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.
@Ran
If you haven’t already done so, you can also try your question at http://www.expatforum.com/expats/expat-tax/.
It’s possible they would be better equipped to handle a “domestic” question.
Lawyer 2 has the best answer. Do you trust him or her? If so, I would go with his or her advice. You can file old FBARs online. Filing amended tax returns is a red flag. Streamlined is a can of worms and it is sent to the criminal division. You are hardly a criminal.
Ran, do you want to keep your green card? If so, a 4th option is to start filing FBARs going forward. Remember they are going to get hundreds of thousands of these things. If you don’t want your green card, file the form that ditches it and nothing else.
@tdott — thank you for the suggestion, I will check in with ExpatForum as well, and report back here if the conclusion there is different than here.
@Duke of Devon
Got it — thank you for the responses. Yes, keeping the green card is ideal, as I plan to continue working here. So, to summarize, your opinion is that I file current FBAR + past five years then? And, for the ones I am filing late, which reason should I use? Other + provide a separate statement for why they are late?
Once again, thanks much for your kind response, my gut feeling is also telling me that streamlined is simply not the way for me, precisely for the reason you mentioned.
When you check out the online fbar submission site, http://www.EfileFBAR.com, you enter the year for which you are filing. If prior to 2014, a drop down menu appears asking why you are late. Simply pick a reason- ‘ I didn’t know I had to, I thought I was below the threshold, the dog ate my statement- whatever. I suggest the ‘I didn’t know ‘- it’s true.
The other choice is to not file late FBARs. Only file 2014 on. Your choice.
Ran using other and attaching a statement is a flag-someone has to read the statement.
Awesome — that makes a lot of sense. Most likely, selecting “I didn’t know” is what I will do in case I file historical FBARs. If you have any thoughts as for only filing 2014 vs. back-filing 5 years, then feel free to share as well, but if not, I am extremely happy with the advice you have given so far — it makes a lot of sense!!
It will take years for them to sort out FBARs. They are a work in progress. There was a story that when they were filed on paper, they sat in boxcars in Detroit. No idea whether or not that was true.
Remember , their primary interest is big spenders, resident in the US hiding money ‘offshore’. When they find one, by whatever means, (say he was dealing with the wrong Swiss bank), they could go back and pile on the fines for not filing FBARs.
Also remember that FBARs come under a different law than income taxes.
In your case I suspect it will make no difference whether you file 1 yr., 5 yrs., or 8 yrs. Not sure why you pick 5. Lawyer 2 might have an answer that is better informed than mine.
@Ran Björnelid
I have to disagree with @tdott about recommending the expat forum. In particluar, there is one apologist (paid troll?) for CBT, FATCA, FBARs and everything else american who consistently gives dangerous and very one sided advice. Beware.
@notamused
I know who you are referring to and I totally agree that he is a CBT/FATCA apologist. Having said that, he is undeniably knowledgeable and I find the actual information (as opposed to opinion) he provides to be accurate, albeit in a dot the I’s and cross the T’s sort of way. So, I would separate the 2 aspects – provided information vs leanings of the provider.
Also, I would point out that the person moderating the forum is a former US tax accountant and she often provides counter-balancing advice to the person mentioned above. I find this to be useful – getting the by-the-book point of view and the what’s-practical/push-the-envelope point of view. And there are a few other regulars there, at least one of which is a Brocker, who will also provide counter-balancing advice when warranted.
Finally, I would point out the Ran is a US resident, presumably with assets in the US, and with a Green Card he wants to hold on to. And for all we know, he’s looking to one day become a USC. Unlike almost all of the rest of us he can’t fall back on a treaty right to deny the US the $$ it may claim is owed should he take a misstep.
IBS is an unparalleled place for USC expats to get advice; but, IMO, it is less effective when it comes to a US resident’s queries, which makes sense given that the vast majority of Brockers are not US residents dealing with US resident type problems.
