US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
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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.
Hello Brockers, I wonder if you might comment on my question: If a former US person living abroad entered OVDP and the penalties were more than she had in her overseas account, and that money was literally all she had in the world, would they take it and force her to be homeless? Thanks…
@basilalgorithm
How did you end up in OVDP and not Streamlined?
@Bubblebustin
Well, it all looks too willful I’m told…long time of checking ‘no’ on the forms and so forth, so the counsel’s recommendation is the OVPD. Haven’t done anything yet.
@basilalgorithm
When did you become a “former US person” exactly?
@basilalgorithm
If you were not paying tax on the gains of these “foreign accounts”, and those accounts were foreign to you (not just the US), and if that tax would have been significant, then you could indeed have a problem needing OVDP.
OTOH, if:
– all accounts were local to you (“what do you mean ‘foreign account’? that’s my bank across the street where I put my paycheck and do my chequing”. how is that foreign?)
– tax was paid on the accounts
Then in my non-lawyer opinion, which should be taken with a huge grain of salt, Streamlined would be appropriate.
If there would have been tax but the tax would have been minor, then Streamlined may still be appropriate. Minor tax would support the idea you weren’t a tax cheat in the Swiss account mold.
OVDP opens a world of hurt, so if I were you I’d want to avoid it if at all possible.
You would have to tell us a lot more about your situation and why exactly your counsel wants to go with the nuclear approach of OVDP. Note that unless you have good reason to have 100% faith in your counsel, I’d also take what he/she says with a grain of salt – many tend to take a strict CYA approach (which coincidentally helps make their BMW payments), even though the risk of a less drastic approach is quite minor.
They would try. OVDP is not for you. It is meant for big time rich tax avoiders. Do anything necessary to avoid it. More info needed to help you.
But they said Streamlined would probably catch me, because of ‘badges’, so otherwise I must just do nothing and see what happens. I filed all the stuff after renouncing, five years etc., but I didn’t say about the overseas account, so I’m told its perjury.But I don’t live there, the money was an inheritance and never touched there, I just never told about it and checked ‘no’ every time. Will they chase me? I have nothing there, but the amount was quite large in 2010, because of the exchange rate, more than one million, but now half that, because I bought a house overseas. I haven’t been there in 8 years. But I have nothing else, so no job, no other choices. Last year I renounced.
@basilalgorithim
Well, at the risk of stating the obvious, $1M is not a small amount.
So questions:
– Did that money earn interest, dividends, capital gains, etc?
– If so, was US and/or non-US tax paid on it?
– If not, how much income was it (each year)?
Re the overseas house you bought with the inheritance money:
– Is/was it rented out?
– If so, was US and/or non-US tax paid on this rental income?
– If not, how much rental income did you receive (each year)?
– Has it since been sold?
– If so, was US and/or non-US tax paid on the gain?
– If it was sold and tax not paid, how much was the gain?
Feel free to ignore questions if you don’t want to divulge info.
And, to repeat, IANAL or any type of tax professional, so take anything I say with a huge grain of salt.
@tdott
Yes it made some. They don’t give a statement, but I have asked. It wasn’t included on my forms, ever. I don’t really know how much it made, but I think not a lot.
The house is where I live, and I bought a car too. Then I had some sent time to time for five years for medical bills, living expense etc. So now there is about half left but the bank says will hold it if I don’t OVDP, but if I do then it will be gone and I will be finished. I heard of these things and renounced last year. I have the cln form.
I will never go back. I have nothing there. I am afraid they will send men to arrest me and take me to the USA for prison.
@basilalgorithim, don’t worry. No one’s going to send men abroad to arrest you.
But who exactly is saying this to you. Your tax counsel or the bank? You said you’ve done your filing so why now is your counsel/bank querying it? If the filing is done I would enter neither as there’s no need.
@Medea Fleecestealer
The bank says I must OVDP. But in filings I didn’t put this outside account, and I checked ‘no’ on the box each year for outside account. So now I am in trouble.
@basilalgorithim –
Do you know what FATCA IGA is in force (if any) in the country in which the account is held? Are you a citizen and/or resident of that country?
@iota
swiss. I do not live there.
