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.
yeah, you mention another variant of the population. I was thinking about those that may or may not be known by their banks. The gist was about their IRS filings, filing income but missing interest, or filing interest but missing the FBAR.
Since the IRS is monitoring every bit of data in the world, we should say hello as they now are learning more from my words about how to get us. I might as well also give them my greeting and remind them that their mothers ought to have taught them ethics, and that their political science degrees ought to have instructed them about the constitution. If you at the IRS are instructed to do something against your ethics and against the constitution by your leader, and you do it anyways, you are the same as all the SS officers just performing their duties. You at the IRS may get us with your bankrupting penalties but you will be responsible for your IRS enforcement actions to your maker. Same goes for you, Chuck Schumer.
@ allou
Definitely claim yourself on line 6a. Take the standard deduction (line 40) AND the exemption (line 42) because I think the IRS would probably correct your 1040 if you failed to take both. It just means writing a few extra zeroes if you reach zero (that is, a minus number because minus means zero to the IRS) after subtracting the standard deduction. The IRS does not refund anything when your taxes owed are zero.
If you have access to an account I believe it should be reported on the FBAR too. I know this means lots of entries but that’s the nature of their beast.
Schedule D is for capital gains and if you have any you put the final total on line 13. It’s a doozy with about 6 classifications to deal with. If you have no shares in anything, consider that a blessing — no Schedule D.
I’m not sure about that FILED PURSUANT thing but don’t forget to also write OVERSEAS FILER at the top of the first page of the 1040 and at the top of the FBAR too.
@mark twain;
re; “if you at the IRS are instructed to do something against your ethics and against the constitution by your leader, and you do it anyways, you are the same as all the SS officers just performing their duties.”
I would really welcome some supernatural intervention at this point, and some form of lightning bolt to jumpstart their consciences and restore or provide them with ethics – since waiting for reason, ethics and morals to strike the US Congress, Treasury and IRS is a fruitless and hopeless wish on my part.
@MarkTwain,
Re: “Since the IRS is monitoring every bit of data in the world, we should say hello as they now are learning more from my words about how to get us”.
Yes, but the more we write, and the more they read, the greater the chance that they will have a light-bulb moment, and start to see how destructive FATCA and citizenship-based taxation is to everyone, not just to us. Hopefully some of them have ethics that are developed enough so that they can grasp the unfairness, but if not, then lets hope they are smart enough to learn that there is nothing good in it for them anyway.
@WhiteKat and others
Thanks for comments. I am new to all this but there must be thousands of accidentals out there who are completely unaware. Is there any acknowlegment by the Canadian or US governments or IRS that many people may not know anything?
It is apparent to me from Finance Minister Flaherty’s often quoted statements that dual Canadian-US citizens are better protected than US citizen residents in Canada. As there has been more and more media on this subject, the argument for “not knowing” is becoming weaker.
I do believe, however, that many still do not know. To not pay attention to what is going on (not just on this — witness the current RBC story in the news), we lose our rights. To not give our views to the Canadian government in strong enough numbers, we lose our rights. This subject has not yet hit the radar of some US Persons in Canada or it has and they ignore it. Some accidental Americans have no idea; others do. There are many who maintain if they ignore it all, it will go away and not affect them — heads in the sand approach. One million US Persons or families in Canada coming together to fight this could make a significant difference. I hate that this is not happening. Real awareness is the first step to any of us in doing the necessary research to gain knowledge for the decisions we have to make on how to deal with this US citizenship-taxation problem we and our families have “inherited” according to US tax law. Has the US informed us all along — NO. And, it is apparent to me that we were (at least was) lulled into complacency.
One of many that discuss: http://people.stu.ca/~hunt/ustaxinfo/cadct.htm
Canadian Minister of Finance James Flaherty has made these points about the FBAR:
@allou
i agree with Em’s comments. Also, keep in mind that interest, dividends, capital gains, rental income, pension income and any other investment income is not reduced by the FEIE on 2555. You can use the personal exemption and standard deduction to reduce those amounts and if you need to reduce them further than you would need to do 1116 to claim any foreign tax you paid.
@Calgary411, This is interesting. Does the CRA collect US taxes owing from US citizens (not duals) residing in Canada?
@Woofy,
As I see it from what Finance Minister Flaherty has stated, for a US citizen only permanent resident in Canada (vs US/Canadian dual citizen), CRA has the authority given with the Canada/US Tax Treaty to collect outstanding taxes from a delinquent US citizen resident in Canada. If directed by the IRS to to pursue, they would have that obligation (but not for those who are Canadian and US citizen (duals) residing in Canada from the time that ‘USP’ became also a Canadian citizen. He has stated that, both in the US and in Canada, and with correspondence with many of us. We have to be vigilant that Canada does not change that statement with an IGA it may sign with the US re FATCA. As well, as it now stands, Mr. Flaherty says that CRA will NOT collect FBAR penalties for either US/Canadian dual citizens or US citizen only residents in Canada.
For any USP resident in Canada who does not plan to return to the USA to live, if they take the necessary steps to become a Canadian citizen, they are then able to claim relinquishment of US citizenship (vs renunciation) by virtue of becoming a Canadian citizen (if that is their intent). Why would they not if they do not plan to return to the US to live? I wanted very much to become a Canadian citizen so long ago as I knew that Canada was the country I wanted to raise my children in; neither my then husband or I had any intent to return to the US to live. We were working in Canada, paying our taxes to Canada, becoming a part of the Canadian fabric and had all the benefits Canada gave, so that was our 1975 decision.
A USP in Canada is better protected re US taxation overreach by also being a Canadian citizen (or, for many of us now, a Canadian-only citizen) — if that is his/her reasoned choice.
