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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.

3,618 thoughts on “US expat tax and FBAR: Discussion thread (Ask your questions) Part Two”

  3. More US gobbledygook of instruction: http://intltax.typepad.com/intltax_blog/. I’m glad my last one is done and MAILED.

    Mandatory Electronic Filing for FBARs Coming Soon

    The I.R.S. indicates on its website that electronic filing for FBAR Forms will be “MANDATORY” beginning July 1, 2013. The full quote is as follows:

    Electronic Filing for FBAR Forms – MANDATORY Beginning July 1, 2013

    On June 29, 2011, FinCEN announced that all FinCEN forms must be filed electronically with certain exceptions. The FBAR was granted a general exemption from mandatory electronic filing through June 30, 2013. E-filing is a quick and secure way for individuals to file FBARs. Filers will receive an acknowledgement of each submission. For more information about FBAR e-filing, read the FinCEN news release.

    Interestingly, the FinCEN news release linked to says nothing about electronic FBAR filings being mandatory. On the contrary, the news release is titled “FinCEN Offers Optional Electronic Filing for FBAR Forms.” Emphasis added. The FinCEN news release explicitly states that “Paper FBAR forms will still be accepted until further notice is given by FinCEN.”

    In addition, the instructions to the FBAR have no reference to electronic filing. The instructions provide two mailing addresses and also indicate that the FBAR may be hand delivered to any local office of the Internal Revenue Service or to the Internal Revenue Service’s tax attaches located in United States embassies and consulates for forwarding to the Department of the Treasury, Detroit, MI. No mention is made of electronic filing.

    Additional investigation, however, supports the I.R.S.’s website that FBAR filings will be mandatory after June 30, 2013. FinCEN’s “Mandatory E-Filing FAQs” website indicates that “[w]ith limited exceptions, E-Filing is mandatory effective July 1, 2012” and that “FinCEN granted a general exemption for mandatory E-Filing for the FBAR until June 30, 2013.”

    Thus, it would appear that electronic filing of the FBAR will be mandatory in less than three weeks. In fact, FinCEN states that it may impose a $500 penalty for failing to comply with its regulations if a form is required to be electronically filed but is filed on paper.

    Although FinCEN states that it is working to allow tax preparation software to create and file an FBAR, this capability is not yet in existence. Consequently, after June 30, 2013, tax preparers will be unable to assist their clients in the preparation of FBARs. Clients will need to prepare and submit the FBARs on their own computers.

    Many individuals file late FBARs. However, unless FinCEN provides an additional extension to exempt mandatory E-Filing of the FBAR, I wouldn’t be surprised if the number of late FBARs drops off precipitously after June 30, 2013. The combined $500 penalty for paper filing and the inability for tax advisors to assist in the preparation of the FBAR is likely sufficient to significantly impede the flow of FBARs being filed with FinCEN.

    And, of course, as the I.R.S. likes to highlight, the FBAR must be received by the Department of the Treasury in Detroit, MI, on or before June 30th. An FBAR that is mailed on June 30th but that is received by FinCEN after June 30th is a late FBAR.

  4. and more on FBAR: http://www.accountingtoday.com/news/FBAR-Deadline-Approaching-67099-1.html?ET=webcpa:e7241:241779a:&st=email

    FBAR Deadline Approaching
    June 14, 2013
    By Roger Russell, Senior Editor, Accounting Today

    Practitioners who have clients with overseas accounts should alert them now that the FBAR (Foreign Bank and Financial Accounts Report) form must be received by the Department of Treasury no later than June 28 this year. Although the actual due date is June 30, this year it falls on a Sunday and there is no extension of the due date when it falls on a weekend.

  5. @calgary411

    So, this will be the last year, I have the small pleasure in forcing them to input the data themselves. This is truly having the FBAR victim weave the rope and tie the knot that is used to hang him!

  6. tie the Knot… duh. Petros, why can’t we have that edit function back? It won’t crash IBS, as I see a lot of other WordPress blogs that have it.

  7. @Just Me – don’t count on it. Do you really believe the IRS has geared itself up properly to accept foreign addresses, etc, into it’s system. From what I’ve read of people over on the English Forum having problems filing their ordinary returns, I doubt the FBAR’s are going to be any different. Besides, think of all those extra $500 penalties they can do you for because you paper filed.

  9. @Just Me.

    Sounds like it, along with more opportunity to collect penalties from the uncomprehending of the many US rules. Don’t forget to have it mailed for them to receive, this year, by June 28, since June 30 falls on a Sunday. Good night!

  10. I am confused about the electronic filing of the FBAR. I filed mine in March using snail mail (receipt confirmation that I never received) but now they say that electronic filing is mandatory for this year?

