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.
Your parents must have applied for it when you were born.
You have several choices then.
Just renounce and present the bank with the CLN as I suggested and forget filing.
Give the bank the SSN, renounce, CLN to bank and don’t file.
Give the bank the SSN, renounce, CLN to bank and do any necessary filing to be able to file the 8854 form.
Cheaper options if you don’t wish to spend US$2350 to renounce.
1. Give the bank your SSN. Don’t renounce, don’t file, ignore any mail you might receive from the US government.
2. Tell the bank that you don’t have an SSN and are not able to get one. Banks are only required to *ask* for the SSN (once per year I believe) to meet their compliance obligations. There is an IRS ruling to this effect. Without an SSN the IRS will have even less reason to bother you. Otherwise, don’t renounce, don’t file, ignore any mail you might receive from the US government.
Both options will only work if your bank will not deny services to you. If that becomes a problem (as is the case in some countries, especially Switzerland) you may need to renounce and show them your CLN. But no reason to file US taxes if you renounce.
If you are concerned that the IRS can find you and penalize you, fear not, they can’t. They have no power to go after non-US assets, particularly if you are a citizen of your country of residence.
Dutchie. It all sort of depends on how big your accounts are. If tiny, I support the idea of not renouncing- let the bank do what they lke. If moderate size, Renounce, give Cln to bank. If large, renounce, give Cln to bank, consider filing 5 yrs and 8854 but only if you owe no tax. The objective is to not send them a penny. There is nothing they can do.
“If you are concerned that the IRS can find you and penalize you, fear not, they can’t. They have no power to go after non-US assets, particularly if you are a citizen of your country of residence.”
I think a Dutch citizen in Ireland has to worry about becoming the next Dewees. If assets can be moved from Ireland to the Netherlands then the IRS can’t collect from the Netherlands. Or maybe the IRS can’t collect from Ireland if there’s no mutual assistance clause?
If the person became both Dutch and American by birth, and has too many assets, the person might have to reside in the Netherlands at the time of renouncing.
@ND
The Dewees situation would only arise if Ireland had a mutual-assistance provision for collection, like Canada, which I don’t believe to be the case.
It’s don’t think that Dutchie is living in Ireland, but we can wait until morning in Europe for clarification.
All that being said, it’s probably safer to be a citizen of your country of residence if you plan on offering yourself up to the US (as Dewees did) rather than merely ignoring them.
Dutchie,, Be wary of these guys. They seem to put everyone into streamlined- even those who don’t. belong there.
https://americansoverseas.org/en/fatca-letter-bank/
@Portland
I have the feeling that AO is a referral site and that they may possibly get a referral fee without disclosing that fact. There are a couple of cheap and dedicated lawyers known to this site whom I have come, vicariously, to respect by using their free online guidance and references. I am happy when such lawyers get clients and make a living. Not so much when Raptors aka Condors enrich themselves and the U.S. Treasury. Wealthy noncompliant non-taxpayers have choices to make. Not-so-rich single mums who think only of their children’s future (whether the kid is burdened with USP status or not) merit a blessing for insulating themselves and their offspring from the State Terrorism that is today’s USG: the Top Raptor and all its greedy spawn.
Please don’t classify this as spam: it is my life story.
EVERTHING on the americansoverseas.org. site site points its’ victims to streamlined. Be forewarned.
E. G. take this little gem
“. Once you are aware of your obligation, it is compulsory to do so. (file taxes). You could face stiff penalties if you don’t comply.”
@Gone Soon, and @Portland, on the issue of misrepresentations and exaggerations by Condors attempting to drive expats into their nets, I just today saw a condor site falsely claiming that ‘quiet disclosures’ are “…(illegal)”.
Several weeks ago I posted here that I had received a letter from the irs about my final 1040 filing which stated they required more time to process my paperwork. I had hoped to never hear anything further, but, alas, I got another letter today. It was a fat envelope full of forms that I’m supposed to fill out in order to claim the child tax credit. The irs says they might owe me some money if I fill this crap out, but I don’t want their money. Can I just ignore the forms, or will a lack of response pigeonhole the completion of processing my exit year tax filings?
@ Petlover
You are under no obligation to accept anything from the IRS. You could ignore it or send the forms back unfilled with a note that you have no intention of claiming anything from the US government.
I have just received the following letter from a Swiss cantonal bank (my translation; introductory and closing words omitted):
In December 2015 [bank] concluded an agreement with the Department of Justice of the United States (DoJ) to bring to an end the tax conflict between the Swiss financial sector and the American authorities. The implementation of that agreement requires us to take certain additional steps with respect to clientele having a connection with the United States.
In order to continue our business relationship, we need to assure ourselves that your accounts with [bank] have been declared to the American tax authorities (Internal Revenue Service – IRS) for the last fiscal year. We thus kindly ask you to confirm this by signing [sic] and returning to us the following documents:
— the Declaration of tax compliance for clientele subject to [sic] the United States of America
— the Report of Foreign Bank and Financial Accounts (FBAR) accompanied by proofs of transmission and the form 1040 if available, accompanied by Schedule B
Without news on your part before 4 August 2018, the deposit and withdrawal of funds on your account will no longer be possible. The permanent payment orders will, if relevant, be cancelled and our relation can be subject to termination on the part of [bank].
