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.
@ Lynn,
Brock is a source for peer-to-peer sharing of information and experiences. So, one should consider what’s said here in that context, along with the research one does/has done themself on a matter, and bearing in mind that everyone’s fact set and risk tolerance is different. And always feel welcome to ask questions or provide info or commentary for others!
@lynn
My friend/colleague is a permanent resident here in Canada waiting to become a citizen. He uses Turbo Tax to file– it’s inexpensive and easy to use. He tells me he likes it because he can play with the numbers before printing his return in order to make sure he doesn’t have to pay the US a dime. He is an incorporated MD– he is very “creative” with what he reports to the IRS.
Would your daughter be able to relinquish her USC using an earlier date when she had no income to report? This would potentially simplify things for her.
lynn, If I may, I’m going much further.
Firstly, She absolutely doesn’t need to file anything before renouncing or documenting relinquishment. Secondly, if she relinquished before June 2004, there is a large body of opimion that no tax filings are required.
Thirdly, many of us including Peter Dunn, the brains behind IBS, feel that filing FBARs is not required for expats who have been away as long as your daughter. Fourthly, if she was a dual at birth she may have no exit tax obligations.
And finally , in my opinion, someone who has been away for 31 years and has never filed should not start now. She might not even have a social security number and they are a hassle to obtain. The IRS receives several hundred million tax returns a year. They have been saddled with Obamacare and FATCA. Their budget and staff are cut every year. They aren’t on the lookout for minnows living offshore. The only thing your daughter would ever get if she doesn’t file is a computerized letter.
You asked for qualifications. We paid $20,000 to a lawyer and accountant in 2011 and were advised to enter the OVDI. When we saw the outrageous fines payable, we declined to enter the system. We had never earned a penny in the States. Not a dickey bird so far and we aren’t expecting one.
No she doesnt have anither but has been excepted for another one has to give up the US first. and yes she knoews it costs 2350.dollars plus whatever she has to pay the tax lawyer. but Iwanted to know because he told her she had to file before renouncing. hense my question. so she can start the process for renouncing not have to wait until she has filed. now.
thanks
yes thank you again
no sorry no earlier date ,should have been smart and done it before she turned 18.
turbo might be an option although she has FBAR also. and never having anything to do with a US form of any kind might not be a good idea. will take it into consideration.
thanks
@Lynn, no definitely no need to start filing before kicking off the renuncation thing. As said, they’re two totally different things.
FBAR’s are filed electronically these days so it might be worth her while to look at the relevant pages for that too.
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR
If she decides to go with a tax professional then they can do the FBAR’s for her, she’d just need to sign an authorisation form to allow them to do so as her agent. They are fairly simple forms though, you just need to details all your account/s details – bank name, bank address, etc – and the equivalent American dollar figure. You can get the official end of year currency exchange rates here:
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Treasury-Department-End-of-Year-Exchange-Rates
I filed paper ones for mine so I haven’t looked at the electronic form, but I think you can play around with it without doing any actual filing so she could try it out and see what she thinks.
The main thing for her is not to rush into anything. She needs to do her research on what she feels she should do and only when she’s happy with her decisions/plan should she act.
Recent information on Phil Hodgen’s site may be helpful regarding what to do in filing the 8854 if the CLN hasn’t yet arrived (something I had wondered about). He says you can apply for an extension past that June 15th normal deadline — to October 15th, or beyond that to December 15th. (Scroll down in his post at the link below)
http://hodgen.com/a-renunciation-report-and-explanation-of-what-happened/
thank you again, i will have her read all your comments, she came overseas at the age of 8 went to school, college. and has never worked in the states although she does has an ssi number, applied for when they were kids in USA stupid i know, she is the only one of my 3 kids that even knows the number the others have a number but do not,know never used it although my son because of a sickness received SSI when he was 10 ? right before we expatriated. the numbers they have ,but unknown ,also my daughter will have to travel to the US for her job and is concerned about entering.with not complying.? (Reid amendment)
lynn
The Reid amendment is not a concern. It would require her to be in the system and to have had a tax judgement outstanding. It has never been enforced.
If you like succinctness, you’ll like the congratulatory note I wrote to my MP Pamela Goldsmith-Jones, the newly appointed Secretary to the Minister of Foreign Affairs. My MP and I are in regular communication over FATCA. The latest impression she attempted to leave on me was that our government was committed to upholding our Charter rights for ALL Canadians.
“Hi Pam,
Congratulations on you appointment as Secretary to the Minister of Foreign
Affairs.
Well we already know where Canada’s foreign affairs can benefit from some
improvement – the coercive behaviour of our main trading partner under
FATCA. US lawmakers still haven’t enacted legislation that would allow the
IRS to reciprocate with Canada under the terms of the FATCA IGA. Something
must be done about that.
