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 made a quiet disclosure back in 2011 with my accountant attaching a letter to the London IRS attache pleading reasons for reasonable cause regarding not filing FBARs. The accountant delivered the amended tax returns, current year’s and all six years’ FBARs to the US embassy there too. I believe since the earlier years would have been the forwarded onto Detroit. I suppose I’ll never know though if they were even delivered by the IRS to the FBAR center.
However, I haven’t heard anything back since then and it’s been almost two years so am probably going to be OK but at the time, it seemed a riskier move than OVDI but figured I’d risk it because OVDI would have ruined me anyway. I still have another four years though before I’ll be out of the woods but would think I could relax by mid 2015.
I filed my 2011 FBAR by myself last year.
Has anyone done this 8845 form themselves? If so can they please enlighten me?!
1. I have always filed 1040’s jointly with my husband, but 8854 must be done separately.
8854 Part IV sect A states. ‘Enter your US income tax liability for the 5 tax years ending before the date of expatriation.’
As our total tax liability was shared does this mean that I just put down half the amount?
2. Part 1, question 6.( Number of days physically in the US in the ‘current’ year.)
Does this mean 2013, or the year I expatriated 2012?
Thanks
@Heidi, I admire you for trying to tackle that form yourself! I’m not brave enough; I’m going to pay my accountant, whom I trust, to take of it for me; it’s going to cost me a lot of money for her fees but at least will hopefully have all this behind me after next year!!
I
@Saddened appears lost for words.
@monalisa1776
I am lost for words too. I want to get all this Orwellian nightmare behind me and get on with what’s left of my life.
@Monalisa1776, Besides being lost for words, with this mess I just feel lost period..
I guess you could call me the Silent Partner!!
@Heidi, goes without saying!! 🙂
@Heidi
1) I remember reading a blog post from Phil Hodgen in which he stated that generally it is OK to list half of the assets/liabilities on 8854 if they are jointly owned by you and your spouse. That’s what I did on mine.
2) 2012, i.e. the year you expatriated. For the purposes of 8854, anything after your expatriation is none of their damn business. 😉
@Heidi
I managed to find the blog post I referred to above: http://hodgen.com/question-about-expatriation-from-reader/
….is OK to list half of the assets/liabilities on 8854 if they are jointly owned by you and your spouse……. YES correct
@Saddened, so true. I don’t have any idea yet if my renunciation will go smoothly and how much more I’m going to have to pay my accountant; to a degree I feel beholden to her because I will need to be able to rely on her to represent me if I am audited. I thus feel stuck with her at least till the statutes of limitations have closed on my earlier amended returns which could be as late as Oct 2017.
In other words, it’s still theoretically possible that the IRS could audit me for the still open years even after I’ve received my CLN and even after filing 8854. Unlikely but still possible. So I better remain as her client till then…
@monalisa1776….. QD is a lottery like a lot of things at the moment … time will tell if you get audited or not. The audit btw. is not the problem in your case anyway the problem is if they decide against your reasonable cause argument and apply mitigation non-willful civil penalties per year for FBAR and 75% civil penalties for undeclared income taxes on your amended returns.
We keep our fingers crossed and hope the best for you 🙂
Hi thanks all.
Yes, I understand about dividing our assets, we consulted a lawyer regarding that little baby. It’s just declaring how much tax we paid (tax liability)for each of the five years, as our income was shared on 1040’s then surely the tax we paid on that income would be shared (ie halved when we declare it on our separate 8854’s
Also
Surely’ current” year means just that, the year, you file 8854’s, otherwise it would state (the year in which you renounced? Maybe they are seeing if you have spent over the permitted number of days in the US since you renounced to try to tax you yet another year post renunciation?
Isn’t this fun folks…?
I may have to employ an accountant?!
For tax purposes you cease to be a US Citizen the midnight before your renounciation date. So technically when you pay your $450 you are no longer a US citizen abd therefore would not be able to deduct it.
@Mike, I agree that quiet disclosure is indeed a lottery though would have thought I’d have heard back by now if they were going to assess F-bar penalties for the earlier years. My accountant says she doesn’t know of any minnows like myself who’re genuine long-term Expat having been hit with major fines after quiet disclosure for f-bar. Fincen would also have to pursue me through the courts and with hardly any assets in the U.S., said It’s unlikely, especially as she believed I had reasonable cause.
@ just a Canadian
That logic would also mean that I can’t deduct my accountant’s fees for doing my 1040, 1040NR, 8854, which I have by US law to complete post renunciation?
@Heidi: Surely “current” year means just that, the year, you file 8854s…
Just bad form wording on the part of the IRS, I think. If you look at the form instructions it seems relatively clear that they’re interested in the “tax” year for the form, not the year to happen to be in when you fill it out (which is far from over, in any case!).
What they’re after here is a way to entrap folk who left between jun 2004 and jun 2008 (hello!) into being US tax residents for the complete year based on just 30 days of actual presence. My guess is that the question has no real relevance for post-HEART renunciation.
…..I’d have heard back by now if they were going to assess F-bar penalties….. no not necessarily.
I have a hunch unfortunately that this whole QD segment will have its own waterloo sometime in the not so distant future – I just think it is not their priority at the moment with the limited resources they have. Remember the IRS is trying to create a “uniform penalty structure that treats taxpayers consistently and predictably“ with all sorts of Minnows in VD,OVDI,OVDP`s , and probably 2013 opt outs.
@Heidi
As I understand it, fees for tax preperation are always available, regardless of your citizenship.
But I am not a tax expert so you might want to research it a little further.
Thanks Watcher. My head was completely muddled.
I can see now that I can’t also deduct my accountant’s fees for doing my 1040, 1040NR, 8854, as this is post renunciation…even though I am FORCED to do this utter nonsense.
Followup to my own comment since we cant edit anymore. ;-(
I suppose if you are filing a 1040NR for the period after your renunciation you could try putting it on that return. Again you should research it further.
@Heidi, if you are a covered expatriate, things may get complicated on Form 8854 because there would be from a US law perspective a potential tax liability.
However, I was well below the threshold both on tax liability and assets. Therefore I filled out the cursed form on my own. I doubt that I will ever hear from the bastards, because I am so far below owing anything that they would be throwing good money after bad, as it were. I want you also to know that I pleaded the Fifth Amendment on the form itself. This is a legal dodge that is permitted on tax forms for information that is not necessary to establish a tax liability. I received this information not from a lawyer but from reading law articles. See http://isaacbrocksociety.ca/2012/04/29/form-8854-fbar-and-the-fifth-amendment/
@Mike, you may well be correct which is why I won’t truly relax until all the statutes of limitation have finally closed. But common sense suggests that if they hitevery single Expat with draconian Fbar fines, especially if they made an honest disclosure before being discovered, that everybody effected would become too terrified to become compliant. That would defeat the whole purpose of these fines in the first place, especially as even egregious offenders aren’t being hit with the maximum fines.
I suspect though that this could change after spring 2015 when the IRS and given start receiving reports on undisclosed foreign accounts from F.AT.ca
Also, assuming I can smoothly renounce and subsequently receive a CLN, if things then really nasty, I simply would never revisit the states ever again. Without any assets there, what can the realistically do? I would also probably get more protection from the British courts as I’d then only be a I’ll citizen.