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.
@bubblebustin, re;
…”Lets not forget that this is the benevolent organization that allowed those who didn’t know they were USP’s a reduced penalty rate of 5%. Insane….”
Exactly. We must remember that in the OVD, through mandatory penalties, the US Treasury and IRS was completely willing to confiscate legal post-tax money from those born and living dual outside the US – who only inherited the status via a parent, with no US income or economic connection. That shows that the US had no scruples whatsoever in even the most ‘benign’ of minnow cases. Who knows whether that has changed now that there is the December 2011 factsheet and the Streamlined process. Which still may present potential pitfalls for the unwary – who knows?
Who knows what is happening behind the scenes – whether there has been sufficient public evidence of unrest (like IBS and complaints to non-US governments) and thus international pressure to be more lenient now – because they’re trying also simultaneously to get Canada and other countries to sign those FATCA IGAs. After all, their behaviour re OVD has amply demonstrated what the rest of the globe can expect in terms of US intransigence and arrogance. They very carefully never acknowledge that the situation of those born and living dual entirely outside the US have two birth citizenships – and the US one is not of their own volition. I suspect that they may not be eager to have one of those compliance cases made public – which might enlist the fellow feeling of other Canadians – and highlight the insanity, greed and arrogance of the US tax and financial reporting system as applied to people with no real connection to the US, living in other countries.
I share @Anincog84’s concerns that my case may never actually have full closure because who’s to say that Congress won’t someday pass retroactive legislation restoring tax obligations to former citizens. I also worry that any U.S.-sourced inheritance could be punishingly taxed before being allowed to receive it or that it might become very difficult to remit it to the U.K.
The fact is, as long as my parents are alive, I will continue to be somewhat tied to the U.S. And because of this uncertainty, I will probably continue to stay with my currently compliant portfolio so that future filing would be less complicated. Life has uncertainties and it’s obviously not always going to be fair; but after carefully weighing up all the risks, I concluded that renouncing made the most sense, especially as it may become more difficult in future.
I’d say that I could see things going either way, with either helpful reform or harsher treatment towards expat’s. But what I’m hoping for is that if filing and tax responsibilities are restored to renunciants that it would hopefully only be prospective towards future expatriates and not retroactive; I’d hope that I’ll be safe since I will have got out before such laws were passed. But saying that, I share Bubblebustin’s concerns that the U.S. government could take the line that only U.S. citizens can enjoy constitutional protection.
I am plodding along to get this sorted out and have come across following from IRS publications. Hopefully it will also guide others who maybe uncertain of what to do:
IRS publication 54 – 2012 page 34 question 13 with answer
13) I am a U.S. citizen. I have lived abroad for a number of years and recently realized that I should have been filing U.S. income tax returns. How do I correct this oversight in not having filed returns for these years?
Answer:
File the late returns as soon as possible, stating your reason for filing late. For advice on filing the returns, you should contact an Internal Revenue Service representative in one of the four over-seas offices listed in chapter 7
Fbars from Fbar (TD F 90-22.1)
Item 15. Determining Maximum Account Value.
Step 1. Determine the maximum value of each account (in the currency
of that account) during the calendar year being reported. The maximum
value of an account is a reasonable approximation of the greatest value
of currency or nonmonetary assets in the account during the calendar
year. Periodic account statements may be relied on to determine the
maximum value of the account, provided that the statements fairly
reflect the maximum account value during the calendar year. For Item
15, if the filer had a financial interest in more than one account, each
account must be valued separately.
Step 2. In the case of non-United States currency, convert the
maximum account value for each account into United States dollars.
@iamquincy
“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.”
Perhaps you can help me out a bit here. I earn some small interest on my savings accounts. I would proibably still be under the FEIE limit. In my country of residence (COR) this interest is included in my yearly income and taxed along with my wages. What to do then? Deduct the amount from the gross income on form 1040 and then add it somewhere else (where?). And is it uncomplicated to take the individual deduction that the IRS persons suggested?
Thanks for any help!
@ allou
So the IRS’ own publication tells you to just file late returns and makes no mention of OVDI or Streamlined. Is it really too much to hope for consistency?
A question re FEIE and Foreign Tax Credit (FTC):
If your income exceeds the FEIE, do you just file using your FTCs and as far as you’re concerned the FEIE does not exist?
TIA
monalisa,
Can’t you relax and just enjoy the pleasure of your CLN, just for a few days? Please, do it for you!
I will and I am, @Calgary, *lol* I’m going to treat my old man to tickets to ‘The Book of Norman’s for his birthday and then he’ll treat me to a nice meal out so we can both celebrate!! 😀 😀
For any DIY US persons here is a good source of information, Don’t stay up too late 😉
http://www.unclefed.com
@ allou, re;
“…IRS’ own publication tells you to just file late returns and makes no mention of OVDI or Streamlined..”
That’s very interesting. I wonder when that appeared as advice? If that is the case, then OVDI was even more of a bad faith confiscatory effort from the IRS than previously thought. They discouraged the traditional ‘quiet’ filings, and said nothing about how ‘filing going forward’ would be treated. And wouldn’t address any specifics for how many years required, etc. So much money spent by many minnows and those ‘abroad’ on professional fees that not all needed if truly so straightforward. And useless lost LCUs and sleepless nights and fear and anxiety.
On the other hand, the Taxpayer Advocate said that until/unless the advice in enshrined in the IRM, the FAQs or similar types of information sheets couldn’t necessarily be relied on to bind the IRS (they tried to ignore one of their own FAQs in OVDP, and she exposed and opposed their bad faith actions). She has been browbeating them to issue international and compliance information in a way that ‘taxpayers’ can rely on. See: http://www.taxpayeradvocate.irs.gov/userfiles/file/Full-Report/Most-Serious-Problems-IRS-Offshore-Voluntary-Disclosure-Programs.pdf
There you go, monalisa. Again, congratulations and both of you enjoy every minute of that celebration, without worry. You did good!
