US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
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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.
“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″
I’m not quite sure what you were attempting to address here. (Yeah I know someone paraphrased my words but I’m not sure how either of those two paragraphs relate.)
However:
Thank you for calling attention to that document, because look at this:
‘5.1.12.27.8 (12-20-2017)
Reversal of Certification
[…]
Example:
The taxpayer has a liability of $66,000 for tax period 30/201512 due to an SFR assessment. The taxpayer is certified as a seriously delinquent tax debt and receives a Notice CP 508C. The taxpayer is in the process of renewing their U.S. Passport with the Department of State. The taxpayer files a return for tax period 30/201512 which reduces the tax debt to $30,000. Once the taxpayer’s return for 30/201512 is processed and posted on IDRS, the taxpayer will be eligible for decertification.’
Yes, the IRS can trump up that liability of $66,000 based on a Substitute for Return. (Of course the IRS omitted the possibility that the taxpayer might already have submitted a return properly owing no tax and deserving a refund of overpayment, a return which the IRS might have filed and unfiled on its own, but nonetheless the IRS doesn’t need a real return in order to trump up a passport revocation.)
Norman Diamond:
“the IRS doesn’t need a real return in order to trump up a passport revocation.”
“Tax money would be owing regardless of whether it’s assessed.”
I suspect this semi-mystical despair is at the heart of the irrational fear of the IRS that seems to grip some Americans. The bogeyman is forever coming to getcha.
@plaxy
You are saying that to one whom the IRS bogeyman has already got.
“You are saying that to one whom the IRS bogeyman has already got.”
One whom the despair has got.
@nononymous
“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.”
“Nuance” has been a suit you have played often. Over generalizations and blanket statements seem to be your favorite suits to play.
Yes, we in Japan are in much the situation you describe, but it is not us alone. As exactly zero countries had FATCA IGAs a few years ago but all do now, it is not at all far fetched to think that more and more will soon have colle tion assitsnce clauses added to their various agreements. The last chapter of our collective story is far from written, but the writting is on the walls.
@plaxy
‘“You are saying that to one whom the IRS bogeyman has already got.”
One whom the despair has got.”
Yes, because the IRS bogeyman got him and his non resident non USC wife. Or are you not aware of any of the court cases he has delt with or has pending with the IRS?
As discussed in the thread on passport revocations:
“As of August 31, 2018, 272,656 taxpayers have been certified by the IRS to the State Department. Of those taxpayers, slightly over 17,000 have been decertified or reversed.”
@JapanT
Collection assistance clauses?
That’s a ton of extra work for Gov tax departments to entertain with no benefit to themselves. Tax depts are there to collect for their own treasuries, not The US treasury especially when there would certainly be lack of reciprocity from the US.
Egregious tax fraud is one thing but trying to collect unsubstantiated penalties from their tax paying, law abiding residents I think is extreemly unlikely.
@Heidi
“@JapanT
Collection assistance clauses?
That’s a ton of extra work for Gov tax departments to entertain with no benefit to themselves. Tax depts are there to collect for their own treasuries, not The US treasury especially when there would certainly be lack of reciprocity from the US.
Egregious tax fraud is one thing but trying to collect unsubstantiated penalties from their tax paying, law abiding residents I think is extreemly unlikely.”
I thought so too, and then everyone jumped aboard the FATCA band wagon and signed the IGAs.
By hook or by crook, I’d bet it is going to happen. Although, pobably not in a way we currently think. But a few points to consider. 1. Few USCs actually leave the US and fewer still live abroad. Compared to the number of citizens from other counties spend extended times in the US for study or work, many countries may be thinking that they’d come out ahead in the exchange.
2. More paper work is not a deterant. Governments love to have excuses to add more paper pushers to the civil service. 3. CRS seems to already be moving in the direction of some kind of automatic global taxation scheme. With all the automatic data sharing, collection is a lot closer than before CRS.
