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.
@norman Diamond, thanks.
The tax is zero if FEIE applies. I haven’t made the computation with the tax credit. Where I live I get an exemption from being a divorced mom with one dependant daughter who couldn’t be a qualifying child for thé IRS. The papers were sent and should arrive on 15 June.
“one dependant daughter who couldn’t be a qualifying child for thé IRS.”
Because she didn’t get registered as a US citizen and didn’t get a social security number? It’s not fair. Some people get all the luck.
Have a USC friend that recently moved to Australia. Can anyone recommend a good cross-border tax person/firm for him?
TIA
“Can anyone recommend a good cross-border tax person/firm for him?”
That question can be answered by yes or no. As a matter of mathematical logic, silence did not answer your question. As a matter of human social conversation, silence answered your question.
Did a big multinational company transfer your friend for a temporary assignment? If so, surely the company should arrange for someone that the company can deal with.
Did your friend move on his own? If so, it is not likely worth the expense of hiring anyone. If your friend tries on his own, he will make mistakes for free, but if he pays someone, someone will make mistakes for him at his expense. Your friend needs to figure out whether to try to comply in the first place. Non-compliance breaks US law, but compliance brings penalties.
Hi:
I am sure there is an answer to my question on your site, but I was unable to find it.
I am an accidental American born and raised in Germany (German mother, American father). US Passport only with a German husband.
My two banks have sent me the dreaded FATCA letters which I have not sent back so far. I do not have an SSN nor a tax number.
1. What happens If I fail to send back the letters to my banks? I will be a “covered expat”. But will the IRS persecute me in Germany (normal income, not rich and paying high taxes for mass migration anyway)?
I do not intend to visit the US in the near future.
2. What happens on the other hand, if I do send back the letters and forms to my banks? Will the IRS persecute me anyway for having failed to file tax returns, FBAR etc.?
It seems to be very difficult to get clear answers in the Internet – almost as if answers to these vital questions are withheld by the banks and states.
What would you recommend – or if this is to risky, which potential cases are there?
Thanks for your advice and kind regards
Mary
1. No, they can’t do anything.
2. No, they can’t do anything.
Reason – you don’t have an SSN so they don’t know you from Adam.
The real questions are what your banks may do if they want proof you’re US tax compliant and you can’t provide that info? Not knowing what they’re asking for it’s difficult to say, but if you send them back I assume they’ll want you to sign a W-9 form which iirc requires an SSN. Or if you don’t or can’t provide the info they want they may close your accounts.
Best thing to do if you can is claim or acquire German citizenship and then dump the US one.
Hi Medea
thank you for your answers which give me some peaceo f mind. Sorry,I I forgot to mention that – of course – they sent those forms (W-9 and 8) to complete, which I do not want to complete, because I want to stay off the grid, since I do not even have an SSN.
So, If I am right, in the case of noncompliance the bank might ditch me.
In the case of compliance and failing to provide an SSN, might the bank or the IRS follow this up an have me on the hook?
I considered renouncing but am still waiting and hoping that FATCA will somehow pass, given global turmoil, lack of revenue for the IRS, understaffing at the IRS and the EU’s anger at the US’S failure to reciprocate data, to compy with the CRS and enticing all the FATCATS into the US haven which, yet again, angers Switzerland.
As in so many cases, it depends.
You were born in Germany so do your banks know you are also American? If they do not, our best advice is to not tell them.
If you don’t send back the letters, that doesn’t make you a covered expat. You can’t be a covered expat unless you expatriate. I imagine the banks could freeze and/or close your accounts.
There is nothing the IRS can do to you.
If you do return the forms, presumably the banks will include your accounts to the German agency in charge of this nonsense who will forward the list to the IRS. The banks might demand a social security number. Don’t rush to get one.
At this point there is nothing the IRS can do to you . a very good set of rules is on this site and called the Petros principles. They are well worth a read.
http://isaacbrocksociety.ca/2016/08/05/petros-principle-12-who-is-criminal/
The bottom line is don’t enter a program and don’t start filing taxes unless you are extremely wealthy and have other good reasons to get caught up.
Mary, Returning a W8Ben is a possibility. These forms are not returned to the IRS. They are kept by the bank. They serve 2 purposes for your banks. 1). It tells your bank you are not American. ( “my goodness, I had no idea”). and 2). it tells your bank how to deal with withholding on US investments which you don’t have.
