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.
@ Laura Snyder
Thanks for your response. It was helpful.
Thanks, Laura. I see the relevance now.
“Something we are hoping to better understand with the results of the survey is whether or not women are affected by US tax and banking policies differently than men are.”
I think we’ve seen enough evidence on Brock that the US is an equal opportunity abuser.
On the question of income, my income was different at the time of renunciation than it is now. I can imagine some usefulness to the question “At the time of renunciation was your income over or under US$100,000” so we could show that ordinary people are the ones who get forced to renounce. I don’t see why the question demands a more detailed answer, let alone asking about my current income.
Here I go again asking for advice on the same topic I’ve asked before. This is about FBAR. I’ve been holding off from filing, in the naive, now dead, hope that some sort of legislative solution would have been introduced by now.
I’ve been a good American for 30 years, filing our 1040s and FBARs. For various reasons, we’ve concluded that it is in our best interests to continue the appearance of compliance, since we hope to renounce in a few years and do it cleanly (do not remind me that I don’t have to be compliant to renounce; we want a thorough, clean exit).
My question is about the FBARs. Because of a property sale, which we did not declare as a capital gain because we could never afford the tax (note that I said we maintain the appearance of compliance), we did have a temporary boost to our bank balances. All of a sudden US$400,000 appeared in one account, which was then transferred to a bank in a different country to buy the property which will eventually win our freedom. The money then left that account for the purchase. So there is a 3-day period in one bank, and a 5-day period in the second bank, in which $400,000 was present. But, if reported as required–maximum balance during the year–after years of FBARs never showing more than $60,000 total at any one time, suddenly our FBAR will report a total of $800,000 in two accounts.
Only one of the two accounts (the new one in the other country) above has been FATCA’d. We are not listed as US persons on the first one, and never received FATCA forms.
Of course, the worry is: this sudden six-digit spike will trigger an alarm and hence some questions.
The IGA in the country with the new bank account clearly requires end-of-year balances to be reported.
So, do I:
A) Play dumb and report the end-of-year balances for both accounts (which will be minimal)? Or, after years of reporting maximum balances, would I be hit for willful violation in the event of scrutiny?
B) Report the maximum balances, assume that the likelihood of this triggering an alarm is next to zero, but rest easy that I’ll never be charged with a willful FBAR violation (which could be much worse than the penalty for not declaring a capital gain).
I’m fully aware that I am attempting to hide a capital gain from the IRS, which may be a worse level of criminality than not filing at all. But this is the corner I’ve painted myself into, too late to turn back.
I have until tomorrow (15 October) to send in the damned self-incrimination form. Final advice, anyone, before I put my head on the chopping block?
I vote for playing dumb. Pumpkin head and his son in law pay no taxes and they call themselves billionaires- why should you.
@Barbara
So what will ‘end of year’ balance in new bank report, ( not the $400,000)?
Does your US passport need renewing before your new citizenship comes into force.
You are in effect not really complying. So the calculation of your risks are similar (albeit somewhat elevated, since the IRS know you exist) to someone who has never filed.
Do you hold citizenship in the country in which you are resident and/or in which you plan to be resident? Does that country have any sort of mutual collection policy? Do you need your US passport? Do you have any US income or assets?
@BP
Barbara does not hold a citizenship of her country of residence nor is it desirable or feasible. She does not hold a second citizenship but is in the process or purchasing a citizenship through investment with the view to renouncing US citizenship in a few years.
@Barbara, it’s a dilemma. I’m also concerned that the IRS may follow these threads and that it could possibly trace your ISP from your postings here. Whatever you decide to do or not do, I wouldn’t publicly declare your decision on here, especially if you chose to not declare a significant capital gain. Especially as you also point out, you’re already filing and in the system.
@Barbara although if you use a VPN when you post then you can’t be traced.
Hm. I guess this is a tough one to seek advice on. Let’s just say that my end-of-year balances are about the same every year in actual fact, and they’re exponentially less than $400,000. As for worries about being tracked, yes, the paranoia pervades every millimeter of my life. But I’m only asking feedback here, not declaring what I end up doing.
But the question remains, and I’m asking more experienced and calmer heads than mine: is there any anecdotal evidence that an outlier FBAR would trigger a red flag?
@Barbara
Obviously no one here can give you a definitive answer as to which course is better. My hunch is that the risks of each are both extremely low, but you won’t know which is the lower.