Why is it the word “not” keeps not appearing in my posts?
“Nuance” has been a suit you have played often. Over generalizations and blanket statements seem to be your favorite suits to play.” Should read, ‘Nuance” has not been a suit you have played often. Over generalizations and blanket statements seem to be your favorite suits to play.’
‘Why is it the word “” keeps appearing in my posts?’
Because the word “not” appears in briefs that are sent by registered mail to courts, return receipts are signed by court employees and/or USPS’s web site reports delivery, courts destroy the briefs and do not file them and do not return them unfiled, and in at least one case the court ruled that the court did not receive the witness’s notarized declaration even though a court employee signed the return receipt.
Or because the word “not” appears in a form sent by registered mail to the IRS, USPS reports delivery, and the IRS alleges in court that the IRS did not receive the form.
Which criminals are nottier than which? A notty question.
@JapanT
“Few USCs actually leave the US and fewer still live abroad. Compared to the number of citizens from other counties spend extended times in the US for study or work, many countries may be thinking that they’d come out ahead in the exchange.”
How? Non US countries would have little interest in their citizens who live and work abroad. They would be paying tax as residents in those countries. The US is unique in trying to steal from other countries treasuries.
Good discussion. Well, my FBAR is sent. I won’t reveal to the lurking IRS spies what we decided (Hi, spies, I don’t envy you your sucky job). After heated discussion with hubby, who is more of a scaredy-cat than I am, we choose a fourth option, which made sense at the time, and filled me with regret seconds after the upload completed. Let’s just say it included at least one fully honest maximum balance. Since then I haven’t slept, having invented a new worry, that I’ll get a note from FinCEN politely asking for documents to prove the source of the sudden windfall. Okay, okay, I’m a nut. But I won’t sleep until I receive the “FBAR has been processed” e-mail.
At a social event that same day, a couple of Americans asked me why I looked so tense. I let loose an invective-laced tirade all about FBARs, FATCA, CBT and the whole shebang. When I showed them the web page for Financial Crimes Enforcement Network, you should have seen their jaws scrape the tile floor. They told me they were immediately canceling plans to move to a small European city and start an AirBnB business. I felt bad about that.
F*** America for messing up people’s lives like this, to the benefit of nobody.
@Heidi
“How? Non US countries would have little interest in their citizens who live and work abroad. They would be paying tax as residents in those countries. The US is unique in trying to steal from other countries treasuries.”
True, but why CRS then? Also, several now have their own versions of FATCA. Japan, France, and at least one other EU country already does. Things are changing along that front. Not US like CBT, but not as it has been either.
Besides, once countries start feeling the sting FATCA gives to their economies, I think we are going to see some changes in how they treat the US. If the US can force all its citizens abroad to act as financial Trojan Horses and sap wealth from our residet countries to the US, these countries are going to look at using their own citizens against the US economy. I know I sure would.
@Barbara
“They told me they were immediately canceling plans to move to a small European city and start an AirBnB business. I felt bad about that.”
You’d feel worse if you said nothing and they were later destroyed for carrying out their modest plans.
@japanT
CRS is for those countries resident taxpayers who have undeclared accounts abroad earing high interest rates 🙂
Seriously though, those residents could have income from property, investments etc that is being stashed away undeclared from their resident country.
Barbara
Good you have made the decision, it’s always the hardest part. No looking back now or second guessing, enjoy your life. Good luck.
@heidi
“CRS is for those countries resident taxpayers who have undeclared accounts abroad earing high interest rates
Seriously though, those residents could have income from property, investments etc that is being stashed away undeclared from their resident country.”
Yes, for now, But once it is up and running and everyone is used to the whole concept of cross border reporting, little by little we’re going to see it become much more intrusive and problematic. Too late by then to anything about it though.
@japanT
CRS enables countries treasuries to collect from their resident taxpayers income earned abroad which should have been declared at home. It would be simple to collect when the person lives and pays tax as a resident in the country where the tax is due.