I still read the email q and a’s from Phil Hodgen’s site (note, this is not posted here as an endorsement or an advertisement). I don’t need the advice and information myself, but I still remember the depth of anxious mystification and fear I felt while trying to get out of the taxable citizenship morass I was shocked to find my self enmired in – just because I was born there and live outside the US.
For all those newly arrived at this impasse, or those who are still grappling with how to and whether to renounce/relinquish and are stuck at wondering about how and whether to comply with the certification that you have complied with past specified years of filings, here is something about FBARs in relation to that certification.
Hodgen’s site offers practical information, you can send him questions via email (can even be an anonymous one) and you can weigh out his answers to see if you feel they work for your specific situation. I could really have used some of that back in the early days. I subscribed to his various email of the week offerings and still read them even though I personally no longer need them.
Here is the FBAR link I’m citing;
http://hodgen.com/expatriating-without-filing-fbars/
Hope this helps some of you out there.
@tdott
You make some valid points about the information provided there, e.g. providing references and pointing people to the right place in the documentation, etc., however I see the need for people to be extremely wary about the conclusions drawn from that information and the advice given. At IBS, people may receive differing opinions on many issues, but I think those giving advice here generally have the questioners best interests in mind; over there I don’t get that impression at all, to put it diplomatically.
Again, just for reference, but not an endorsement, here is an interesting description of what an FBAR audit might entail – in this case cited, after an OVD/I/P opt out. Read the whole post:
http://federaltaxcrimes.blogspot.ca/2013/01/steps-in-ovdip-processing-and-opting-out.html#comment-2121570604
Excerpt:
“The general topics that were asked about were:
1. Education
2. Business experience (both spouses if married couple)
3. History of return preparation (duties assigned between H&W and then between couple and return preparer if one was involved).
4. More detailed questions about the return preparer if one were involved (such as the taxpayers’ completion and submission to RP of organizer, questions RP asked about foreign accounts, etc.)
5. If accounts were moved, why they were moved.
And other case specific questions.
Basically, the audit is an FBAR audit.”
Another reader posted http://federaltaxcrimes.blogspot.ca/2013/01/steps-in-ovdip-processing-and-opting-out.html#comment-2123945848 a link to a column by a practitioner Rettig, in Forbes for the questions listed;
http://www.forbes.com/sites/irswatch/2013/06/12/irs-fbar-voluntary-disclosure-program-taxpayer-interviews/
Again, I do not post these as adverts for the practitioners, but in hopes they might help some small Davids facing the IRS/USTreasury/Goliath.
Okay, this strikes me as decidedly odd. I filed my final US taxes earlier this year, having renounced in 2014. Today I received a Notice CP51C from the IRS saying “After reviewing the tax return you sent us, we calculated your 2014 income tax for you using the married filing separate filing status. Based on the tax we have computed and your payments and credits, you don’t owe anything.” It includes a billing summary showing no tax owed and it also says “You don’t need to take any action at this time.”
I have been a DIY overseas filer for a number of years and have never owed tax or received one of these notices before. So why now? I’ve never heard of anyone else getting one for their final year of US taxes either.
Not that I’m complaining about a receiving something that seems to show I’ve actually managed to check out of the system correctly…
@Verity, maybe because you have renounced? Could this actually be the IRS getting its act together and deciding that people who have renounced and filed do deserve to have a piece of paper to say they owe nothing? How wonderful if true. Keep it with your CLN and make copies of it to keep in other places just in case. And congratulations for checking out of the system.
I posted a question to this forum about a month ago, and got some great answers from all of you. I would now like to share everything I have learned since — in a summarizing post.
My original question / case
——————————-
* 5+ year green card holder, EU citizen
* Looking to potentially get US citizenship
* No FBARs filed (ever) (at the time of asking the question at least, which was June 2015)
* Aggregate foreign balances of $30-$100k in the last 6 years, not reported anywhere
* Total capital gain + income from accounts less than $1000 per year (and in most cases, as little as $200 per year), but never reported on US tax returns
* Everything fully taxed in home country, and no taxes owed in the US even if it had been properly reported here
* Had contacted 3 lawyers about how to come into compliance, and gotten three different responses
– Lawyer 1: Go with Streamlined Domestic
– Lawyer 2: Follow the Delinquent FBAR procedures since there are no taxes owed
– Lawyer 3: Amend 3 tax-returns, and back-file 6 FBARs.
