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.
……I guess it’s good that for 2013/14 ony max balance will be reported rather than all incomings and outgoings scrutinized…….
No ,as of today just year end balance (12/31) for 2013 and 2014.
….. 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……… no you still have $100K if you can prove double transfers
Yeah, I know that I only have 100K and that I can show proof. Like I said I will have a few situations where they may want to argue one way or the other, and in the end should hopefully deemed non-willful, but I’d just like to not get flagged in the first place 😛
Close the accounts within the next 6 month, wire the funds back to the US and for FATCA purposes you will not be flagged. For the rest in your case it is about lowering the penalty base. (FAQ37) but that is another topic.
do not fear FBAR`s or form 8938 . Key is where your interest , dividend or LT/ST capital gains income if any is coming from the rest is smoke ! Keep it simple.
My recently departed CPA father (reason why I’m moving back) taught me long ago not to fear the IRS, so the goal is just lowering my level of frustration 😛 My feeling (more like my hope) is that the TD MUST get way more FBAR’s than they can reasonably deal with on a real-time basis, and as such IRS uses FBAR and 8938 retroactively instead of proactively… for example, if someone is targeted or otherwise flagged by FATCA, they can go back and see if the numbers line up properly ie whether said someone has properly reported the income and overall balance. If not, there’s a problem. I also think that as time goes on that FBAR will take a back seat to 8938, perhaps becoming obsolete itself. The more and more I see that the people getting caught are those who were ratted on by the banks already, the more it seems to support the above. But what do I know 😛
CanadaPerson,
As others have said, and as you will find if you study the Consulate Report Directory http://isaacbrocksociety.ca/consulate2/ (where others give, some very detailed, of their renunciation and relinquishment appointments — what they say and other details. You will also find links in that document (maintained by pacifica) to all of the forms that may be required, the differences between renunciation and relinquishment and list of IRS and other resources you should make yourself aware of (including the archived Renunciation Guide which would be a good overview for you). Read, read, read to make sure you are fully aware of all of it. The Consulate Directory, I think, is your best learning resource.
After your renunciation, you will have to file IRS Form 8854, which certifies to the IRS that you are compliant with all US tax requirements for the previous five years. The Department of State (DOS) is the department over the US consulates around the world; that is where the renunciations and relinquishment appointments take place. Your closest, if you are in Alberta, would be the Calgary consulate, which if you look at the Consulate Directory reports has been one of the best to deal with.
See blog post ‘Lobbying against common sense’ at http://waybeyondthebeltway.com/2013/04/14/lobbying-against-common-sense/
Blogger raises question about those with vested interests, like Intuit (Turbotax) lobbying against the simplification of free tax preparation in genereal , and the relationship between FATCA, US extraterritorial citizenship-based taxation and the growing FATCA Compliance Industrial complex. http://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing
I used to feel bad for Intuit that most overseas people I know just use pirate copies to do their returns (NEVER EVER me of course… no sir). Now, not so much.
It seems that it’s all, whatever we encounter in our lives in these times, about big business, big compliance industries, lobbying for the best buck for that industry. It, and our politicians, is not about the individual person or the well-being of persons within their total society. And, the advertising industry, which supports all of these big business industries is enough to make me lose it on a daily basis.
@Badger
Thanks for all the great info
@Calgary411
Me too…the system’s rigged against the little guy when corporations are people too.
@HKGS
I tried to purchase Turbotax but the website wouldn’t let me and when I called their HQ they said it was not for sale outside of North America. I managed to sweet talk a nice customer service rep into giving me a copy for free in exchange for a magnificently awesome customer service feedback form. However, two hours into data entry, I discovered that Turbotax is just not sophisticated enough for my totally straightforward foreign return. You can not redesignate interest income to the general limitation basket on 1116 if you live in a high withholding tax country.
heidi Only covered expatriates are considered to have expatriated for tax purposes. Forget about the Red amendment. Forget about being banned. (Unless you have a criminal conviction)
@Edelweiss… yes it does have significant limitations. I don’t have your particular problem as there is no capital gains tax in HK, but the whole 1116 handling is just weird in general and requires re-checking w/ a more sophisticated package (or just doing it by hand, which sucks). Add to that it doesn’t support 8621 or 3250 (I think) and its usable only for the most simplistic of FEIE returns. It does support 8938 and FBARs at least… if only to remind the unwary that they should be ticking the box.
Bubble. Of course not. No reasons need be given, No discussion of taxes. NADA. But scaring people with the reed amendment doesn’t add to the discussion.