FATCA wants to collect from it’s resident taxpayers as well as its non resident citizens elsewhere in the world. It steals from other treasuries that why I think other countries will not collect for the US, they have nothing to gain and also stand to lose revenue.
Both are intrusive and should not be used in a blanket fashion when there has been no suspicion of wrongdoing. Hopefully the current challenges will be successful.
@Barbara
Look on the bright side – you also saved a small European city from another neighbourhood-destroying AirBnB entrepreneur.
@heidi
Companies are investing huge sums of money in to the developement and marketing of FinTech. The one company I was employed by that is working on this believes it their duty to humanity to stop all tax evasion and avoidance. All. They are simultaneously working on tech to virtually shut down all cross border financial transactions and a way for business to continue doing business across borders. This would require certain laws to be enacted and others repealed, but they are working on that.
The method my client was working on was a way to transfer asset ownership. So, let’s say you live in country A and want to engage in some kind of business with an entity in country B. Everything is going fine except that the time and cost to transfer funds across the border to pay for whatever it is you want are just too cumbersome. TA DA! In steps FinTech Man to save the day. See, due to their data gathering and matching, FinTech sees that you own assets in Country B that your business partner has a use for. FinTech would allow you to transfer ownership of these assets to your business partner as payment for whatever goods and services they will provide you. Of course, for this to work, meaning countries allowing it, complete transparency of asset ownership is a must.
The amount of money my client had charge of to make this happen is the greatest amount I had ever learned of with in that company, including greater than bids for building new bullet train lines in Europe. There are many competitors is this field and FIs and countries are interested in buying.
I saw a very very very small part of this, but the goal was plainly stated and the efforts toward it monumental. Just one little cog in the big wheel of what is going on out there. Not that I have seen much more than this one cog, but I have lived long enough to understand that at best we only see the tip of the iceburg.
@japanT
I think I have lived through the best of times on this planet. To be a teenager in London in the 60’s in the simplest and most fun of times that I think can never be equaled. Life has become too complex and overburdened. I shan’t miss the 21st century. 🙂
Without getting into a discussion of the likelihood or timelines for this dystopian future, one thing worth pointing out is that the effects will not be equal for everyone.
It’s not unlike climate change: while generally it means badness for humanity as a whole, overall you’re going to suffer far less (or at least preserve yourself far longer) as a comfortably middle-class Austrian or Canadian than if you live hand-to-mouth in a trailer somewhere on the Florida panhandle, or god forbid Bangladesh.
Similarly, accidentals/duals in some countries would have a much easier time than those in other countries (US birthplace + Switzerland = can’t do shit unless you buy a CLN, whereas in Canada there’s nothing to worry about provided you know not to comply); what’s perfectly clear is that US expats without second citizenship will be screwed first.
I quite agree that most if not all countries have an interest in obtaining information about what their tax-residents (as opposed to citizens) are doing with money outside their borders. Hence CRS; FATCA was sold in part on the false promise of reciprocity. I don’t agree that countries are equally interested in letting other countries tax income generated within their own borders, so I don’t expect to see any great surge in collection agreements. And don’t forget, the handful of collection agreements currently in place specifically exclude home-country citizens, so are toothless against most accidentals/duals.
‘But I won’t sleep until I receive the “FBAR has been processed” e-mail.’
They do that? Then I guess they didn’t process FBARs that I uploaded for the part of a year until the day before I renounced.
“It’s not unlike climate change: while generally it means badness for humanity as a whole, overall you’re going to suffer far less (or at least preserve yourself far longer) as a comfortably middle-class Austrian or Canadian than if you […]”
than if you admit to being a comfortably middle-class American in those very same countries. Of if you admit to being a lower middle class American who can’t afford to renounce.
Don’t admit to it, obviously.
But if it’s a birthplace-on-the-ID Banking issue, as we’ve said a million times, then save your pennies for a CLN because there’s no other option.