Some of the responses from here on Isaac Brock
——————————-
a) * Lawyer 2 has best answer…
* Streamlined just opens a can of worms, don’t do it
* Amending tax returns is a red flag
b) * Simply file FBARs going forward
* Do nothing else
* Use the “I didn’t know” option when filing FBARs
* Don’t attach any written statements (someone has to read them -> red flag)
Some responses from the Expat Forum (I cross-posted the same question there)
——————————-
a) * File past 6 years FBARs as a first step
* Select “I didn’t know” as the reason for the late ones
* Potentially amend tax returns as a second step
b) * File past 6 years FBARs as a first step
* Do nothing more
c) * File FBARs for the last 6 years
* Use “I didn’t know” as the reason
* Review tax returns / amend, as need be
What I decided
——————————-
I filed 6 years worth of FBARs (this was the one thing nearly all commenters agreed on!), and I will continue filing going forward, both as the FBAR goes, and also including any foreign investment income on my US tax return. A word of note here — which wasn’t really a factor for me as my wish would have been to be in compliance anyway — would be to everyone that lots of European banks will start reporting this information back to the US this year. So coming into compliance before that happens, arguably would be the better the option, in my opinon.
Regarding tax returns / amending: at this moment I haven’t yet amended any tax returns for any of the past 3 years, as I’m still undecided on whether it’s worth it (primarily talking about my time / their time, the effort needed, and the cost of filing, potentially paying an accountant as well, and also the fact that I am wondering if such action could come with the risk of opening up issues and just having the potential to be another huge time sink for me. Someone said “let sleeping dogs lie”, and while my own preference would always be to do these things as “correctly” as possible; given the threatening language and scare tactics that the IRS employs, I’m quite frankly concerned that any benevolent actions on my part could backfire. Who knows.
Best of luck to everyone else and thank you all for your ideas and insights!
Ran
Does anybody know what the deal is with IRS form 8833 regarding Canadian Registered Pension Plans?
I’m not talking about RRSP’s here; I’m talking about an employer, defined-benefit plan.
I’ve heard from one accountant that I do not have to file this to defer income earned and another accountant says I do have to file it. I’ve scoured the web searching for answers but cannot really find any.
I’d appreciate any help.
This very brief excerpt appears to say you do not.
https://www.kpmg.com/Ca/en/IssuesAndInsights/ArticlesPublications/TNF/Pages/tnfc1443.pdf
You are however supposed to file FUBARS and 8938 if you are over the threshold.
Go with the first accountant.
Thanks Duke of Devon. These new procedures come attached with so many caveats that it is hard to meet the criteria. I know I would not qualify, because an accountant I used added in the pension adjustment as other income on my 1040 (this was how things were done before 2009). However, what I am trying to find out is if they were also supposed to file a “blanket” 8833 to take a treaty position to defer the earnings IN the plan as well. Just wondering if others have had experience with this form.
My biggest frustration with the IRS is that, with every new “rule” or “procedure” it’s never truly retroactive. It’s like they are throwing the rest of us under the bus.
One mistake we make is to assume the IRS has a way to check what you do. Or that they care. I still say go with the accountant no. 1.
Duke of Devon, If I had a sane “voice of reason” in my head, I would heed your wise words. Unfortunately, the stress of “coming into compliance” (hate that IRS term) has caused me to question my very existence and shaken me to my core. I just don’t want something to come back and bite me in the butt.
Forgot to add that I am expatriating, so I feel like I am being forced to walk through “checkpoint Charlie” with a giant spotlight on me. I’ve come to believe that the US Govt. wants their pound of flesh with everything.
We believe that a large subset of renunciants are not bothering to come into compliance in any way. Depends on what ties remain to the US. Look what happened to Marcio Pinheiro. He tried his very best to come into compliance. It ruined the last few years of his life.