US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
Please ask your questions here about US Expat tax and FBAR.
Participants will need to provide their e-mail address (real or fake) and an alias. The only written rule is that participants must use a same alias each time they post (and not “anonymous” or derivatives thereof).
Bear in mind that any responses that you get from participants is peer-to-peer help, and it is not intended as a replacement for professional advice. Also, the Isaac Brock Society provides this disclaimer: neither the Society nor any of its members are professionals. We offer our advice here only in friendship and we recommend that our readers seek professional advice if they need it.
If you wish to receive an e-mail notification of comments, check the box to that effect when making your first comment.
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.
Thanks for the link calgary411. Would that apply for the FBAR’s too? They seem to be all that I need to file tax-wise.
@ notamused says
Good point – the reverse is also true. For those considering the “full compliance” strategy, if you have children without US citizenship who therefore have nothing to renounce, the IRS may question your childrens’ US status during the process of your renunciation.
Or the banks may question your non-US childrens’ status, which could prove to be a headache to disprove and result in disruption of banking services for them, or their account details sent to the IRS. More grounds for class action lawsuits?
@iamquincy and others
Well I took the bull by the horns. I phoned the irs international advice center and after a long wait had a pleasant, informative conversation with an advisor who first asked me a couple of questions re. income, housing etc and then told me to fill out a 1040, 2555 ez, and fbar. As for back filing he said just to download the forms from their website, fill in the details, print them out, and sent all back to the Texas center by registered mail. And of course read the instructions for the respective years. How many years I asked? From 2007 or 2008 is good he said.
He guided me thru what lines I had to fill out on 1040 and 2555 EZ and also mentioned that I would probably qualify for a refund they had for 2009 and 2010 if I filled out some extra spreadsheet with income details. To that I said thank you but I only wanted to comply correctly.
All the years I wanted to file could be sent in the same envelope, but I must not staple them all together. If I wanted an irs affirmation/signature that the package had been delivered there was a different address (which he gave me). I asked if I should write an accompanying letter explaining my ignorance, not necessary he said – as there were millions of other people in the same situation. About Fbars, he said just fill them out and gave me a direct phone number to call if I had any questions. He said they could guide med thru that process. This sounds essentially like what iamquincy did, so I will start on it. I have looked at turbotax but can’t find a step-by-step video on youtube showing how it works with foreign taxes. If anyone has a link, please post it. The advisor said “unlike many foreign countries the irs does not contact you if your returns are in order, if you are entitled to a refund they send it, if you don’t hear from them then it means the returns are ok.” No name or SS nr asked, he gave his name and irs id nr which I wrote down. Comments?
Sounds like they might be realising that it’s better to be helpful than hurtful, allou. Well done for grabbing hold of those horns. I’ve got my US filings to sort out soon too now the renunciation is done. At least they’ll be in English, but from the little I’ve studied them so far coping with Swiss tax forms in French is the easier task!
To calgary411 : Thank you for your views on my situation. In answer to your question about “was your identification as an American to the IRS an punitive or accidental action on the part of this investment company or part of something they had to comply with and provide to the IRS in regard to an investment you obtained”, it seems that questioning me about American citizenship was part of the form in order to access an on-line investing account (Nesbit Burns). Once the clerk heard the word American (in the context of having relinquished years ago, but not having the documentation to prove it), she would not remove the checkmark against that box (the American one). A few months later, I received a letter from the investing company saying that their records showed that I was an American and that they were sending the information to the IRS. Most perturbing was that I was not provided with a copy of the form that the clerk had originally filled outn nor do I know what information was sent to the IRS. Wish I could be more helpful.
Katherine,
The description of your experience is likely common — “check this box if US citizen” that would occur often in online applications. It is helpful to all of us as an example of the traps we can so easily fall into. Sorry this happened to you. Will it mean anything without a social security number to attach to it (which you didn’t, right?), who knows? Thanks, Katherine.
To KalC, JustMe and calgary411, Just a note to sincerely thank you for your views. I’ll continue to monitor this site, read the link that you sent me and others on the IBS website, until I come to a final decision on how to proceed. If any further ideas/views come to mind in the meantime, I will always be grateful to hear them. Again, thank you for your help!
Best wishes,
Katherine
To calgary411 … yes, you’re right, I don’t/never had a social security number (was born in Canada; my birth was never registered with the US gvt; the now expried passport was never signed by the US authorities; I swore allegiance to the Queen in 1979 and affirmed this allegiance in 1981 (documents available to prove!); never lived, was schooled or worked in the US, nor ever considered myself an American) …. not to put too fine a point to this.
Thank you again for all your help.