There is, of course, the usual ‘penalty of perjury’ BS.
Hi Mary:
Germany, like all the EU Member States, signed a “Model 1”
agreement with the US. Under the terms of that agreement, your bank shouldn’t ditch your pre-existing account. If you don’t respond to the letter, the account will get reported to the German tax authority which will forward the report to the IRS. Which can’t do anything with the information.
However, whenever you want to open a new bank account, you will again have to answer the same questions and since it is a new account, the bank probably won’t let you open the account if you don’t answer the questions. As Portland said, you could see if you can get German citizenship and then renounce.
You may be interested to know that the Petitions Committee of the EU Parliament has looked at the adverse effects of FATCA on ‘Accidental Americans’ like yourself, and has adopted a Resolution strongly critical of FATCA. You may wish to write to your MEPs to complain about the difficulties FATCA is causing you, and ask them to support the Resolution when it comes before the Plenary session next week (July 4). See the theead “FATCA and the EU” for more information, and links to the documents including the study.
Mary, you said you have a US passport. That makes you more than just an Accidental American in some people’s eyes, and makes it pretty hard for you to try to claim you didn’t know you were a US citizen (as someone suggested above). One of their justifications for CBT is the ability to claim citizenship rights and benefits, which you or your father did for you. Are you also a German citizen due to your birthplace and/or marriage? Does the bank know about your US passport (and therefore citizenship)?
No. You have a nationality problem, not a tax problem. German law requires your banks to ask the questions, and report the account if you don’t answer; that’s all.
Keep clear of the US tax system, complain to your MP and MEPs about FATCA, apply for German citizenship, and renounce your US citizenship. Problem solved. Resume normal life.
Germany does not allow dual citizenship, except under strict criteria. It may be worth investigating though – Wiki has this:
“If a child born to German parents acquires another citizenship at birth (e.g., based on place of birth [birth in jus-soli countries mostly of the Americas], or descent from one parent [one German parent and one foreign parent]).”
https://en.wikipedia.org/wiki/German_nationality_law#Dual_citizenship
It looks like an individual born in Germany to a German parent and an American parent is dual from birth and this is allowed. But obviously that would have to be verified by the appropriate German ministry or department.
If correct, US citizenship can be renounced immediately if wished. Costs $2350. Email US Embassy to request an appointment to renounce, and they’ll send instructions.
@Mary
You said you are born in Germany, one US and one German parent, but US passport only. Is that correct? Presumably you are a German citizen from birth, so legally dual?
The first thing you need to do, immediately, is obtain a German passport. Put the US passport in a drawer and never take it out.
What ID did you use to open your bank accounts? Your Personalausweiss hopefully, not the US passport. Does the bank have any idea that you are a US citizen? Do they have other US indicia (i.e. did your American father bank there, or is it widely known in the community – for instance if you live in a smaller town and your father is ex-military who met a local girl and stayed on) or was it just the normal FATCA letter sent to every customer?
If you only used German ID to open the account and your American parentage is not known to the bank, then I would just forget you ever had US citizenship, sign the W8 and go about your business. You are off the radar and FATCA won’t put you on the radar. If your US personhood is known or suspected by the bank then you need to tread more carefully – possibly close the accounts (quietly, without protesting too much) and then open new accounts somewhere else. With a German birthplace and ID you should be able to avoid the difficult and potentially dangerous scenario of having to do all banking in your husband’s name.
In no case should you consider entering the US tax system, at least not before you’ve figured out how you can dodge FATCA. Renunciation is an option but if you can stay camouflaged, probably safer (and certainly cheaper) not to bother.
@Mary
You said that the bank sent you both a W9 and a W8-BEN form? This may suggest that they have no prior knowledge of your US citizenship. In which case, as I advised, hide your US passport at the bottom of a drawer where no one will ever find it, and sign the W8 so that your information is never reported to the US. As someone said earlier, the bank will just keep the form on file to prove that it did its due diligence by asking you about your citizenship.
But first think hard about whether your American-ness is known to the bank in any way.
Nononymous:
Renouncing is expensive, but perfectly safe.
