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.
@taxconfuzled, have you asked your questions over at expatforum?
http://www.expatforum.com/expats/expat-tax/
There is a woman there named Bev that moderates the forum and is an accountant living abroad. She has been helpful for people trying to become compliant.
As for what will happen if you get audited, I imagine you could face penalties and back taxes. The point is, is that it is close to zero chance that it will happen given your level of income, savings and location. A first time FBAR with about $70,000 is not that much considering you live where you bank. There can be many explanations as to why you suddenly have that money, ie it is your NRA wife’s, loan from bank, gift etc. (keep in mind, you don’t report the money you have back in the US) If you lived in the US and suddenly had 10 accounts overseas with $70,000, that might raise a red flag. In your situation, I still believe that you should just file going forward. Good luck.
Your chances of being audited approach zero. Does your bank know you are American? If not, FATCA is not a worry- if it ever gets applied.
I am more cautious but still reasonably optimistic that you’d be reasonably safe just to file going forward too. Your older tax returns will be in the clear within six years and probably even just three, as you’re a minnow; plus, unlike unfiled tax returns, the fbar statute of limitation automatically closes after six years. You’d probably be ok just to file it ON TIME (arrival in Detroit before 28 June, as 30 June falls on a Sunday).
Be honest with your accounts and their details but a ballpark figure is fine. If in doubt, overestimate slightly to be on the safe side. They can always contact you if they want more info about the earlier years back through 2007.
Just to clarify that you could probably just file your first fbar for 2012 but make sure you keep filing correctly with safe arrival to Detroit before the deadline of 30 June (or the last business day before if 30 June falls on a weekend such as this year.)
Also can vouch for Bev on Expat forum. 🙂
@IBS administrator:
It was a surprise today to see that someone has used my nickname “Innocente” above. To avoid confusion, it might be best to remove the above “Innocente” posting at May 25, 2013 at 3:17 am.
Thank you.
I sent an email to our sleeping leader also—-over there in Molsen-drinker-land.
I really hope that we could register the names that we are using in order to avoid someone else stealing them for whatever purpose…
Innocente, thanks for informing us, and we were already on it. We have a little problem with one commenter who is doing this, and we are doing our best to protect the people who comment on the blog. We know the real identity of this person and if he continues to abuse the people at this blog we will see what legal action will be necessary.
taxconfuzaled,
Also, see Petros comment: http://isaacbrocksociety.ca/expat_tax/comment-page-30/#comment-355537
@iamquincy and others.
Thanks again for your continued help.
The total aggregate balance on my FBAR, I just calculated it, is just over $108,000. Does this change anything? This is not the amount I have in my account, it is the yearly highest balance. This is created because 1. some money coming in for business. 2. Most of it is transfering a larger sum of money from account A to account B to account C so I can send it back to the US.
And no, I have not posted over in the expat forum yet.
If audied do you think that I would also be subject to FBAR penalities? If they ask why I didn’t file them, my answer should be? “I had no legal obligation to go back and amend those?” I don’t think that would fly, but.. I am wondering.
@taxconfuzaled
I know you are going through the drudgery and frustration of figuring out what you are going to do..
The route back to Compliance is not easy.
I have been reading your comments and responses and have hesitated to weigh in as frankly there is not much to add. You have been given some excellent advice even when I caution others not to take advice from a blog.
At a minimum, without regard to the past, and given your current situation and desire to maintain U.S. Citizenship, you MUST be compliant for 2012 now that you have knowledge. Don’t cross the willful barrier.
To set your mind at ease at the outset, no matter what you do, you are not criminal prosecution material. No DOJ lawyer in his right mind is going to take you to court based upon the facts I have read here, so I would set aside any concern that you might have, IMHO.
Penalty worry is your biggest concern, and rightfully so, but in any audit under normal IRM discretion, your penalties would NOT be the highest amounts the IRS likes to use in their hyperbolic examples. If my example is of any comfort they would only be 1 discretionary non willful penalty per year at some amount way below the $10K amount they could apply. I don’t think I got the best deal, so yours could even be less.
Going forward compliance has it merits, as my understanding is, there is no legal requirement to correct your past failures. I got that from Jack Townsend’s blog, but I don’t have the specific reference to give you. My memory is always suspect, so DO NOT take my word for it, but going forward compliance without correcting the past is a legitimate strategy.
If you decide to follow that strategy then consider this fact. From the Economist,
Who will tame the Taxman, your chances of audit are 1 in 360. Given the current controversy, the state of IRS funding, the decrease in agents, and given you are living overseas, the audit lottery says your chances of being singled out for examination are probably even less than that.
But depending one your Risk tolerance, even that might be too much for you.
If you enter the streamlined or QD process, I think your chances of being audited actually go up, as the GAO has encouraged the IRS to look at QDs or first time tax filers with an eye to extracting more revenue.
The streamlined process means they definitely will see you and have to make a decision about further examination, as you will exceed their stated $1,500 low risk category which they seem to be fudging right now.
So, on a FBAR penalty risk vs reward basis, the go forward strategy would seem to have the least risk, given the current situation.
If anyone out there reading this, thinks different, weigh in.
Now, whatever you do, if you are not comfortable yet to arrive at a decision on your own, I think it might be time for you to get competent tax attorney advice to help confirm your decision leanings. It might be good assurance(insurance) for you. Not a CPA, NOT an enrolled agent, but an expensive knowledgeable tax attorney who will NOT rail road you into any program or milk you for additional fees.
