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.
#mrfea
From what I understand, basil says the account is in Swit, but is not resident there. She does not say that she is a Swiss National.
All US persons who had reportable accounts over 50,000 had to supply Fbars to their banks dating back to 2008. . Basil has not done thiis, that is why her bank is requesting proof of fbars or enter Ovdp.
The banks can avoid a prosecution if they can show complete adherence. Even the post office bank post finance got a fine. They didn’t in any way canvas American money.
As far as I can see – entering the OVDP could well result in wipeout of the account, plus the risk of covered expatriate status (if certification condition deemed unmet).
The advantage of entering OVDP would be no criminal action.
@heidi, well it’s a bit confusing. iota asked what country the account was in and if Basil was a citizen/resident of that country. When they said Swiss I assumed the account was held there and that Basil is also a Swiss citizen.
Is that 50,000 an aggregate figure? Because my accounts were over that figure one year and I’ve never been asked to provide any copies of the FBARs. But then I was in Streamlined so that may have been enough.
Medea
Not sure about aggregate. I had only one account and was asked to provide fbars for all yrs back to 2008, (which I did), but I was not resident there for all that time, although I kept an Apt there.
@iota
Are you saying that if a bank has concluded a npa, then the dogs may be called off Basil?
@heidi – no, the opposite. If there’s an NPA, the bank is obliged to treat the account as recalcitrant, if I understand correctly. It’s not clear to me what exactly happens if the bank hasn’t concluded a NPA.
@iota
Now I am confused. Once the npa has been concluded and the fine paid depending on the number of recalcitrant account the bank has on its books ( based on those who cannot show fbars or refuse to enter streamline or Ovdp) then surely the banks only future responsibility would be to report any US persons on their books.
Only one or two Swiss banks refused to enter a NPA, they were local farmers banks who had no exposure to the US stock market. Even the local post office bank entered and received a fine, even though they had no US investment exposure, but they wanted to keep their options open.
Surely if the bank had not concluded a npa, then the emphasis would be to ferret out all non reported accounts.
@heidi – yes, that’s what I mean – they’re obliged to treat the account as recalcitrant.
With the result, if I understand correctly, that the accountholder can’t transfer the funds and is wide open to IRS audit and unmitigated FBAR penalties, if they don’t elect to enter OVDP.
@heidi – “Surely if the bank had not concluded a npa, then the emphasis would be to ferret out all non reported accounts.”
That does seem very likely. If so, I guess it doesn’t actually matter much, to the accountholder, whether the bank is Category 2 and has a NPA, or is Category 3 or 4 and has a “Non-Target Letter”. The account probably gets treated as recalcitrant, regardless.
@iota
Cat 3 or 4 have taken the safest route and thrown out ALL US tainted people, even Swiss temporarily in the US. Soon the only US persons outside the US will be the ones on vacation.
What a fiasco.
One more thought, @basilalgorithim – If the gain from the account is taxable in your home country under the relevant tax treaty (if one exists), it might be prudent to get up to date with that, before dealing with the US side of things.
@iota
Banks in Switzerland automatically deduct 35% from the miniscule interest they pay on all accounts. The sin of Basil is only in the omission of the information that’s the real travesty .
@heidi – interesting – who does the 35% go to? Switzerland, US, or country of residence?
@iota
Switz. But I guess if you live elsewhere you should be able to claim a tax credit. But we are talking about a pittance, current interest rates are around 0.1% and there is talk of a neg rate coming. It’s time for the bank of the mattress.
@heidi – It doesn’t matter how much or how little is due. The point would be to get straight with the home tax authority before joining battle with the IRS. If the IRS contacts the residence country, as is very likely, seeking further information, it would be just as well for them not to be told that there was tax unpaid there as well.
Iota
Yes, I see that. But it sounds like no tax would be owed in resident country. Basil said this was an inheritance and if so, it would be perfectly legit in any other country other than the USA. But we don’t know the whole story and as far as I can see there is precious little advice we can give.
@heidi – we seem to be talking at cross-purposes. basilalgorithim asked for comments on whether the IRS would take every last penny and leave her homeless. That’s hard to predict, but one way to improve the chance of a less-bad outcome would be to make sure everything’s straight with the home authority – the one where the actual property is located. If the residence country taxes its residents on their worldwide income, as many countries do, it might be prudent to make sure everything is in order on that front lest any outstanding problems might be used by the IRS in court, should it come to that. That’s why I made the suggestion. It’s up to basilalgorithim to decide whether it’s useful or not.