@calgary411
If someone was was already Canadian (from birth), what would be an acceptable reason to give for renounciation? I understand ‘tax reasons” is not an acceptable reason to give
@CanadaPerson You do not need to give them a reason, it is your right to renounce. I told them that I was a Canadian citizen and wished to be a citizen Canada and Canada alone. That was good enough, I have my CLN. One of the forms you will be asked to sign DS-4081 says on line number one you have the “right” to renounce/relinquish.
@TrueNorth
Thanks. What questions do they ask in the interviews?
Again, I’m new to all this so my apologies if these questions are repetetive. I have been reading!
@CanadaPerson There were very few questions, it is not an interrogation. The meeting was friendly and professional. It was the consul who did most of the talking, telling me all the reasons why I should retain US citizenship and going over all the forms and asking me if I understood them line by line. I think for the most part they just want to make sure you do know what you are doing and you do understand that the decision is final. If you have made up your mind then there is no need to worry.
@Canadaperson, you may want to research the “Reed Amendment” if you haven’t already. Renouncing to avoid paying US taxes could ban you from entering the USA.
canada person. Bubble bustin is wrong about the Reed amendment. Don’t concern yourself about it. Firstly, it has never been enforced because it is unenforceable. Secondly you are only considered to have renounced in order to avoid paying US taxes if you are determined to be a ‘covered expatriate’. It’s a long story. Best source of info here.
http://web.archive.org/web/20121017102240/http://www.renunciationguide.com/
Canada person Forget about the Reed amendment. Details here
http://web.archive.org/web/20121017102240/http://www.renunciationguide.com/
Just Me –
Pass on the Quinlan because of combination (1) just a blogsite (2) Center for Freedom and Prosperity sounds iffy, but no effort checking into that (3) FATCA stuff is endless & overwhelming & to some extent peripheral/epiphenomenal.
Don’t want to out myself through more specific reference to other theatres of documentation & pushback.
@KalC
Are all covered expatriates considered to have expatriated for ‘tax purposes’ and therefore at risk of being banned to enter the US? What about those covered expats who’s assets are above 2,000,000 but below the $650,000 in unrealized gains and who owe no exit tax? I thought in the Reed amendment it had to be proven that you had expatriated for tax reasons. What about retired people living abroad with a house and who have saved a decent pension but are no longer able to function as they no longer have access to banking, surely that is a good enough reason?
@calgary411 and other IBS persons (nice idea that – inter-nationality IBS?)
It would be a big help to have these links in one place. I can make a list of what I have gathered with a short description, but how do I contact Petros?
I have gone from shock to desperation then anger and now determination to get through this and enjoy life (which is is on a sort of stand-by right now) I only discovered that I had to file 2 weeks ago. However for US persons of whatever variety who decide to comply, the links are very enlightening. I am very grateful to the IBS participants and hope that my posts can help others.
@Mark Twain
“I picture the IRS loving to find a way to GET these people prior to the FATCA bank reporting schedule, where the first bank reporting is May 2015 about their clients activities from Jan 1, 2013”
I usually check up on IBS before going to bed and almost always find a tidbit that will allow me yet another sleepless night (it’s a sickness I think). Last night the above did it for me. Does anyone know for sure if banks are obligated to report on USP accounts which are already closed? I had thought not but we can never be sure (and now I suppose I just gave them an idea if they are indeed reading IBS religiously, as I am…)
@HKGS …… it is all about the the $ balance …..
March 15, 2015: FFI reporting begins on “US accounts” held in 2013 and 2014.
(Please note: US accounts are accounts beneficially owned by US persons as defined under the FATCA rules.) …..Preexisting individual accounts are tested using a four-step process in order to determine if the account is a US account. First, low balance accounts (i.e., less than $50,000) may be classified as non-US accounts………..sleep well now 🙂
All pre-existing accounts held by individuals with balances of $50,000 or less are exempt from review. The threshold for review is raised to $250,000 for pre-existing accounts held by entities and for accounts that are cash value insurance or annuity contracts. Insurance contracts with a balance or value of $50,000 or less are not treated as “financial accounts.
All accounts maintained by an FFI prior to January 1, 2014, are treated as pre-existing accounts.
The due date for the first information reporting by participating FFIs with respect to the 2013 and 2014 calendar years is modified to March 31, 2015 sorry not March 15.
The reporting requirements also are phased in over a number of years:
• Reporting for calendar years 2013 and 2014: The information that participating
FFIs must report with respect to 2013 and 2014 is limited to basic account holder
identifying information and the account balance or value as of the end of the
year. No payments made with respect to the account will be required to be
reported. This information must be reported by March 31, 2015.
@KalC
The discussion was around what to discuss with the consul when you are renouncing. Whether or not the Reed Amendment is enforced, it’s probably not a good idea to have it on record that you are renouncing because of taxes. Would you?
Thanks @ Mike T… I’ve more or less read the same but the devil is in the details. Actually I have nothing to hide really (that can’t be explained away as an “oops I didn’t know”). What I fear is visibility. I am actually going to repatriate back to the US but will keep some foreign accounts open and close others (because I have no need for them). Meanwhile I will move some funds back to the US. My biggest fear is the impact on FBAR max balance (say I have only 100K, I move it from one account to another. Using FBAR/8938 max balance rules I suddenly have 200K, plus whatever money I move to the US). I guess if I timed it well I could transfer the money before I closed the accounts, but still any deposit may be subject to scrutiny… most of the balances are over 50k as I’ve lived outside the US for more than twelve years now and recently sold a flat.
I guess it’s good that for 2013/14 ony max balance will be reported rather than all incomings and outgoings scrutinized. When you’re packing up and leaving a place, you have a lot of things like deposit returns, selling stuff, etc etc that might look like income but isn’t really. I just hope they don’t go back and change the rules later.