You should only need a couple hours, (limit yourself) spend ~$1200 and in the scope of things, that money spent might give you more comfort about your decision. I would consider calling someone like a Jack Townsend, but there are others including those that occasionally comment here.
Tell them you are trying to decide between the three options of 1. Go forward, 2. QD or 3, Streamlined VD. Tell them you DO Not want them to do the work rather just review your facts and help you make a good risk analysis to limit FBAR penalty exposure.
So, that is the best I can do in the way of advice. Take it for what it is worth and in the context of every other good comment you have received.
Best wishes for your new compliance and continued membership in the TAX, Form and Penalty Club!
@Just Me, Beautifully explained!
@iamquincy
Thanks…
I hope it helps him. I would have loved to have had IBS around as a sounding board when I was agonizing over my decision. It seemed really lonely then.. LOL
@JustMe – yes, beautifully and clearly expressed
This might not be the best venue for this…but here it goes. I am about to file my final tax return and was wondering if anyone has successfully launched this balloon yet.
As most know i relinquished my US citizenship on Dec 12th 2012 (yay) and am filing a dual status return.
I paid an Accountant to do these returns and now find out later, after asking different questions on the ‘S” ends with a ‘ski’ forum that there might be something amiss. (actually a simple question turned into a barrage of other questions)
Here is what i have…i was sent a 1040 tabulated with all the numbers up to my date of relinquishment, and a 1040NR for the remainder of the year (to Dec 31).
The 1040 has “Dual Status Statement” written across the top and the 1040NR has “Dual Status Return” written across the top.
The 1040NR has no number tabulation (all fields are blank) with the exception of personal information on page 1.
The 1040 has all the numbers and calculations
I am now told that this is incorrect for a dual status filing, and that values from the 1040 have to be transposed onto the 1040NR…????
Anyway….after a paid consultation with another Accountant…i am still confused, but he says that if sent in that way it will most likely be accepted, but the S with a ski poster was correct.
I have read pub 519 over and over and over again…and for the life of me i do not know why you would place income that is not US generated on this forum.
does anyone have any insight to this? It seems a lot of people have filed the way i am about to without any problems from the IRS.
@ mach73
It’s my understanding that your 1040NR reports only your US income for the portion of the year you were in the post renunciation zone. If that is zero then zero is all you fill in. After becoming a non-US person why would you be reporting anything earned outside of the USA to the IRS? You are either off their hook or you are not and I say you are off their hook. It would be easier if all you had to do is sign a short statement that as of such and such a date you are a non-US person and you have zero financial ties to the USA. The End. I’d give them the “zero” 1040NR (providing you had no US earnings) and if they object just say pardon me I guess I didn’t understand. Also keep in mind that pretty much everything IRS related confuses me.
@Em,
That does make sense to me…and all my income post relinquishment was from Canadian sources…no US source at anytime.
However the ‘other’ forum poster, who is quite knowlegeable, was backed up by this paid consultant that post income from the 1040 is transposed onto the 1040nr.
They are telling me over and over again that the instructions make it quite clear…but I don’t see the angle at all.
in fact if you look at the 1040nr is specifically states to only put income from US source trade or busniness.
regardless, i would feel uncomfortable putting any canadian income on this 1040nr as it would appear that it was US generated!
I am sending it in as is…i am just sick and tired of dealing with a system that does not make sense to me….2 + 2 = 8 in the irs world!
BIZZARE!
Mach 73. Employ the KISS principle. If you have no US source income, don’t file a 1040 NR. Ask yourself-why would I bother? If you insist on filing , put zero. Remember ,they have 200,000,000 returns- what exactly are you concerned about?
This is from Renunciation Guide .com There is alink at the bottom of the IBS website. It has proven to be extremely useful and reliable. In the FAQ section one of the questions with the answer is:
• If I expatriate, how do I do my U.S. taxes that year?
The 2008 HEART act became effective in June, 2008, but the IRS didn’t really have an answer to your question until October, 2009. According to IRS guidelines, you need to file 3 forms for the year of your expatriation:
Form 1040, the standard tax form, with your global income in the period from January 1 until the day before your renunciation
Form 1040NR, the non-resident form, with your U.S.-source income in the period from the day of your renunciation until December 31
Form 8854, the expatriation form, where you determine if you’re a “covered expatriate” and what taxes you owe.
According to them a bunch of zeros on your 1040NR are just what the Dr. ordered.
Thanks KalC
I have read this as well…and it is also confirmed on Phil Hodgens blog as well….not sure why the moderator on the “S…ski” forum is trying to convince me otherwise.
Probably want you to spend more money They are part of the FBAR FATCA IRS compliance complex.
Hi All
I am looking for a competent, cross-border tax accountant to help me catch up with my tax filings at a reasonable price. Ultimate goal is to renounce, hence ideally need at least 5 years catch-up.
I’ve seen mention of Phil Hogan (Victoria, BC) and wonder if anyone has used him and would recommend him?
I am also open to any other recommendations. Preference would be for someone in the Vancouver area, but that’s not a necessity – competence and reasonable rates are.
Admins, not sure if I’ve crossed a line in asking for this – apologies in advance if so. I’m at something of a loss to find someone I can feel comfortable with, hence the plea.
TIA
@tdott,
You can ask and any others can comment, but from our Administrative Notice:
That’s all I ask, calgary411. Not expecting any official endorsements from IBS.
Just hoping to get a personal, non-official recommendation (or 2 or 3) so I can move forward.
@tdott,
Somewhere here I think there is mention of someone perhaps in Vancouver and another in Washington State. I can’t find those comments offhand.