Warm regards, Katherine
@Katherine,
Personally, only personally – not advice, I would wait for them to “catch up to me”, and then present all you have just done. I really don’t think you’ll hear from them. They’re bloody insane and likely just as stupid — but what do I know? Get on with your life as it’s supposed to be, not as the US deems it should be.
@allou Turbotax is pretty easy. It works by interviewing you about your situation. It allows you to select foreign for address and income. You can try out the online version up to a certain point for free to see how it works. I didn’t use the online version because it wouldn’t let me pay with a foreign credit card.
If you have interest, investment or pension income, you may need to do form 1116 to claim a foreign tax credit. These amounts would have to be greater than your personal exemption and the standard deduction ($9750 for 2012) before you would need to worry about 1116. Form 2555 is only for income you earn at your job. You would also have to do schedule B for interest and investments.
Also, you can call the IRS about 8 weeks after you file and they will tell you if everything was processed and if anything was owing.
If you use courier or registered mail, you do have to send it to a street address in Austin:
http://www.irs.gov/uac/Submission-Processing-Center-Street-Addresses-for-Private-Delivery-Service-%28PDS%29
To calgary411 … thank you for your good wishes. All the best to you, and all the Isaac Brock Society “colleagues”, too!
Katherine
katherine Nesbitt burns had no business sending anything. Since there was no social security number attached, they will never connect the dots.-it’s all done by computer and there are zillions of forms.
Close the nesbitt account. Finit. Don’t lose another minutes sleep.
Hello KalC, thank you for the reassurance. I admit that I was taken aback by the letter from Nesbitt Burns. And, all the more so, since I’ve read the recent IBS post on Canada’s PIPEDA (Personal Information Protection and Electronic Documents Act) (http://www.priv.gc.ca/information/02_05_d_08_e.asp) and the section on “However, there are rules to ensure that they advise you about their intent to collect and use your personal information, and obtain your consent.” (page 1, Introduction, 4th para).
I have closed the account … and will now be trying to get back into sleeping soundly after so many worried months.
With thanks and good wishes, Katherine
I was born in a European country, and am a citizen of that country. Only last year did I learn that I am also a US citizen, and even more recently I learned about the IRS filing requirements. My country is a high-tax one, so since I learned about the IRS filing requirements I’ve thought that surely it wouldn’t be a problem since I surely I wouldn’t be doubly taxed anyway (“what kind of state would treat people that way?” I thought), so it would just be a matter of clearing up paperwork.
After reading all the horror stories on here though, I’m now dead afraid of going to the US (which I might have to soon). I feel completely frozen and unsure about how I should even begin to tackle this. Some say “just file a couple of years of returns and you’ll be fine”, and some say “renounce your citizenship immediately and get a lawyer”. I feel like crying out “I haven’t done anything wrong”.
I’m obviously not asking for legal advice, but many of you seem to have been in a similar situation before. Should I be afraid of going to the US? Should I renounce my citizenship? I don’t plan on living in the US, but I’m young and would rather not burn bridges I don’t have to burn. I just want to set everything straight, but I’m too afraid to even begin the process.
My country is a high-tax one, so on one hand I keep thinking that credits for foreign taxes paid should always ensure I pay no US taxes. On the other hand, my country is a high-income one – with the seemingly hard limits on amounts present in the US tax code I feel I could easily end up being considered much wealthier by US standards than I am (I am not at all wealthy by the standards of the country I live in).
I am scared by the seeming rigidity and hostility of the whole system, and even though I know the worst thing is to do nothing at all, I really do not know how I should approach this.
Okay. Can anyone tell me what the !#@ difference is between a grantor and non-grantor trust. I am so confused I don’t even know if I am a beneficiary or owner. I have been reading the 8854 instructions for too long. I have a pension plan at work where the employees contribute an amount each pay period and the employer matches that amount. It takes our money and invests it in godknowswhat and when we retire we get payments. So how would it be classified. I wrote to the administrator of the pension plan and even he couldn’t tell me. No one in Canada speaks IRS.
Only you can judge whether to give up your U.S. citizenship. If you do not give it up you will have to file U.S. taxes and F-BARS every year, but if your finances are not very complicated that would be no problem. Stay away from mutual funds, trusts, term investments, pension plans, mortgages, retirement savings etc. and you will be okay.
@banany: I can’t tell if your last sentence was meant as a joke or not… but I have a pension plan (what working person doesn’t?) and a mortgage. These things severely complicate the situation?
The last line was sarcasm. Personally, I am still trying to figure out how to report my pension plan on the 8854.. There are many people on this site with more complex situations who are qualified to answer your question. Usually owning pensions, mutual funds, etc. generates a lot more paperwork. I find it all confusing and am trying to locate a qualified person to help but so far no luck in Ottawa.