@iota
Yes, I agree, I think we are on the same page here, but we don’t know her resident country but if the account is in Switz then tax would already be paid on the interest on the account. Any EU country would give a tax credit to Basil for tax paid abroad. It is not a crime to have an account in another EU country as long as tax
has been paid but I doubt if this would make any difference to the IRS assesment of non disclosure.
@iota
Basil said that the property had been bought from the inheritance, on which estate tax would have already been paid. It seems to me the only problem is non disclosure to the US… A form crime.
@heidi – I don’t get your point, I’m afraid. basilalgorithim knows what country she lives in, and what her tax situation is – you and I don’t, nor should we. Why all this speculation?
I’m out of this.
@iota
I do understand what you are advising.
I just don’t see see why it would ameliorate the situation by squaring anything with her country of residence. If the tax has been paid on the inheritance, and the tax has been paid in the account interest then there is nothing to square. Surely it’s just the failure to inform the US that is her problem.
Let’s just leave it there, I don’t want to argue with a fellow Brocker. 🙂
@iota
I just wanted to say thank you again for your help with finding the treaty on the relief of double taxation of my SS retirement benefits. It seems the tax Dept here had assumed I was a US person , who do not get the same tax benefit as NRA’s do. They are dealing with it now.
I also wanted to apologise for any misunderstanding we had recently. I do understand that you were only offering sound advice but after Mr Schumers remark “There is no such thing as a simple Swiss bank
account”, I tend to be very defensive of anyone who has one. The majority of banks in Switz are just that, simple and what is more any interest is taxed by them at source.
Please accept my apologies for any offense caused.
@heidi –
I wasn’t offended by anything – just wary of extending discussion about the poster’s circumstances, given that from what was posted, she could be facing a very difficult situation due to the blasted IRS jurat. I wish her luck.
Glad to hear the SS taxation is being sorted. 🙂
Just came across this wonder if any of you law minded canadian folks see any truth to this?
about the freezing of assets and what not http://www.expatarrivals.com/article/consequences-for-not-filing-us-income-taxes-as-an-american-expat
thanks in advance
@Bruno;
I’m not a lawyer. But, in a general sense, overall that list is garbled, some of it is inaccurate/overblown/exaggerated/unlikely or just plain incorrect. Particularly in terms of the actual reach, powers and resources available to the IRS if the person does NOT live inside the US and does NOT enter the US and does NOT have any US sited assets. Ex. Funds frozen at an ATM? Freezing or seizure of bank accounts? Where, in Canada where the person lives? For a legal local Canadian bank account. How?
Likewise with these – not possible, if the person and the assets, wages and accounts are NOT inside the US itself;
“Liens are placed on any physical assets owned, such as one’s house, cars, etc.
Freezing and seizure of financial accounts – often without warning or prior notice.
Garnishment of wages from one’s employer – your earned wages can be withheld to contribute toward your obligation to the US government.”
The IRS has no power to do the above extraterritorially.
Some of the other items on the rest of the list could only potentially or theoretically take place if certain important conditions were met. Or are unlikely to be cost or resource effective for the IRS to even attempt to achieve extraterritorially.
This one is just plain completely wrong – the author doesn’t know FBAR from FATCA;
“Automatic imposition of 30 percent withholding on transfers between financial institutions (FBAR).”
And “Jail or imprisonment”???? How would they get someone extradited from outside the US merely for not filing a US tax return and information forms – particularly if the person is a citizen and legal resident of another country, is a fully compliant local taxpayer with legal local accounts and never sets foot in the US? Only certain types of offenses would be criminal offenses – and only certain types of criminal offences would be extraditable.
Etc. etc.
I can’t be bothered to go into debunking/explaining/dissecting in detail all the relevant details and sources for not taking that list at face value. It was meant to scare people and drive them panicstriken into paying that source for US tax compliance services. I would never trust the services of anyone who publishes scaremongering inaccurate material lacking in all nuance and detail and caveats.
@Bruno, utter rubbish and a very good reason not to use Bright Tax’s services!