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.
@The Mom
Basically they just sent a letter requesting that I provide an updated FBAR with the account numbers, which I then did. There were no fines or threats involved, but that was long before the FBAR jihad had begun. I probably wouldn’t try something as cheeky as that today.
let me tell you a little story about my phone conversation I had on friday with my local government tax agent.
I am an expat living and working outside the US ….. the “Homeland“. As many others here I pay taxes twice every year. I do own a big home in the country of my current residence and have no assets in the US. Unfortunately it was time to replace our roof . My current country of residence lets me split up renovation costs into either value added or value maintaining cost . The value maintaining portion is fully tax deductible $ for $ but not so on my US tax return which would only allow such consideration at the time of a sale of the home. Now from the $250K total expense my current country of residence lets me deduct $125K from income on my 2013 tax return which means the following : the net impact is a refund and a tax saving of approx. $43K …. now on the flip side since my FTC would decline substantially my annual bill (or 1040ES) to the IRS would now skyrocket >$43K . Basically what I save with my current country of residence in taxes is what I have to pay now to the IRS which means net-net no differencre to me the taxpayer. Since I am not as patriotic anymore as I used to be and I find this shift of refund towards the IRS as kind of unfair und more importantly undiserved 🙂 I am declaring the full $250K cost only under value added (legal option) which means no refund or tax savings in the country of my current residence BUT the IRS does not get the extra $43K !!!!!! and everything fully legal.
Net-net no change for me the taxpayer . This is how crazy this double taxation issue has become for some expats. When I mentioned this to my local government tax official in my country of residence he was stunned about this fact but more importantly he thanked me more than once for not claiming this refund which for them means obviously a lot more money for their local tax budget in 2013 which is fine by me because here I am happy to pay my FAIR SHARE because it is real but for all those IRS officials reading this you are not seeing 1$ …..nada,zip ,zilch,zero from this extra $43K and all totally legal . Maybe you think again how you treat us former loyal expats that have paid for decades their taxes into a 73,000 pages thick rotten sytem.
US extraterritorial citizenship-based taxation forced onto millions of perfectly ordinary individuals and families living outside the US – who already are paying tax in full where they live and have perfectly legal and registered bank accounts. What’s a bit of double taxation imposed on millions, and punitive laws when you’re on a holy mission? No cost too high if the victims live outside the US and have no meaningful recourse or representation. If they really were interested in TAX JUSTICE, they would support Carolyn Maloney’s bill to strike a Presidential Commission and investigate the punitive conditions we face for merely living outside the US with a US birthplace or parentage. But, their avowed commitment to JUSTICE is hypocrisy and a sham.
@notamused, thanks.
I am confused as usual. The CPA considers my RRSP a trust yet never mentioned forms 3520 and 3520A. If the reporting is deferred on an RRSP and a pension plan how and when does one report them?
Question for those of you who file by snail mail. For the FBAR’s it says in the Filing Information that these can also be delivered to the IRS’s tax attaches located in US embassies and consulates for forwarding to the DoT. Has anyone ever done it this way and did they arrive on time? How do you find out if an embassy has a tax attache?
For the RRSP and RRIF: Form 8891, U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans (attach to 1040) http://www.irs.gov/pub/irs-access/f8891_accessible.pdf
What is the other pension plan, Banany?
Good for you, ANON. I would do the same.
Has anyone else come across this before? I’ve been getting the exchange rates for CHF/$ from the FMS site that the IRS uses. The rate for year 2012 is 0.916, yet when I just checked on the Bern embassy’s website to see if they have a tax attache there is a notice to say the rate to use when filing 2012 tax forms is 0.976 – a difference of 0.060. Is this some sort of dodge to help Americans filing in Switzerland? You see if you have CHF30,000 and use the first rate you get $32,752 and if you use the second you get $30,738 – a difference of just over $2,000. If you use the rate that the embassy suggests the IRS is missing out on tax on that $2,000. Sneaky, naughty or what!
@Medea: Has anyone ever done it this way and did they arrive on time? How do you find out if an embassy has a tax attache?
Yes. I sent my last ever “part year” FBAR to the IRS office in the London Embassy . Because I’m in the UK it was cheap enough to send recorded delivery, so I have proof it arrived there. Did it ever get to Detroit? No idea, and… not my problem. As for tax attaches, maybe these?:
http://www.irs.gov/uac/Contact-My-Local-Office-Internationally
Just four to cover the entire planet. Not very geographically spread either.
@medea ………yearly average for 2012 is 0.9760 but year end is 0.9160 …. most CPA`s use the first one but both are acceptable if used consistently. For 2012 just a market coincidence no conspiracy…..sorry 🙂
Unless you are in the 7-figure category that difference evens out to less dramatic numbers since both income as much as local withholding taxes are exchanged at the same rate
@Calgary 411
The other pension plan is through my work and is Nursing Homes and Related Industries Pension Plan. When and how does the IRS collect taxes on these deferred plans? Do we still have to file something even after we have exited their system and are no longer citizens? How do they get the money from us for these deferred plans?