@plaxy
Well, renouncing does identify you to the US authorities, which means you at least have a decision to make about whether you want to do the tax compliance and exit routine or just not bother. Pros and cons either way.
@Mary
As of last year, you now need a social security number in order to renew your US passport, so that’s another reason to get your German passport.
“renouncing does identify you to the US authorities, ”
She’s got a US passport, she’s not in hiding.
“you at least have a decision to make about whether you want to do the tax compliance and exit routine”
No – renouncing is simple and easy. Get the appointment, assemble the requested documentation, turn up on time, pay, chat, swear, and renounce. Once the individual swears the oath at that appointment, they’re no longer a US citizen, aren’t tax-resident in the US, and can open bank accounts like any normal person. 😉
Not trying to be argumentative, just stressing the point that renouncing doesn’t involve anything scary.
Good evening in Germany:
I was out so I am reading your friendly replies only now. I was born at a time when there was still “ius sanguinis” in Germany. i.e. in that case the “blood of the father”, so I had to opt for one passport only when I was 18, as I could serve onyl one master (in the army) as the Germans said.
Then the law changed, where my parents could have had the opportunity to apply for dual citizenship for me which was automatically given to my sister who was born at that time. My parents missed the opportunity and as I was stil a child I couldn’t do it myself.
Later I stuck to the US passport as an escape route should things go bad in Germany – as they are very much right now. But little did I know that FATCA would come in.
As the laws changed I regularly tried to apply for dual citizenship and always failed. So, I never had a German Personalausweis and my banks know I am an American, so in a narrow definition I am not really an “Accidental American”, but never did expected to be in the midst of a witch hunt.
I do not understand – als some wrote – how I should simply renounce my citizenship and become German. It does not seem that easy. I always assumed would have to sumit tax returns for the past 5 years and then pay 2.300 $. Or is there a point I missed?
But as I have gathered now the IRS will not prosecute me, even if I fill in one of the two forms (W 9 or 8), since I am not rich at all. And I will still be out of the US tax system, even if I return those forms. And by no means will I enter a disclosure program.
The worst thing that coud happen to me, if I do not return the forms, is that the bank will close my accounts. Ok. Thank you!
Thanks also for the info that I will need an SSN to renew my passport. Times are terrible. No escape anywhere.
Renouncing US citizenship is entirely separate from US taxation. You can renounce as soon as you have German citizenship, if that’s what you decide to do. There’s no point in entering the US tax system in order to leave it, and no need. Tax advisers like to tell people they can’t renounce without five years of compliance, but actually you can. I did, and many others have done it.
But I take your point about wanting to keep US citizenship.
@Mary
Reply on three separate points:
Nationality
That is indeed a strange situation. I find it incredible that after having been born and lived all your life in Germany, with a German parent, you cannot get German citizenship. (Though in the past I know there were different rules depending on the mother’s vs. father’s citizenship.) But you’ve tried and I haven’t so I defer to your experience. Though you might want to try again, and talk to a better lawyer.
But if you are married to a German, and have lived legally in the country for a very long time, are those not both paths to citizenship? It shouldn’t be that difficult. If you naturalize as German you would be required to renounce your US citizenship, but that isn’t exactly a negative (and if you can prove financial hardship – the $2350 fee is more than one month’s salary I believe – you are excused from this requirement). You are not required to be tax compliant when you renounce, by the way.
Bank
If the bank knows that you are a US citizen, you can either ignore the forms and risk having your account closed (which means they might also report you as being “recalcitrant” – not cooperating – so you’d still be identified to the US) or you can just fill out the W9 form and your year-end balance might be reported. You are not obliged to provide the bank with an SSN if you do not have one. If the bank complains about this, come tell us here and we can point you to recent IRS guidance that this is okay, they are still in compliance with FATCA rules.
Also, we have heard no reports of German banks wanting any proof of US tax compliance, as this is not required by FATCA. The form is enough. If you do choose to fill out the W9, before doing so you and your husband should talk about reorganizing your affairs so that the absolute minimum is reported – have only a small joint account for regular household expenses, with any significant savings in his name only. This requires you trust your husband and potentially puts you in a weak position should the marriage break up, however.
