US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
Please ask your questions here about US Expat tax and FBAR.
Participants will need to provide their e-mail address (real or fake) and an alias. The only written rule is that participants must use a same alias each time they post (and not “anonymous” or derivatives thereof).
Bear in mind that any responses that you get from participants is peer-to-peer help, and it is not intended as a replacement for professional advice. Also, the Isaac Brock Society provides this disclaimer: neither the Society nor any of its members are professionals. We offer our advice here only in friendship and we recommend that our readers seek professional advice if they need it.
If you wish to receive an e-mail notification of comments, check the box to that effect when making your first comment.
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.
Petlover. Happy you have it resolved in your mind. Either way would work.
Hi, thanks to Karen for guiding me to this very helpful blog. My story: I have been in Australia since I was 4 (now early 60’s), never worked in the US (although I got a SSN many years ago when I was 17 and thought I might work when I was in the US on holiday), my banks don’t even know that I’m a US citizen (so they don’t have to report to the IRS!). I’d never realised I had to file in the US until I noted in my passport renewal application that my details would be sent to the IRS. I did a bit of googling to find out why, and discovered the filing requirement. I’d be happy to go down the streamlined approach (I’ve paid much more in tax here than I would have in the US), but for the fact that I am soon to commence a pension here in Australia. When I travel to the US (to see family) I enter on my US passport. My best options seem to be: (a) do nothing; (b) file a streamlined application, then renounce; or (least preferred ATM) file a streamlined application, utilise my tax credits for the next x number of years to reduce the US tax on my pension to zero, then when the credits run out either renounce or pay tax. Any thoughts?
Pick (a) do nothing. Your only contact with the US has been passport renewal, and there’s no evidence that the passing of your information to the IRS ever happens or has consequences. You will likely never hear from them, and if you do, so what, they can’t touch you in Australia.
Bob – have you seen The Petros Principles?
Ultimately it is your decision. Your answer will depend on how you view US taxation of non-resident citizens, your assessment of the risks, and your tolerance for uncertainty.
Thanks both. Further question: would it reduce whatever risk I have to enter the US on my Australian passport?
A bunch of options. None of them guaranteed. Why not just continue as you are? There is little risk.
It appears that the IRS has little interest in those offshore. Presumably you can travel on either passport.
@Bob
I don’t think you have any risk to reduce. That being said, choice of passport will have no impact on tax issues. You will not be asked tax questions when entering the US.
Technically a US citizen must enter on a US passport, so an Australian passport with US birthplace might, if noticed, lead to a lecture about getting a US passport. But this has nothing to do with taxes.
“It appears that the IRS has little interest in those offshore.”
It appears that the IRS has little interest in NON-FILERS offshore (though we don’t know if that will change in the future). The IRS has huge interest in penalizing FILERS offshore who are stupid enough to try to comply (including me).
Non-filing is automatically a “Felony Offense”. Whether the Customs Officers (Treasury/IRS) are instructed to persecute non-filers is anybodies guess. They do have up to date information (including new speeding offenses etc..) readily available. There is a 7 year statute of limitations which might apply if the ‘felony offense’ was not intentional.
A.O.
@allan osborn
The IRS won’t have information about a person not filing if the person is not in the system. And even a person having an SSN or having filed in the distant past shouldn’t be an issue, because they can’t know if you should have been filing, versus don’t actually need to file on the basis of low income, if they have no other information about your finances.
Yes in theory they could take FATCA data and possibly figure out that you might owe something if you have millions stashed away, but right now there’s zero evidence of that happening, and likely it won’t happen in the foreseeable future given the extent to which they’ll be swamped with FATCA data while being short on personnel and modern computer systems.
If you live in Canada, you likely don’t have to worry about FATCA reporting because banks are so lax, there is no validation of the answer you give them to questions about US citizenship. (In other words, if you lie, they don’t try very hard to prove otherwise.)
‘Non-filing is automatically a “Felony Offense”.’
Yes (except for those who don’t have to file). That is why I’ve said:
Non-compliance breaks the law.
Compliance brings penalties.
Even if you filed, the IRS might not know that you filed.
An IRS employee signed administrative records under penalty of perjury showing that I filed certain returns, and later showing no returns on file. Later, another IRS employee signed administrative records under penalty of perjury not showing that I had filed those returns and not showing that those returns were not on file later. Later, another IRS employee signed administrative records under penalty of perjury showing that I did file those returns and later they were not on file. Later, another IRS employee signed administrative records under penalty of perjury not showing that I had filed those returns and not showing that those returns were not on file later.
The IRS has to do this. The reason is that if the original returns existed then the IRS has to investigate where the withheld money went (TIGTA reported embezzlement by IRS employee Monica Hernandez and others but the ring leaders haven’t been caught). If the original returns didn’t exist then the IRS can’t penalize me for illegally telling the truth in them.