@banany: Right, OK, thanks! So, since I have you here – would you personally worry about going to the US (for short durations) with things not cleared up (assuming that you haven’t wilfully done anything wrong)?
@anincog84
Since you just learned last year that your are a USC, I assume you’ve never had a US passport and don’t have a S.S. number. Correct? If so, you may have a chance of slipping through the cracks. You should also consider, however, if you have parents or siblings which may renounce US citizenship, that you could thereby appear on their radar.
My personal feeling (not legal advice) is that if you aren’t in a conflict situation with the IRS (i.e. they haven’t made any claims), you shouldn’t have a problem traveling to the USA on your European passport.
@anincog84, if you didn’t know you were American it’s highly likely the IRS/American government does either. If you were born in your EU country there will be no US record of your birth, unless your parents registered your birth with the nearest American embassy, which from the sounds of it they didn’t. So forget all this stuff. You are a citizen of Europe, America doesn’t know you exist so keep it that way.
@notamused: Turns out I have. Learned of it last year. I appreciate your comments.
@Medea: There is. It turns out I have an SSN. I’ve been to the US (for short trips) several times, and there’s never been a problem before. Nothing has changed, except now I know that there theoretically could be a problem, and now I’m scared.
My current attitude is: Go as if nothing has changed, then when back home, file with the IRS and actively check with them if everything is OK. Then after that, stay current, and only renounce my citizenship if I end up in a situation where the US citizenship would start costing me (more than the paperwork) or prevent me from taking a job or similar.
By the way, my wish is to sort things out and keep my US citizenship if possible. It isn’t my primary objective, and I won’t keep it for any price, but it certainly feels like the best option if everything can be sorted out. I guess I’m taking a naive approach to the issue compared to many people here (please tell me if so), but I keep thinking that filling out IRS forms once a year isn’t a big deal for an extra citizenship?
Different situation then, but you could play it two ways.
If you’ve never worked in the US and don’t plan to ever, never used the SSN, never had a US passport, then you could still ignore the situation and carry on as normal. Border control have no way of knowing you have an SSN and if your European passport doesn’t give a US birthplace they won’t know any different. As far as anyone knows you’re a citizen of XX country. Only if you wanted to live/work in the US would you hit problems.
Otherwise, if you decide you want to be compliant I would start doing the filing as soon as you can and then keep it up. You will need to write a letter explaining why you haven’t been filing before to go with the tax returns.
Cost may become the issue for you. It can cost thousands just to file nil returns every year, but that depends on whether you can do the work yourself or have to use a tax preparer. If you can do it the costs will be neglible, but if not – well I was recently quoted CHF3,000 just to do 6 years of FBAR form back filing and the final form I need to file next year as I renounced in March. I should be able to reduce that though as the FBAR’s don’t seem to be complicated, but they are in addition to the main US forms which luckily I was told I don’t need to file. The other problem you will have is that the IRS has said that, I think it’s from this year, they will only accept e-filings yet their site isn’t set up to cope with foreign addresses, etc. You will need to buy a program like Turbotax each year (it’s updated to cope with yearly IRS changes) so you can do the filing.
How did you get an SSN though if you didn’t know you were American?
@Medea: Thanks for your input. It’s comforting to know so many others are in similar situations.
Regarding the SSN: My US parent had it since I was born. It was quite a shock to be told “oh, and here’s your SSN”.
Unconstructive rant: This cost thing is interesting and shocking. It’s so foreign (no pun intended) to me to not file one’s own taxes in less than an hour entirely online (as long as you don’t own a company or have significant stock holdings). I don’t understand how “regular Americans” (those not in our situation) just accept this grossly inefficient system.
They issue them when you’re born?! Wow, how things change. Don’t think mine was, I had to apply for it when I was going to start work. Could be wrong though, it’s so long ago now.
I’m sure most Americans know how to fill in their tax forms so it’s no problem for them. It’s a different story for us though. The only time I ever filled one in was during a social studies class in junior high and that was way too many years ago to have any relevance today.
There is big business in tax preparing in the US so things aren’t going to change soon. In fact there was a recent proposal by the IRS that only tax preparers approved by them should be allowed to do filings for clients, but there was such an uproar from the smaller independent preparers (who couldn’t afford the costs of getting approval) that it’s been dropped. Also was considered to be a little too cosy an arrangement.
I think Turbotax costs about $70. There are quite a few threads over on http://www.englishforum.ch/forum which deal with US taxation in general and about filing with programs like Turbotax so you might want to head over and have a read to see if anything is useful for you.