US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
Please ask your questions here about US Expat tax and FBAR.
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NB: This discussion is a continuation of an older discussion that became to large for our software to handle well. See US expat tax and FBAR: Discussion thread (Ask your questions) Part One.
Hi folks, happy Easter to you all.
I’m just getting ready to visit an accountant to sort the tax side out now I’ve renounced. I’ve got my 6 years of tax forms to take, but just want to check that it’s only the last 3 years for filing of any FBARs. I don’t know if he’s going to need to see the accounts, but I’m pretty sure that some accounts have been over the limit so I want to take details with me on Tuesday.
I have applied for a SS Number to become tax compliant so I can renounce my citizenship, but I have been denied twice. Is there any risk in just letting it go? I lived in the states until I was 16 but never had a SS Number. Does that let me off on the tax filing issue?
Nadine,
You are living your life in another country now and don’t plan to return to live in the US? Did you have a green card when you lived in the US or were you the child of parents with green cards or US citizenship, having gone to the US after your birth in a different country of which they and you have citizenship? / I don’t even know — do you have to have a social insurance number to have a green card? What reason were you given for being denied a social security number when you twice applied?
Perhaps you have a blessing in disguise.
You, obviously need comments from someone with more answers than me.
I’m DIYing my final part-year return and 8854. (I have some professionally done returns from past years to crib from.)
Two questions:
– How does a part-year return (first two months of 2012) differ from a full-year one?
– On part V, Schedule A of the 8854, how would I categorize Canadian mutual funds (RESP, LIRA, RRSP, all with the same company)?
@Medea Fleecestealer
Re: “some accounts have been over the limit”. I’m not sure what account limit you’re referring to here, but the filing criteria from the FBAR instructions are as follows:
1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
2. above means that all accounts (not just those over 10K) need to be reported if you have more than 10K in total. It’s nothing but harassment of course, but those are the rules.
Not sure about how many years you’ll have to file for.
Yes, that was the limit I was thinking of. Only two accounts, but added together they probably pass the $10,000.
@brokenman
On your 1040, only include any income you made in the first 2 months, you can still use the FEIE, but since it’s considered a dual status year, you are suppose to itemize deductions, you use the full basic exemption.Write dual status year on top of your 1040. Include a copy of 8854 with the 1040 and send a copy of 8854 to Philadelphia.
RRSPs, LIRA, RESPs and TFSAs are trust accounts and go on line 9 of section V of the 1040.
April has arrived and I have finally gathered all my tax information for the current year. Last year at this time I was completing the daunting task of being compliant with the IRS. This was before the “streamlined” procedure was announced. So I filed 6 years of back taxes, 6 years of FBARs and letter that stated a reasonable cause defense. I did hear back form the IRS. It seems that I missed signing one of the tax returns.
So It seems that I must at least be on their radar. Since that time I booked an appointment with the embassy in Calgary and subsequently recorded that I relinquished my US citizenship in December 2008, when became a Canadian citizen. Early this year I received a CLN that in August 2012 I told the US that I relinquished on December 2008 dated January 2013. Yeah!!
Back to tax time. Like Petros, I have observed that the guidance given by the IRS is contradictory. I know that I should prorate my income for the 2012 tax year, but I can not find the instructions of how to state that that is what I am doing. I can see any reason that I should file the 8854. I will concede to the IRS that although I have not been a citizen since 2008, for “tax purposes” I will pretend to be one. So tax return is mailed to Austin and the 8854 is mailed to Philadelphia along with a copy of my tax return. And now here is my question:
The FBAR. This is not a tax form. The definition of who needs to file clearly does not include me. Is there somewhere in all of this that states that for “the purpose of the BSA” I need to pretend to be a US person? All the information that would include in the FBAR will obviously be stated on the 8854. Do I need to tell the men from Detroit that I will no longer be corresponding with them about that which has been none of their business since 2008? Will the men from Philadelphia send a note to the Treasury Department.
So far through all of this I don’t think I have rub any agent the wrong way and I would like to avoid that if I can. Has any any one else had a similar story to mine? How did you handle this?