Good luck in your additional role!
Best regards,
XXXX”
My last letter to my MP mentioned that the IGA is up for review in 2016 – reciprocity should be a bone of contention, IMO.
But renouncing would put her in the system or not ? even though I know IRS doesnt control CLNs guess the most they could do if she needs a visa for work to go to the US is deny it? this is the whole issue is being able to go to the US affiliate when needed. FYI the company she works for is NOT a US company.
lynn
Of note in the above mentioned Phil Hodgen post is this:
My 2 cents is that it’s logical that the “As of the date you sign and file Form 8854” would be the correct choice (why should it matter if you file the day before you renounce or the day after, as long as you’ve filed before finalizing everything is what should matter). But I’m an even more random person than Phil Hodgen, and IRS regulations don’t necessarily follow logic.
The IRS has created training materials for agents who don’t have experience in dealing with ‘international’ filings.
But, they contain dangerous assertions and rampant overgeneralizations that amply illustrate the rampant bias that the agency is still promulgating; that all or the majority of ‘foreign’ e.g. non-US accts were created and exist to willfully hide money from the IRS and evade US tax.
See the article:
http://tax-expatriation.com/2015/12/28/irs-creates-international-practice-units-for-their-irs-revenue-agents-in-international-tax-matters/
‘IRS Creates “International Practice Units” for their IRS Revenue Agents in International Tax Matters’
December 28, 2015 :
……..”…These IRS materials give a good perspective from where the IRS views the world; including the introduction to this particular IRS International Practice Unit where it states: “This Practice Unit focuses on a U.S. Person’s proactive steps to “conceal” their ownership of foreign financial accounts, entities and other assets for the purposes of tax avoidance or evasion, even though, there may be some situations where there are legitimate personal or business purposes for establishing such arrangements. This unit falls under the outbound face of the matrix and thus, will focus on U.S Persons living in the United States . . . Most U.S. taxpayers using an offshore entity or structure of entities to hold foreign accounts are simply hiding the accounts from the Internal Revenue Service and other creditors . . .” [emphasis added]
This is a breathtaking statement from the IRS internal training manuals that “Most U.S. taxpayers using an offshore entity or structure of entities to hold foreign accounts are simply hiding the accounts from the Internal Revenue Service and IRS Form 3520-A p 1other creditors . . .”?
The vast majority of the USCs or LPRs who I see who renounce or abandon their citizenship or LPR status, are living outside the United States and in most cases have spent almost all (if not all) of their lives outside the U.S.
Does the IRS mean that a family living in Switzerland that have dual national family members are “. . . .simply hiding the accounts from the Internal Revenue Service . . . ” if they are using, for instance, a Liechtenstein Stiftung to hold their family assets as part of an estate plan recommended to them by their Swiss legal and tax advisers?……”……
“……What role will these IRS “International Practice Units” play in forming perceptions and molding ideas of IRS revenue agents who have had little to no life experience in international affairs, multi-national families, global finance and international business operations?”………..
Disclaimer;
I am not posting this link or article at IBS as an endorsement of the US tax lawyer or his blog. This is posted for information and discussion only. I do however think that the materials and excerpts he cites show that there can be no fairness when the IRS is still making broad blanket and uncorroborated statements about non-US accounts – without underscoring that the local legal (and often already post-tax accounts of 6-7 million deemed US citizens and “US taxable persons” around the world have nothing to do with tax evasion.
@Badger
If that’s what the IRS is telling their agents then expect their agents to act accordingly – that there’s no difference in motive between a resident and non-resident. Expect to be treated no differently than a US resident hiding bank accounts overseas, with no chance to enter Streamlined once the IRS has contacted you. That is if you get their mail. FATCA’s lack of due process, enforced by rules that assume that the taxpayer is aware of his obligations and has been duly notified spell disaster for US persons abroad.
@bubblebustin;
There is no doubt in my mind that what the IRS is telling their agents is just a codifying of what they already believe in order to justify what they are and have been doing. They are ignorant of life outside the US, and would care less anyway – since they see no problem with deeming those born, living, earning and saving outside the US to be fictive ‘US residents’ for US tax purposes over a whole lifetime (how convenient) based solely on US parentage or whether our mother’s birthing bed happened to be located on US soil at the time we were born.