In the context of these measures, we inform you further that whatever be the means of communication — fixed line or mobile telephone, fax, e-mail — contacts with persons on American territory are forbidden and any instructions received from persons located on American territory can not be executed. We will only respond to contacts [from] outside the United States (identifiable as such).
@andy 05, can you provide what they ask for? If not, prepare to have your account/s closed. Better yet, do you have a CLN to present to them?
@Medea
I wrote them a 2-page letter in which I repeated the story of an encounter I had in 2009 with one of their Managing Directors at a mountain retreat reception sponsored by them and the developer from whom I was buying a flat. MD vaunted the advantages of his cantonal bank with no US offices or business. I told him “not so fast” … and knowing the 1989 Van deMark v. Toronto-Dominion Bank case, the bank could come a cropper with such arrogant ideas, soliciting tax evasion business. The MD ignored me, of course. Arrogance does make one impervious to facts and who knows what they clever Swiss lawyers were telling them. I’ve told them this story before and I gave them the link to the GlobaLex article on FATCA when it came online. And I made point today of mentioning that they are on the latest IRS “Bad Bank” list.
They’ve threatened before to call my mortgage when I didn’t respond quickly or correctly to paperwork demands. I am now able to tell them (and just posted the letter) that I’ve put my flat on the market (15% cantonal CGT, 28% UK CGT & 23.8 US CGT, but never mind; at least it’s worth more than I paid, which isn’t true of my other flat in Switzerland), and I sent them those pages of the FBAR on which they are mentioned, and pages 1 & 2 and Sch. B of my 1040. There was an error on my FBAR so I submitted a corrected copy today, happily before the June 30 deadline; I checked, and my 8938 (which they didn’t ask for and are not getting) was correct.
Unfortunately I can’t renounce. My taxes would rise astronomically due to loss of tax treaty advantage and also I’d be a covered expat. Indeed, if I became a tax resident of Switzerland even now my taxes would be far higher. Who said Switzerland was a tax haven? Except for wealthy foreigners with a forfeit fiscal.
Sorry: forfait fiscal, lump sum taxation regime, blame the spell checker. (based on presumed spending, not on wealth or worldwide income. Swiss citizens not eligible. And the system isn’t very popular in Switzerland and apparently more cantons are opting out. A British friend just moved from Vaud to Valais.
@andy 05, sounds like they weren’t really paying attention to FATCA and are now scrabbling to sort themselves out. If they’re on the IRS’s bad bank list I’d see if you could move everything over to UBS, Credit Suisee or PostFinance because they may just decide to dump their US clients altogether. A bit surprised that they haven’t already, most Swiss cantonal banks did it way back in 2012 before FATCA even came into force.
@medea
Nobody is giving mortgages to anybody who’s ever set foot in America or whose ancestors did so much as eat American cheese. I just want to sell the flat, pay off the mortgage, let the notaire put the money in the contested account (for some years every notary I’ve known will only receive or send money to a Swiss bank account, which basically has kept Americans out of the Swiss property market unless they are fleet footed or have some corporate intermediary). Since I’m selling the problem will go away in due course. Although the Swiss property market is slow-moving. And sank with the fall of the euro,.
@andy 05, yeah it’s not the fastest when it comes to buying and selling property, but then most Swiss still rent rather than buy. Also people seem happy to hang on to a property until they get the price they want. I’ve seen a few that have been on the market for years before selling. Others go within a few hours. The house we rented when we first moved here was like that, even though they had around a dozen different people viewing, it was snapped up by the first couple who viewed it that day. Housing market is still overpriced here though, has been for a long while.
question on last declaration ( year of renunciation) – can I declare part year as US citizen and the rest as resident alien, so I can benefit from the FEIE which is far simpler than tax credit? will lookup in the notice 54.
I doubt very much that you’re a resident alien for the part of the year after renouncing. I wonder if anyone had a green card, then naturalized, then went abroad to renounce, and then tried to re-enter the US using their green card.
You get FEIE for the part of the year that you were a US citizen or resident alien. You get FTC for the entire year.
Instructions for FTC say that on some lines of Form 1116 you have to exclude the income that was excluded by Form 2555 and exclude the amount of tax that was accrued or paid on that income, but on other lines of Form 1116 you have to include that income and that tax. However, the instructions are obsolete. In Tax Court the IRS called me frivolous for obeying IRS instructions and stopped complaining when I filed copies of 4 IRS documents. However, in Court of Federal Claims the Department of Justice also called me frivolous for obeying IRS instructions, and I did not file copies of those IRS documents, so I think now you have to include all income on Form 1116 and include all tax accrued or paid on it, regardless of whether you also get the Form 2555 exclusion. (If anyone benefits from this double-dipping, for which you need about 10 times the amount of earned income I have, I’ll be glad to accept donations.)
Juliette I presume you don’t live in the US
For the first part of the year you were a citizen which they call a resident taxpayer.
For the second part you are a non resident alien. See my answer to Trebor on the relinquishment thread.
Thank you Norman & Portland,
Indeed, I have never lived in the US except as a baby (first year). I don’t have any US source income. As I’m getting out of time, I will send just the 1040NR, the 1040 and the 2555-EZ (pro-rata) together with 8854. I suspect it’s not right and should use 1116, but I looked at that form and would need quite a bit of work before figuring it out.
If your US tax is already zero before starting Form 1116, there’s no point doing 1116.
When we did it earlier this year we sent in 8854 and nothing else. No 1040s. If we had chosen to send 1040s, they would have been a sea of zeros. So far not a word.