Looks like a good resource for this site. Thanks, allou.
@allou I would subtract it from the wages and put it on line 8a and in section 1 of schedule B. The exemption and standard deduction are easy to take. The exemption goes on line 42 and the standard deduction goes on line 40a. Use the box on the left of page 2 on the 1040 to determine the amounts.
@badger
I found the information on page 34 of the IRS publication 54 available on the irs website. This publiucation is mentioned by IRS as the guidebook for US persons resident abroad and filing US tax returns. Here are the details:
Publication 54
Cat. No. 14999E
Tax Guide for
U.S. Citizens
and
Resident Aliens
Abroad
For use in preparing
2012 Returns
@All: Sorry for disappearing abruptly from the conversation. You’ve all been very helpful. I don’t know what I would have done or thought if I weren’t able to get in touch with people like you. This thing can certainly make one feel very, very alone. Even telling friends about it is hard – it’s like normal people cannot believe that this can situation be real – I tend to be met with an attitude of “you must have misunderstood something, it can’t be this way, it’s too crazy”.
I have the impression that this situation has received a lot of media attention in Canada. Is it not picked up by US news media? From what I’m reading online, US-resident Americans tend to be completely oblivious of both the fact that the situation is what it is, and also have serious misconceptions about the fairness of it all. To me it sounds like a story for something like NPR’s Planet Money – “How an absurd taxation system few even know about is ruining millions of Americans abroad”. At least it would raise a little bit of awareness in the country itself.
@badger: Thank you for your long comment at 1 PM on the 12th. Of course it’s all rumors and hearsay, but your words still have the effect of reducing my panick a bit 🙂
@newmaple: Do you see yourself avoiding the US until a resolution is reached? I wish you luck. I hope this boat of ours has working floatation devices and the weather doesn’t worsen…
@calgary411: Thank you for pointing out these things to me. There’s a LOT of info on here, and it’s hard to get an overview of it all.
@anincog84
Re ur… “To me it sounds like a story for something like NPR’s Planet Money”
I agree with you 100%, but I have had no success in getting their attention to the issues at hand over the past year and 1/2, so encourage you to try. They do good podcasts and cover a wide range of financial subjects, and have a pretty diverse audience that probably tilts towards the progressive end of the spectrum, so that is an audience that needs to hear the message. Not the libertarians, as they already get it, as do most fiscal conservatives if they don’t have a knee jerk “patriotic” response.
Planet Money and ‘This American Life just teemed up to do a stunning program on how SS disability has replaced welfare in America and how rapidly it is growing. It is not just with this Administration either!
http://apps.npr.org/unfit-for-work/
So, you too can try to contact them. Their email is.. Planet Money NPR
Their Twitter @Planetmoney and Adam Davidson twitter account is @pm_adamdavidson
If they dug into this story, it would get attention!
I’ll send them a tip, but as I’ve said I’m completely new to this world, so I highly encourage others with more knowledge of the situation to try to get their attention as well. And besides, the more people who try, the better.
@anicog84
“newmaple: Do you see yourself avoiding the US until a resolution is reached? I wish you luck. I hope this boat of ours has working floatation devices and the weather doesn’t worsen…”
Yes, I never plan on going there again
Does anyone have any good news about fatca being rejected?
Yesterday, I almost took the easy way out but chickened out.
@what to do,
What do you mean by ‘you almost took the easy way out’?
I think that eventually there will be so much fallout, that FATCA or citizenship based taxation will be rejected
@what to do
‘Easy way out’ isn’t what I think it is, is it? As bad as things are, there’s always hope that things can get better. It’s anyone’s guess at this point whether FATCA will prevail, IMO. Hang in there!
@What to do,
If it makes you feel any better, you are among many who are tortured by FATCA..
I get the ‘what to do’ feeling. Depending on the day, and my mood, sometimes I think I should work on becoming ‘compliant’, then the next day I say ‘fuck that, I owe USA nothing’.
Come here to IBS and talk whenever you feel overwhelmed by it all.
Does anyone know of cases where late FBAR’s were filed with a reasonable cause letter and the IRS has fined them?
@what to do,
You can count on a lot of support here. Whatever your situation is, there’s undoubtedly some people whose situation is pretty similar, so if you’re feeling overwhelmed, they may have some specific experience/advice on how they’re getting through or got through the type of situation you’re in.
Most of us have experienced/are experiencing some pretty horrible feelings as we cope with this, so we’re all here for each other. Hang in there! You’re not alone!
@iamquincy and others
“I did all of my FBARs in 1 day”
I need some guidance on the Fbars. I will be filing 1040s as married filing separately.
1.I understand I have to list all my own accounts
2.Also all accounts with my spouse which I have signing authority over (even thought they are not in my name)
3. What about accounts that are solely in my foreign NRA spouses name and which I have no signing authority over? Do I also have to list these snce I am filing as married filing separately?
4. Here in my EU country all interest earned on bank accounts is taxable income and as such is included within the amount listed as gross income. On the US 1040 it appears that interest is separate from income. Dos this mean I have to first deduct the interest from my foreign gross income and then add it again on the 1040 form. Or should I just write the total income like it is on my foreign tax returns?
I am a bit confused and would love to hear from anyone who has gone through this before me.
One word of warning: I noticed one expat tax service with a fill-in questionaire and at the bottom a note mentioning that if you sent in a question it meant you were engaging their services! Is this legal to have on an open website???