Consider those training documents coupled with recently reported statements by Koskinen “..“………. On December 17th at the George Washington University Law conference on international taxation, the Commissioner of the IRS John Koskinen said, “At some point, we will have assumed that people have had enough notice that they should have become voluntarily compliant,” “At that point—after some period of time and you’re not compliant—it will be assumed that logically you are purposely not compliant”……….” as reported here;
https://www.taxconnections.com/taxblog/streamlined-program-will-expire-larry-stolberg/
How is any of that consistent with the pretense of fairness, or the list of taxpayer’s rights?
http://www.accountingweb.com/tax/irs/irs-adopts-a-new-taxpayer-bill-of-rights
http://www.taxpayerrightsconference.com/agenda/
I’ve tried to warn people moving to the US from Canada for retirement, work, for marriage and for schooling – mostly to no avail. Or forewarned Canadian duals about FBARs and FATCA. And Canadians-only about buying US property and overstaying in the US for vacations and retirement to Arizona and Florida. They look at me as if I am stark raving mad and have two heads.
Here someone says there ought to be a law to pre-educate green card holders and would be PRs;
http://blogs.angloinfo.com/us-tax/2015/12/26/there-outta-be-a-law-teach-tax-basics-to-prospective-green-card-holders-and-naturalized-citizens/
“There Outta Be a Law! Teach Tax Basics to Prospective Green Card Holders and Those Naturalizing
December 26, 2015”
“…I am finding that green card holders and naturalized citizens who live overseas, are just now learning that aside from a duty to pay US taxes on income earned outside of America when one is not resident there, complicated and confusing tax information reporting obligations are required for their “foreign” assets. Most have never heard about the duty to file so-called FBARs which can result in harsh imposition of penalties if not done properly or in a timely fashion. The cost for professional tax advice and for tax return preparation can be very high when international tax issues are involved, as is often the case for both US citizens and green card holders who reside abroad or have overseas interests. The complexity is daunting for such individuals.
For many of my clients holding green cards, it comes as a rude awakening that even though the individual has not been complying with the terms of maintaining the green card for purposes of the US immigration laws, continuing to hold the card keeps the individual on the hook for annual US income taxes and reporting obligations. Many are under the mistaken belief that simply because their green cards have “expired” they are no longer US tax subjects. This is incorrect….”…..
The IRS and its Commissioner are willfully ignorant of the Taxpayer’s Bill of Rights. Unfortunately no penalties apply.
There is one set of rules for ordinary homelanders, another for ex pats and a third set for the super rich. Read the whole article to get the full flavour. Minnows should take note and stop fussing.
http://nyti.ms/1JdPnTY
I am a ‘US person’, resident in Canada for 40 yrs. Canadian citizen for 30 yrs. Never filed US tax.
What is wrong with me continuing like this, and accepting that I cannot go to US?
@ S.A. Muldoon, absolutely nothing providing your bank is happy. If they check their records and find you’re a US citizen or suspect you are then you’ll need to produce either a CLN or some other acceptable document that proves you’re not. Otherwise you risk your account/s being frozen or closed unless you can prove you’re either not a US citizen or are US tax compliant. It all depends on whether your bank knows or will suspect you’re a US citizen.
Muldoon. Relax and carry on. If you open a new account, you are Canadian only. You relinquished your Us citizenship when you became Canadian. At that time there was no requirement for aCLN.. The banks have no right to ask place of birth. Canadian banks have no right to close your account or ask if you are tax compliant. We aren’t Switzerland yet
There is no reason not to travel to the US on your Canadian passport. It’s done by hundreds every day.
If American citizens, even those who have never lived or worked in the USA have to report their bank accounts and file tax documents. Does this mean that these same people can apply for American tax supported services? Could students get a student tax refund, as an example? It would only seem fair that if the IRS needs to know about your bank accounts, that you would be able to utilize American tax refunds, etc. I bet this whole law would be thrown out, if the USA had to start providing social service payments and tax refunds to so called American persons in other countries.
@Tor12, nice idea, but the US doesn’t do fair. If they did we wouldn’t be here in the first place.
The IRS ‘Secret Plan’;
“…….The report cites the agency’s “future state” plan to use online accounts for the 150 million individual taxpayers and 11 million businesses seeking help and information as its number one “most serious problem for taxpayers” this year. Olson calls this a secret plan that IRS officials have not, and should, release to the public. And she says the public should, but has not, been consulted on its development.
Olson says the plan for online accounts will put taxpayers at a huge disadvantage if they are poor and don’t have access to the Internet, feel uncomfortable discussing sensitive financial matters online or need to resolve issues that are not “cookie cutter” questions that can be resolved by talking to a person (or computer) on line…..”……
NTA comments quoted from;
‘Secret plan shows the IRS wants to ‘get out of the business of talking with taxpayers,’ advocate says’
By Lisa Rein January 6
https://www.washingtonpost.com/news/federal-eye/wp/2016/01/06/secret-plan-shows-the-irs-wants-to-get-out-of-the-business-of-talking-with-taxpayers-advocate-says/
Read about the IRS Secret plan, and the rest of the identified ‘most serious problems’ cited in the NTA’s latest Report to Congress:
http://www.taxpayeradvocate.irs.gov/reports