Heidi To be more clear, if that’s possible’ the IRS wanted a standard definition for those who had ‘expatriated for tax reasons’. They wanted an objective test. One that has nothing to do with why one expatriated but only with how wealthy they are. A bureaucratic solution. Hence the concept of ‘covered expatriate.
@KalC
It’s ONLY BECAUSE of the Reed Amendment that no one should discuss taxes with the consulate during the renunciation process. How does it benefit someone not knowing about it?
@bubblebustin and KalC,
…and essentially gags us all!
We’re all essentially gagged and I agree with Calgary, Edelweiss and Badger that we as individuals don’t count; only big business and vested interests count. There is a compliance industry whose vested interest lays in there NOT being tax reform or simplification. Our tax preparers may be privately sympathetic but are essentially wolves in sheeps’ clothing; they want us to remain dependent on them, as we’re their bread and butter. I’d guess that some of the tax attorneys are the most predatory, plus many retain IRS contacts, having often previously worked for the Service, themselves.
As for being a covered expat, my understanding is that if my accountant doesn’t at least file for an extension next year with a 4868, that I would still be considered a covered expat if my 8854 isn’t filed within the deadline. I believe the standard deadline if abroad is before June 15 but could be extended to October 15 with the extension.
I will thus still be biting my nails till that final tax return and 8854 are filed sometime next year…I also understand that if I’m deemed a covered expat that I would then have to pay a huge tax bill because, with covered status, the entire value of my personal pension would be treated as though it it had been paid to me in its entirety on the day before I’d expatriated. So even with hardly any stepped-up basis, its whole value would be taxed as ordinary income, thus pushing me into the 25% band and thus costing me another five figure sum…:'(
@ monalisa
I know your financial situation is complex but maybe a little CYA (Cover Your A$$) strategy could give you a bit of peace of mind. In that I mean do your best to prepare your own 8854 and have it ready to go in case your tax preparer doesn’t get things together in time. If need be you could send off your DIY 8854 with a cover letter explaining that your tax preparer will soon be sending the finalized version. That way you can be sure the deadline is met. Just a thought. Also that extension form is one of the easiest ones the IRS offers. You could DIY that yourself too.
Be it as it may, I do not at all feel that my US tax lawyer nor my present US tax accountants have been predatory. They are among those who have kept me sane. I am paying them for their years of education and their years of expertise. They are bound by constraints of US law. I saw what H&R Block did for my daughter — nothing but problems and almost paying US penalties. She is the one that had to solve her problems and highlight their poor tax, incompetent US tax service. I will just not paint ALL professionals with the same brush as we are all being painted by the same brush. In the end, others may be able to solve their US citizenship-based taxation dilemmas by themselves. I am among those incompetents who could not do what had to be done without professional help. I hate that I have to spend he money to do such (and they know it!) — it absolutely should not be necessary, but that is the fault of the US congress persons / lawmakers, the same ones I see calling me a cheat, a liar, a traitor and setting penalties that I must make sure I and my family are protected from. So, I see it quite a bit differently. I try not to paint all Americans with the same brush, all colours and nationalities of people with the same brush, all religions with the same brush, all sexual orientations with the same brush, etc., etc. All need to be judged on their own individual merits — even those congressmen of the USA homeland — and those in the US tax compliance industrial complex. I do know we are their opportunity for business, but I will not call all predatory.
@Em, I agree. I don’t think it would be a bad idea to actually try to prepare my own final tax return for 2013 either, though am flummoxed as to how to go about it: can I still claim a standard deduction in a dual status 1040 or only the personal exemption? Would my tax rates be pro-rated too?? Would I still be able to claim the foreign earned income exclusion and, if so, is that also pro-rated, etc. So bloody confusing.
I feel I really still have to keep my wits about me!! I know I will feel so much better when that final return and 8854 are filed.
I’d imagine that I’ll have to pay my accountant a premium but it will be worth it for my peace of mind. 😉
@Calgary, I agree with you too. I have had a good experience with my tax preparer and realize you have as well; It’s just that I’m pointing out that others have not been so lucky. Of course there are good eggs and Thank God!! 🙂
@monalisa and em,
You can try your hand at completing your IRS Form 8854, monalisa. I believe yours will not be due until next year, right — to be filed with your final partial year 2013 US tax returns. There will likely be as new and improved 8854 online at the end of 2013, the one you will have to complete.
@Calgary, very true. Plus, if I attempt to fill it in, my accountant might hopefully also lower her final bill. 🙂