From the latest ACA newsletter, a reminder:
Foreign Bank Account Report (FBAR) Online Filing Required in 2013
A United States person who has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. Currently, Financial Crimes Enforcement Network (FinCEN) can only accept FBAR E-filings when one signature is required. From July 1, 2013 FBARS must be filed online at the Banking Secrecy Act (BSA) E-Filing site. Please be aware that you cannot simply use an Internet search engine to find where to file the FBAR. There are third party online businesses offering FBAR e-filing services. It is best to go through the official BSA website of the US Treasury as per the link provided. You will then be asked to fill out a user application. IRS offers FBAR assistance in completing Form TD F 90-22.1, which is available Monday – Friday, 8 a.m. to 4:30 p.m. Eastern Time, at (866) 270-0733 (toll-free inside the U.S.) or (313) 234-6146 (not toll-free, for callers outside the U.S.). The form is available online at http://www.IRS.gov and Financial Crimes Enforcement Network Website or by telephone at (800) 829-3676. Questions regarding the FBAR can be sent to FBARquestions@irs.gov.
Thanks.
There’s some debate on the Serbinski forum about the concept of filing a final-year 1040 up to the date or renunciation and a 1040NR for the rest of the year, though it seems kind of nonintutive, even for the byzantine American tax system, for a single-citizenship Canadian resident in Canada with all Canadian income to file US tax paperwork, but there you are.
1040NR? Any ideas?
@Broken man
From what I read on Phil Hodgen’s blog, you should write “Dual-status tax year” on the top of both 1040 and 1040NR. Then the 8854 is attached. I can see the purpose of the 1040NR if you still have US source income, but as for me I have none.
I understand the one set should go to Austin and one set to Philadelphia. I have no ideas how the treasury in Detroit is finds out that they should no longer expect the annual FBAR.
This part of the process is so clear.(not) How hard can it be?
I thought you didn’t have to file a 1040-N.R. during a dual-status tax year if you had no U.S.sourced income during the part of the year you’re a NRA. I didn’t realise that the final tax return and 8854 had to be sent to two different addresses either… as for F-BAR, perhaps we should ring their helpline in Detroit or perhaps attach a note explaining that we’ve expatriated.
There’s a 15-minute audio interview called “IRS Targeting Tax Havens in Singapore and Hong Kong” with two attorneys at Caplin & Drysdale on “Accounting Today”. FATCA, a possible IGA with China and related topics are discussed:
http://www.accountingtoday.com/podcasts/IRS-Targeting-Tax-Havens-Singapore-Hong-Kong-66027-1.html
Bloomberg also has a brief article on this interview at this link:
http://www.bloomberg.com/news/2013-03-25/americans-moving-swiss-cash-to-asia-face-scrutiny-lawyers-say.html
Thank you 411 for your comments. I was born in the U.S. and lived there until I was 16. My family immigrated to Canada. I have spent most of my life in Canada. The reasons I received for not getting a SS number was that I had to prove I lived outside the US the second reason was I had to prove that I lived in the US. Which I can’t do. They said I would need to contact the IRS to find out how to file taxes. Doesn’t that seem ridiculous? I find it invasive and utterly frustrating!
@Nadine, I also recently looked into obtaining a SSN. I was born in US and left as an infant, so virtually all my life was spent in Canada. I was also told I needed to prove my life outside US, for example, present a history of school records going back to Kindergarten, in order to obtain a SSN.
Think about the irony – soon my bank will expect me to prove I am not an American, but IRS wants me to prove I never lived in the US, in order to get a SSN, so that I can pay US taxes. Something is twisted with that logic. In any event, I decided having an SSN wasn’t worth the hassle, and have become an official ‘ostrich’.
No one can forecast the future Nadine, but I think that if it an SSN is that hard to get, then maybe we shouldn’t try too hard.
@Nadine,
One suggestion I have for you is to take your time before deciding what to do. Read, read, and read some more, especially here at IBS. Understand clearly what your options are and the risks of each option. Take your time thinking this through.
Don’t let fear push you into a knee-jerk reaction that will be impossible for you to undo. The IRS has waited a long time for you to become a taxpayer, a few more weeks or months for you to take the time to figure out what is the best course of action for you won’t make a difference.
@brokenman
i also filed a 1040NR , as Phil Hodgens advises in his blog, even though I had no US sourced income. It was a bunch of zeros, but if it puts an end to it all, than fine.
@Worldwide You have it a bit backward, The 1040, 1040NR and an 8854 go to Austin, another copy of just 8854 goes to Philadelphia. The 8854 doesn’t have the same information as an FBAR, A final FBAR up to the date of renunciation should be completed as well. I put a letter with mine and told them I was no longer a citizen.