Many activities in life break laws, but doing so has no practical real-world implications.
So let’s stick to the real world. You won’t be arrested at the border for not having filed tax returns. Period, full stop (unless you are some sort of massively rich international financial criminal who should have known better than to enter the US).
You also won’t be fined $10,000 for entering the US on a Canadian passport with a US birthplace if you’re a dual citizen, despite what the law says. In the unlikely event that they notice, they’ll give you a polite lecture; then you’ll continue to ignore the advice on all future visits and nothing will happen.
@allan oborn
“Non-filing is automatically a “Felony Offense”.
That’s just not true. The most common reason someone wouldn’t file is if that person’s income was below the filing threshold for that person’s filing status. That could be the case even with considerable income if that income was not US taxable. Besides, not filing a US return is not an offense in Canada so who cares what the US government thinks about it? The evidence actually shows the contrary; that non-filers are safer than those who try to comply.
As far as I can tell the border guys have zero info on a person’s tax situation. I enter the US fairly often and I have never been asked anything about taxes. This may change if they get around to implementing the passport revocation law but even then the IRS would have to go through a lengthy process and the individual involved would be well aware of it.
“You won’t be arrested at the border for not having filed tax returns. Period, full stop”
Is that because they only assess $50,000 penalties and revoke passports of people who tried to comply, and they don’t pursue people who don’t try to comply?
You will be arrested at the border if your passport has been revoked without your knowledge.
“You also won’t be fined $10,000 for entering the US on a Canadian passport with a US birthplace”
I think that’s an open question, but meanwhile, airline personnel might not let you board.
@ND
“Is that because they only assess $50,000 penalties and revoke passports of people who tried to comply, and they don’t pursue people who don’t try to comply?”
Yes, as far as we know. And since they haven’t actually revoked any passports, we don’t know what will happen with that either. I suspect that arrest at the border will not be standard operating procedure.
As for flying with the “wrong” passport, yes there are the occasional horror stories about airlines (Boris Johnson a decade ago) but in Canada they don’t check beyond using it as ID because you’ll have already cleared US customs in the airport. Not sure what happens flying into the US from other countries. Last time I did it, from Mexico with a change of planes in the US, nobody blinked at my Canadian-with-US-birthplace passport.
‘And since they haven’t actually revoked any passports’
The reason for revoking Bobby Fischer’s passport (without telling him) was different, but I think it gives us a warning.
‘As for flying with the “wrong” passport, yes there are the occasional horror stories about airlines (Boris Johnson a decade ago) but in Canada they don’t check beyond using it as ID because you’ll have already cleared US customs in the airport.’
Exactly as I said, and which happened to Boris Johnson: airline personnel might not let you board, and you won’t get a chance to find out how US immigration feels.
Well there’s always a worst-case scenario, isn’t there?
I’ve always felt that it was actually safer to enter the US as a Canadian. Worst case scenario is they refuse you entry. But if (as usual) they let you in and later there is a problem, at least a Canadian might be able to get a little help from the Canadian government if they’re traveling on their Canadian passport. Same person/same problem on a US passport and you’re screwed. The entire US seems to be a Constitution-free zone nowadays.
If I were to enter on my Australian passport I would need an ESTA, which requires me to divulge that I have previously travelled on a US passport. It would not be wise to answer that question untruthfully, and the honest answer would squarely raise the issue.
@Bob
With ESTA it’s probably best to continue using the US passport. Continue doing nothing on the tax front. There’s no connection between the border folks and the tax folks, so you should have no issues visiting the US.
“The entire US seems to be a Constitution-free zone nowadays.”
The US is a free country, completely free of constitutional restrictions on its government.
“If I were to enter on my Australian passport I would need an ESTA, which requires me to divulge that I have previously travelled on a US passport. It would not be wise to answer that question untruthfully,“
Interesting question. It certainly looks like a trap for anyone with a US birthplace. It rather belies the theory that they don’t care.
First I’ve heard of this particular question.
The current incarnation of the ESTA questionnaire is particularly intrusive. In addition to declaring that you don’t use illicit drugs and don’t have a criminal record, you need to specify all current and former citizenships that you hold. I had to enter the passport number for my cancelled US passport as well as the number of my current Australian passport. Fortunately, the social media question is still optional.
Although I know US citizens who have traveled to the US on their Australian passports with ESTA in the past, I don’t think any of them have gotten a new ESTA since the questionnaire became much more extensive about 2-3 years ago.
There must be quite a few people around who weren’t born in the US and never lived in the US but had a US passport in childhood.
Choice between lying about the baby passport (consequences uncertain), or renewing baby passport in order to pay to renounce.
Or avoiding the US which is probably the best option if practical. And warning the next generation, since by that time they may be asking whether an ESTA applicant’s parents/grandparents ever travelled on a US passport.