@basilalgorithim – unfortunately, if I’m not mistaken, the Swiss IGA is a Model 2, which means the bank may be feeling very vulnerable to US withholding threats, and may behave in whatever way it decides is most likely to avoid US withholding sanctions being applied. But I’m not a lawyer, and not even a Swiss resident, so this is just my amateur guess.
Thinking about what your options might be, in order to make it clearer which is your least worst course of action – If the bank is saying it wants you to enter the OVDP – are they certain that as a former citizen you would be allowed to do that? Is it open to former citizens? Can’t find any statement about this on the IRS website.
@basilalgorithim, why is your Swiss bank even asking you about this? Presumably you sent them a copy of your CLN when you received it and they should have sent you a W-8BEN to sign. That should have been the end of the matter. Why are they now querying your tax situation?
@Medea Fleecestealer – it seems possible that the provisions of the Swiss Bank Program (https://www.justice.gov/tax/file/631356/download) might be relevant.
Paragraph 5 of the “Program for Non-Prosecution Agreements” includes this:
If the bank is seeking a NPA under this program, that might possibly explain why the bank is asking the OP to enter the OVDP. But again, I’m not a lawyer, so it’s only my guess.
Basically (if this is indeed related to the Swiss Bank Program) it appears that the IRS uses the provisions of this NPA program to get the bank to either
(a) supply information to the IRS about US Person accounts, or
(b) put pressure on the accountholder to supply the information themselves by entering the OVDP.
But, as I say, that’s just my guess. IANAL
@medea@iota
As part of the Swiss npa, I believe banks are required to supply backdated info to the IRS of accounts held by US persons from 2008 onwards.
Basil did not renounce until 2015, so she/he would need to show ‘proof’of his/her fbars to the bank.
@basilalgorithim – there’s a list of the banks which have concluded NPAs at https://www.irs.gov/businesses/international-businesses/foreign-financial-institutions-or-facilitators
Is your bank on the list?
@Basilalogarithm
Has the bank asked you to sign a non privacy agreement?
I suspect the bank is trying to protect itself from a 30% withold by the IRS.
Have they frozen your account? Can you transfer your money to another bank?
@heidi – the “Program for Non-Prosecution Agreements” stipulates:
From which it seems that if the bank has indeed concluded a Non-Prosecution Agreement, transferring funds may not be an option.
Iota
Yes, I thought that may be the case. So unfair, that a simple gift of inheritance received by a US person living abroad can be all but confiscated for the omission of a tick on a tax information form.
Swiss banks are running scared, I am surprised that as a non resident Basil still has an account there!
If he is able to transfer the funds, they may be safer in his country of residence if he can show their inheritance origins.
While I agree to a certain extent, I still wonder why the bank is querying this. If a CLN has been provided and a W-8BEN signed that should be the end of the matter. If that hasn’t been done then basilalgorithim should send them a copy of the CLN and also tell them that she’s already filed the necessary years. If she can provide proof of that with a copy of registered post delivery of the filings that should be it.
Unfortunately I fear you have disclosed too much to your bank/counsel and are probably now stuck with entering either Steamlined or OVDP. The problem is the bank can and will freeze the funds until they’re satisfied and there’s not really much that can be done about that, but to comply. You could do nothing, but the bank will report the account to the IRS anyway and the funds will still be frozen.
I did get such a letter from PostFinance about the OVDP, but I was able to tell them I’d already entered Streamlined.
And how are you supposed to show proof of FBAR’s when they’re file electronically these days? Can you print off a copy for yourself? I did mine under the old paper system.
@heidi, Basil is a Swiss national so they may give some leeway on this, especially as they’ve now renounced the US citizenship. But transferring the funds is no longer possible. The bank is alerted and they will not allow a transfer/withdrawal until they’re satisfied of compliancy.
@Medea Fleecestealer – unfortunately renouncing doesn’t give one protection from audit for years prior to renunciation, until the Statute of Limitations kicks in. If the non-reporting isn’t accepted as “non-wilful”, then as I understand it, the Statute of Limitations doesn’t apply.
But perhaps it’s different if the bank hasn’t concluded a NPA. Fingers crossed.