@Nadine
Just my opinion, but I wouldn’t bother with a SSN. You don’t need it to relinquish. You will get a backdated CLN to show to your bank if you ever need to or to cross the border. I would just forget about the taxes. If you don’t have a SSN, the IRS doesn’t even know you exist.
@iamquincy
Ah yes. Now I see it.
“Where To File
Send your Form 8854 (or a copy of your Form 8854 if you are required to attach the original to a Form 1040NR or a Form 1040) to this address.
Department of the Treasury
Internal Revenue Service
Philadelphia, PA 19255-0549″
I did not read the instructions close enough.
Attach 8854 to 1040 and 1040NR send it to Austin. Only a copy of the 8854 goes to the Treasury in Philadelphia. I presume that they tell the
U.S. Department of the Treasury in Detroit.
Is the
U.S. Department of the Treasury”
the same as
“Department of the Treasury
Internal Revenue Service” ?
Thanks for pointing this out.
Thank you so much for your comments! It is very hard to not feel alone and utterly frustrated with this whole thing! Thank you for your thoughtful advice! Your comments are greatly appreciated!
There is a need to obtain good advice on IRS tax matters for those unfortunate US persons living abroad, especially as there is, surprisingly, still no list of professional advisors with proven cross border experience we can turn to for high certainty of good advice at reasonable cost (I hope that some site will provide this information).
This is not the answer, but I mention the existence of a new publication “A Tax Guide for American Citizens in Canada” by Pound and Reed, sold through Carswell. I recently purchased the book for about $30.
I have no ties with the authors or book and have only disclaimers, and do not myself have practical IRS tax expertise to value the guide, but suggest that IB commenters who have purchased the book might advise whether guide was or was not helpful (e.g., much too simple). The guide actually mentions IRS 8854— the mean-spirited form I am now dealing with.
@Nadine
Were you also a Canadian at birth or did you become one? If you become a Canadian you may be able to relinquish your US citizenship instead. Especially good if it happened a long time ago. I couldn’t do that because I was born a dual & never had to become a Canadian. If you have children then the age you left the US would have ramifications for them as well.
In case you end up going the route of applying for SSN. I did that last year. You shouldn’t need to prove anything about your time in the US. Your US birth certificate should be sufficient for that part. (I actually did bring a school record from the US but they didn’t care & didn’t look at it at all) It does seem crazy & it’s a nuisance but they do want proof of your time in Canada. Their job is to make sure they don’t let people “in” that shouldn’t be. Kind of ironic. I used school records, a Driver’s abstract, an official letter saying that I’d had a provincial health card since whatever year, record of employment & a few odds & ends. You need to take the originals to show them & copies of everything to leave there. For school records, just phone the school you attended, tell them what it’s for & they can point you in the right direction. It involved some work & time to come up with stuff and frustrating to prove I was something I didn’t want to be. I only did it so I could ultimately be free but this road to freedom is fraught with challenges.
Can those above with 8854 experience (or anyone else) answer this question?:
Did any of you living in Canada include your (national) Canada Pension Plan (line #7) or equivalent elsewhere (e.g., in UK) or your US social security (line 6) as assets on 8854.
8854 appears to ask for these assets as they are pensions, but there seems to be no specific guidance from IRS on this. What did you decide to do and what were you advised to do by your tax people?
http://www.jdsupra.com/legalnews/the-50-fbar-penalty-are-you-at-risk-01793/
I particular like his last sentence …….“I wish you the best of luck “.
@IRSCompliantForever:
To help you find an answer, you might wish to review IRS Notice 2009-45 “Guidance for Expatriates Under Section 877A”, in particular, Sections 5 and 6.
http://www.irs.gov/irb/2009-45_IRB/ar10.html
I did not find any mention of government transfer payments such as US Social Security listed in this IRS Notice. Unless I discover otherwise, I am NOT planning on including an asset on form 8854 for expected US and non-US social security. (On the other hand, I plan to include a present value amount on form 8854 for my defined benefit pension.)
How Can the IRS Enforce Tax Collection Overseas?
http://blogs.angloinfo.com/us-tax/2013/04/01/how-can-the-irs-enforce-tax-collection-overseas/