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.
@Barbara
For many, I believe most, there is no “permanently off the radar” any more.
@BP
Very well said and ‘the latter’ would be my advice to Barbara too.
There’s radar and then there’s radar. To abuse the metaphor further, radar without anti-aircraft missiles is pretty useless.
I’m not saying it will never happen, but I do wonder when (If ever) the IRS will begin generating letters based entirely on FATCA reporting and sending them to countries where it cannot collect (and maybe even to recipients who don’t speak English). I suppose it’s a bit like a scam e-mail, you only need to scare a few into actually sending you money and you’ve turned a small profit.
@nononymous
But then the IRS have their shock missile of passport revocation for those targets who do not yet possess another citizenship.
“I do wonder when (If ever) the IRS will begin generating letters based entirely on FATCA reporting and sending them to countries where it cannot collect”
Having money in a bank account is not a crime.
If a non-US-resident USC doesn’t file a US tax return, that’s if anything a reason not to be suspicious. A resident of another country doesn’t owe US tax on non-US income.
But if s/he is a US citizen, s/he can file a 1040 reporting inaccurately or incompletely, in order to receive a refund.
Yes of course. Radar is potentially more dangerous for some than for others. But right now all we can do is speculate about when (or even if) FATCA data alone will be used in such a “pro-active” way, because it hasn’t happened yet.
Passport revocation is another paper tiger. They would first have to show someone owed significant sums. It is designed to keep people from leaving.
“…the IRS have their shock missile of passport revocation for those targets who do not yet possess another citizenship.”
…and have been certified as owing more than $50,000 in taxes, interest, and penalties (not FBAR).
@plaxy
If a US citizen living and working tax-free in one of the Gulf States earned in excess of the FEIE, would they not owe US tax on that income?
“Radar is potentially more dangerous for some than for others.”
No – there is no radar.
There’s third party information streams (inside and outside the US). Nothing to do with tracking down non-filers.
It’s reasonable to suppose that the FATCA reports may be used in future against those opting to file US tax returns; but such reports couldn’t be used to assess a non-filing non-US-resident as owing US taxes.
“If a US citizen living and working tax-free in one of the Gulf States earned in excess of the FEIE, would they not owe US tax on that income?”
No. Not if they don’t file. The IRS needs the return in order to assess tax due.
So far FBARS have not been used prospectively. FBAR fines are piled on to people like Manafort who have been found by other means. Manafort would probably still be getting away with hiding multi millions oof shore if he hadn’t gone to work for Con Don
Nony etc
I am just looking at the pros and cons from Barbara’s perspective, where I believe this discussion started. Hopefully she has the insurance of a current US passport up until the time she gets a new citizenship.
@plaxy
I take your point. I simply meant there’s a possibility of tax owing were such a person to fulfill their obligation to file a US tax return.
“…and have been certified as owing more than $50,000 in taxes, interest, and penalties”
I’ll get out ahead of the time zone and do this myself:
Also fraudulent debts generated by embezzling IRS agents as punishment for illegally failing to commit perjury, which will disappear when challenged but can’t be.
Or words to that effect.
@Heidi
Yes, we’re sidetracking ourselves again. Barbara has a few decisions to make. The risks to her are probably very small, maybe very close to zero, but on paper they exist. It would be unwise to lose a US passport before acquiring another citizenship (though even that might not be the end of the world if the process were well underway). I too would be slightly nervous until the deal was sealed and I could renounce or safely go dark.
“ I simply meant there’s a possibility of tax owing were such a person to fulfill their obligation to file a US tax return.”
Indeed. By filing the return the individual agrees to being taxed under the US tax code.
Some want US tax breaks; some want good standing (especially if they have only US citizenship, and/or expect to return to the US to live.
Those who don’t want either of those things have no need to file.
After all, that’s exactly what’s been happening for decades, and is still happening.
“…their obligation to file a US tax return.”
You can’t have an obligation that you haven’t agreed to unless it’s imposed by the law of the land.
“Also fraudulent debts generated by embezzling IRS agents as punishment for illegally failing to commit perjury, which will disappear when challenged but can’t be.”
Of course they can. See 5.1.12.27, https://www.irs.gov/irm/part5/irm_05-001-012r#idm140156598374320
Correction:
IRM 5.1.12.27.7
@nononymous
“Yes of course. Radar is potentially more dangerous for some than for others. But right now all we can do is speculate about when (or even if) FATCA data alone will be used in such a “pro-active” way, because it hasn’t happened yet.”
Again, foolish, foolish statement. If someone points a gun at you, no worries because they have not yet shot you? FBAR and CBT did not use to be any problem at all, until they were.
You ignore the purpose of FATCA, the reality of ID theft and the constant “progress” of surveillance tech and its usage, among other things.
Please, read with more nuance. I said that the situation is potentially worse for some than for others, and that no punitive actions due to FATCA reporting has happened yet, so we can only speculate as to what might happen and when.
To further abuse the metaphor: there is no gun currently pointed at me, because my bank does not know that I should be subject to FATCA reporting, and the only gun that could be pointed would shoot Nerf darts, because there’s nothing the US can do to hurt me.
Whereas you, to use a different metaphor, exist in a limbo not unlike Japanese death row: one day soon the hangman will knock on your door, but you have no idea when.
“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.”
No good deed goes unpunished — Franklin Pierce Adams. No wait, he wasn’t first. It doesn’t seem to be known who originated this.
Virtue is its own punishment — me.
“My position is that US law ends at the US border.”
US Supreme Court agrees with you. Although we already know that other countries’ governments aren’t bound by the US constitution, in ancient times the US government used to be bound by the US constitution. But eventually US Supreme Court saw the light, the US constitution ends at the US border, and the US government is free to do whatever its wants outside of the US border.
“If a US citizen living and working tax-free in one of the Gulf States earned in excess of the FEIE, would they not owe US tax on that income?”
‘No. Not if they don’t file. The IRS needs the return in order to assess tax due.’
Wrong on several levels. Tax money would be owing regardless of whether it’s assessed. The IRS can’t legally enforce collection without an assessment (they have to break the law to do that, and maybe have to violate a court order too), but in the described situation the tax money would be owing.
The IRS can legally create a substitute for return and trump up any assessment it wants. The IRS can legally impose penalties without even creating a substitute for return. What we’ve seen is that the IRS doesn’t bother making the effort to do this to non-resident citizens, but if the IRS changes its mind someday it will not need ‘the’ return.