@Watcher, thanks for the link. No, they’re not really spread out very well are they. I would have thought moving one of the European ones to somewhere else in the Far East would be better, than 3 in neighbouring countries. Think I’ll send direct myself as there isn’t one here in Switzerland, especially as it’s the back filing, explanatory letter, etc, to go this time. Unless my tax preparer suggests otherwise.
@Anon, yes I thought it might be something like that just after I posted.
Banany,
I don’t know where these will have to be reported (1040 / 8891; 8938; FBAR; 8854 saying you have complied with five years of tax requirements after renunciation?? I presume you are not yet collecting anything on your work pension — is it a defined benefit pension? It is all so complex. These links MAY? help:
http://www.nysscpa.org/taxstringer/2012/march/cassidy.htm
http://www.irs.gov/Businesses/Corporations/Basic-Questions-and-Answers-on-Form-8938
Foreign pensions, deferred compensation plans, or foreign ‘social security’
I have an interest in a foreign pension or deferred compensation plan. Do I need to report it on Form 8938?
I am a U.S. taxpayer and have earned a right to foreign social security. Do I need to report this on Form 8938?
I am a beneficiary of a foreign estate. Do I need to report my interest in a foreign estate on Form 8938?
Someone here at Isaac Brock will have the answer for you. Because I didn’t want to make any more mistakes than I already have, I hired professional help. For me, unlike for many on here, it is too complex and daunting.
banany.. You relinquished. You are well under any conceivable limits to be considered a covered expatriate. You are a senior.
It is not reasonably possible for you to determine the value of your pension plan. People have been quoted fees of thousands for an actuary to compute the value of a defined benefit plan. Leave it out/off. Forget about it. Since you are well under the limits and not resident in the south, they won’t care.
@Not amused, how soon after filing your Fbars did you hear back from them about the missing account numbers, just out of curiosity? I couldn’t find an account number for my PayPal or Payza accounts, for example, etc. Did they question you fairly quickly after filing or was it over a year later?
http://www.dallastaxlawyers.org/?s=The+NTA+said+that+persons+with+Canadian+retirement+accounts
………”IRS will spend money to punish but not educate FBAR violators. The NTA stated that IRS was not doing enough to educate U.S. citizens abroad about their FBAR filing obligations. The report noted that IRS had not conducted an in-person presentation about the FBAR filing requirements in foreign countries, even if the foreign country had a tax attache and a significant number of U.S. persons with filing requirements. âThis approach sends the message that IRS will spend resources to punish, but not to educate, U.S. citizens abroad,â the NTA said.
The NTA also suggested that IRS clarify how beneficiaries of Canadian retirement plans can file late or amended returns that elect to exclude undistributed income from those plans by issuing formal guidance to consolidate the seemingly inconsistent guidance.
Therefore, the OVDP process burdens taxpayers eligible for a reasonable cause exception (e.g. more compliant taxpayers) by processing participants noteligible for the exception (e.g. presumably less compliant taxpayers) through the program more quickly, the report said.
……”
Thank you Calgary 411 for the links. I don’t even know if it is a defined benefit pension. An amount is deducted from our paycheques and the employer contributes an equal amount. Then the pension plan company invests the $$ and we get a %. What I really want to know is when does the IRS come for the tax $ on a deferred pension plan or RRSP? And by what means do they get it?
@KalC
Thank you. I might just do that. I am going bananas.
I don’t think they will come for yours, Banany. But, who am I to say? I wish I could be of more help to you.
Banany. They don’t ‘come for the tax’. And they don’t get any.
Lets say you received RRSP and pension income and let’s say you file Can &US income tax returns. .. You would get a credit on your US taxes for any sum paid to Canada and not owe anything to the US.
I thought you had relinquished. In that case the point is moot.
Whenever I have the nerve to look at this post, and read the never ending dialogue on how to ‘comply’, I start to develop a huge headache.
Maybe I and a whole bunch of others – most of whom don’t even have a clue yet – are going to get stuck having to ‘pay their fair share’ at some point, but I rather doubt it.
The tide is starting to turn, and soon FATCA and citizenship-based taxation will become a thing of the past. 🙂
@monalisa1776
The response came fairly quickly, say about 4 weeks.
Thanks, @Notamused.: )
@KalC
Thank you. I thought IRS wanted all that pension and rrsp information so they could get a cut of it. I am waiting for the CLN to arrive, I did go to Toronto early last November to relinquish. After that I will never go back to the USA unless a relative dies.
banany, You’re welcome. Glad to help. In your case, why bother with the 8854 at all? i wouldn’t bother unless it’s really easy. Certainly don’t spend any more money or much more time on it. With the money you save, buy a good bottle of wine to celebrate.