability.
Again, you need to seek advice but I instinctively don’t think you need to go to OVDI. I do appreciate though that you’re very worried because of all the Green Card issues but am optimistic that you should be fine! 🙂
*I am not sure if this will help. But I know many greencarders living in the USA. So far I have not crossed one who filed the FBARS. A lot did not even know about this. But I always give my opinion that they should start filing them. One thing they also don´t know is that if they had property when they got the greencard, even if it was bought years before, the day they sell it they will have to pay capital gains tax to the USA. They should be told all of this when they received their welcome package.
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