Truthfully reporting maximum balance shouldn’t shouldn’t raise red flags, I would think. $400k isn’t a great deal of money in the grand scheme of things. It’s not unusual to have large sums move through an account when refinancing a mortgage, so it doesn’t necessarily mean that you’ve sold and are failing to report capital gains. On the other hand, reporting year-end balance is probably fine too, if you are confident that the one account subject to FATCA isn’t going to report the high balance. (And even if something were to go pear-shaped there’s always the “oops” excuse – sorry, forgot about that mortgage refinance, money was in and out within 48 hours…)
As you’re doubtless aware, there’s a minute chance this could all end badly for you. But a vastly greater chance that you could choose either option and have no trouble at all.
@monalisa
Using a VPN is good practice in general. However, I would think the odds of the IRS looking here and trying to track down individuals are infinitesimally tiny. Deriving a name from an IP address requires the cooperation of the ISP, which the IRS presumably cannot obtain until they are fairly deep into a criminal investigation, and it would be considerably more difficult with an ISP outside the US. I have never heard of anyone, here or on the Facebook group (where people routinely admit to non-compliance using their real names) or associated with the lawsuit, who has been contacted, identified or otherwise harassed by the IRS because of statements they’ve made online or in the media, anonymous or not.
@nononymous &barbara
Problem with the mortgage refinance excuse is that I believe the new account report would appear to be in a new foreign country account from the place where barbara is resident.
@Heidi
That could mean that someone is buying a house in the new country with a new mortgage (or who knows, an inheritance) but has not sold anything in any other country. It’s not automatically evidence that something fishy is going on, I don’t think. What I meant by the refinance comment was a more general point, that it’s not unusual for otherwise modest accounts to occasionally have a six-figure spike.
Proverbs 28:1, which I’ve always read as ‘The guilty run when no one is chasing them.’ Perhaps it’s human nature to assume that the other party knows more than they actually do.
We know of at least one former IRS agent who reads Brock, so why wouldn’t an active agent read it too?
Sure a VPN is a good idea, but I think the NSA can trace users of VPNs and I think ISPs would cooperate. There were lots of news reports a while back of a famous US internet company (a multinational but headquartered in the US) cooperating with the Chinese government, so who would expect them not to cooperate with the US government?
@ND
If it was that risky, do you think JapanT would dare post here?
Attempts to comply are risky. As has been discussed many times, Mr. Dewees was suckered into volunteering.
As far as we’ve been able to see here, if a US citizen lives outside the US and doesn’t attempt to comply, it’s not as risky. Wait a minute, am I explaining this to someone who already knows it!
@nononymous
“If it was that risky, do you think JapanT would dare post here?”
You are a real gem, nononymous.
I have absolutely no doubt that this site has been known and watched by the IRS and most likely others organization of the US Gov. since before I learned if it. And that was even before we all got to learn about what the NSA was up to.
It seems that the difference between doing something voluntarily and being coerced to do it is lost on you, nononymous, as is the difference of amounts of personal information gleaned from here and the reporting of accounts by our FIs.
A real gem.
“Dewees was suckered into volunteering.”
Dewees volunteered, and Dewees owned a corporation.
An individual with no US-source income is in different situation from the owner of a corporation.
The non-US income of an expat USC individual is not a target. Corporate income of an expat USC very much is a target.
When Dewees entered OVDP he agreed to disclose unreported information and pay tax and penalties.
Since he never reported his Controlled Foreign Corporation’s existence, the corporation fell by default into the C category (tax deferred until earnings repatriated). That’s why he didn’t owe any tax. He was assessed for the $10K per year penalty for not reporting the deferred earnings.
@nononymous
No it’s not unusual for a large amount to appear and disappear in US person accounts but if an inquiry is triggered it’s not so easy to explain away without some proof. Any inheritance is required to be reported on a 3520, remortgaging across country borders has become almost non existent.
I don’t there would be that big a risk to not declare the gain, but I’m concerned if people here directly encourage tax evasion. Of course the whole situation stinks.
I’m not sure what “tax evasion” means anymore. Filing a form with a missing item? Or not filing at all? The latter seems to be the general consensus here when it comes to US taxes in general. I’m one of the fools who has been scrupulously honest for the most part until now, yet I seem to have more trouble sleeping than the ones who are permanently off the radar.
My position is that US law ends at the US border. I am not a serf who has been permitted to leave the plantation but must still report back to a master. The very idea that the USA could consider income and assets which I have earned, and paid tax on in my own country, might have anything to do with the USA sends me from 0 to angry in seconds.
But in order to sleep at night, I have renounced.
@BirdPerson: My reason for renunciation exactly, well said.
My CLN is arriving tomorrow according to Canada Post, finally!