Taxes
The blanket advice for accidental Americans is to stay out of the US tax system. However, if you really do not have German citizenship you just need to be aware that you might not have as much protection. There are only a few countries, Canada being one of them, where the government will assist the US with collection of taxes and penalties owing, but never against its own citizens (in other words, a US-only citizen resident in Canada is vulnerable to IRS collection, but not a dual citizen). Germany is not one of those countries but things could always change. And in any case it doesn’t sound like you would be in a position to owe anything, so are likely of no interest to them.
Recommendation
1. Get German citizenship, which may require getting rid of US citizenship.
2. Ignore the bank until such time as they really threaten you; sign a W9 if it’s the only way to preserve access to banking services.
3. Don’t worry about tax compliance if you need to renounce US citizenship, but it might be quite simple for you to do after renouncing. The IRS really isn’t your biggest concern at this point.
That’s the safest course, in my view. Having a US passport to flee Germany isn’t that useful to you. Partly because the US is not something one should flee towards these days, but also because you wouldn’t be able to take family with you. Among the many requirements to sponsor your husband for a green card is, you guessed it, proof of tax compliance.
Thank you Nononymus and all the other very helpful persons out there.
I am very relieved to hear the news that I can renounce without being tax complaint. That was a very big burden for me and it was absolutely new to me that I do not need those 5 years of tax compliance as a prerequisite for renouncing. This goes to show that there are many fear-mongers out there on the Internet.
I will go for he recommendations to renounce my US passport. Just to clarify the process: I cannot get dual citizenship, but I do have the option to obtain teh German passport, since my mother and my husband are German.
This is a VERY helpful forum.
Kind regards and thank you
Mary
‘1. What happens If I fail to send back the letters to my banks? I will be a “covered expat”.’
No. If you renounce US citizenship and do not meet certain conditions (sufficiently low assets at the time of renouncing, sufficiently low amounts of US taxes in preceding years, and certification of compliance on a subsequent Form 8854) then you will become a “covered expat” at that time. FATCA letters don’t have such an effect.
As for what will happen, if you like living dangerously you can ask your bank, and if you like living dangerously you can just be silent and find out what happens. Aside from Switzerland, I’m not sure if anyone has enough experience to predict what banks will do.
‘2. What happens on the other hand, if I do send back the letters and forms to my banks?’
If you tell the bank that you’re a US citizen but don’t have an SSN then odds are that the bank will withhold 30% US withholding from German sourced interest income that the German bank pays into your Germany account in Germany. The bank will issue Form 1099 to you and to the IRS. An IRS employee such as Monica Hernandez will steal your identity, embezzle your withholding, and get jailed, but the IRS will penalize you for writing an honest declaration on your US tax return.
If you lie to your bank and say that you’re not a US citizen, odds are that you’ll be OK, in most countries. But if you don’t have German citizenship then you might not be able to do this.
Maybe you can lie to your bank by fabricating an SSN for yourself. US Court of Appeals for the Federal Circuit ruled that if you haven’t been able to get an SSN or ITIN you still have to provide one yourself, and as far as I can tell, the only way to comply is to fabricate one yourself. On a refiled US tax return (Form 1040) I complied with that Federal Circuit ruling. The IRS did not complain about the fabricated SSN and even the US Department of Justice admitted to a different court that my fabrication might be legal. By the way a US statute punishes people who fabricate SSNs but it seems the Federal Circuit overturned that statute. However, I don’t know if a German court might have jurisdiction when you commit perjury on a US Form W-9, so I don’t know if German law might punish you for complyinig with US Court of Appeals for the Federal Circuit.
‘Will the IRS persecute me anyway for having failed to file tax returns, FBAR etc.?’
They can if they want to. There are some famous cases where the IRS persecuted people for failing to include some forms when they mailed tax returns, but no one seems to know if the IRS has persecuted anyone for completely failing to mail a tax return. It seems likely, at least so far, that if you don’t tell the IRS anything at all then they’ll likely leave you alone. As for FBARs, there are some famous cases, including the owner of a famous blog, where the IRS probably knows that a US non-resident citizen failed to file FBARs and the IRS did not care.
‘It seems to be very difficult to get clear answers’
Take your choice, whether on the internet or anywhere else. If someone gives you a clear answer, they’re lying. No one knows the facts for sure.
@Mary
Just ignore the comment above.
@ND
I know you have issues you are still working through decades later, but maybe suppress them a bit when we’re trying to help someone with a practical problem.