  11. @Chris,

    Your March submission filed by snail mail will be fine; the “mandatory” (if really mandatory in three weeks) is beginning July 1 of this year.

    Per: http://intltax.typepad.com/intltax_blog/

    The I.R.S. indicates on its website that electronic filing for FBAR Forms will be “MANDATORY” beginning July 1, 2013.

    However,

    On the contrary, the news release is titled “FinCEN Offers Optional Electronic Filing for FBAR Forms.” Emphasis added. The FinCEN news release explicitly states that “Paper FBAR forms will still be accepted until further notice is given by FinCEN.”

    In addition, the instructions to the FBAR have no reference to electronic filing. The instructions provide two mailing addresses and also indicate that the FBAR may be hand delivered to any local office of the Internal Revenue Service or to the Internal Revenue Service’s tax attaches located in United States embassies and consulates for forwarding to the Department of the Treasury, Detroit, MI. No mention is made of electronic filing.

    Further, further…

    Additional investigation, however, supports the I.R.S.’s website that FBAR filings will be mandatory after June 30, 2013. FinCEN’s “Mandatory E-Filing FAQs” website indicates that “[w]ith limited exceptions, E-Filing is mandatory effective July 1, 2012” and that “FinCEN granted a general exemption for mandatory E-Filing for the FBAR until June 30, 2013.”

    Thus, it would appear that electronic filing of the FBAR will be mandatory in less than three weeks. In fact, FinCEN states that it may impose a $500 penalty for failing to comply with its regulations if a form is required to be electronically filed but is filed on paper.

    Although FinCEN states that it is working to allow tax preparation software to create and file an FBAR, this capability is not yet in existence. Consequently, after June 30, 2013, tax preparers will be unable to assist their clients in the preparation of FBARs. Clients will need to prepare and submit the FBARs on their own computers.

  12. Since Canada will not help the USA collect a FuBAR penalty from any Canadian resident then why not send it registered mail next year and refuse to remit the $500 penalty if/when they send one of their stupid demand letters? If a stupid demand letter does come then send a reply feigning no knowledge of this new requirement and suggest setting up a Canadian court date to discuss the penalty further. This is simply a ruse to collect IP addresses from everyone (like the cookies on the IRS website). The next ploy will be to require your home’s GPS coordinates to program into the IRS drones. We would not use our own computer to do a FBAR (we no longer search the IRS website either), and besides from what I’ve read here their damn e-FuBAR isn’t even Mac compatible. Filling out an e-FuBAR on a library computer is not a good option but if they don’t like Macs then what choice would some people have? Ditto for those who have no computer at all and of course do not do e-mail. And yes, we know lots of people who do not have computers and do not do e-mail. Oh my, you say, that can’t be so! Yes it is so — very so. Why is it that every looney loop the IRS creates there is a penalty you must pass through? Ridiculous in the extreme and completely typical of the IRS! There’s a year to think about this new bridge to cross so perhaps by that time … I was going to say sanity will prevail … but no this is the IRS … not going to happen.

  14. Thought you might be interested in this comment from Andrew Grossman on linked here in… http://lnkd.in/GDXSQD I always find his comments interesting.

    • Fairness is not a criterion in taxation. Taxes are levied to raise money and to respond to political pragmatism and political convenience.

    What is interesting is that in the postwar period “nationality” was transformed from source of obligations into source of rights. That was, more or less, the subject of my PhD dissertation years ago. The end of “perpetual allegiance” (and allegiance, not the civil-law concept of “nationality” is the essence of American common-law citizenship) was part of that.

    It is now practically impossible for many US citizens, especially those living abroad, married to aliens and under a marital regime of community property, to meet the legal requirements for expatriation.

    Anyway, statistics suggest that many, perhaps most, Americans abroad are ignoring FATCA and all the new paraphernalia of cross-border enforcement US tax law. Except for the most impecunious who need only check a box on Schedule B, Form 1040, the cost of compliance can be steep.

    A rapid Web search yielded the following data for the years indicated:

    US citizens resident abroad: 3,784,693
    (1999: based on reports from US consular offices and excludes official and military Americans. The actual number is almost certainly higher since many dual nationals and persons whose US nationality has never been documented have not come to the attention of the US Department of State. Unlike some countries that require registration of its citizens and whose citizens can lose their nationality if they do not register with a consult office at majority, the USG does not know who all of its citizens are. A claim to US nationality may succeed or fail on the basis of proof of a prior US residence, long ago, on the part of a parent.)
    http://www.overseasdigest.com/amcit_nu2.htm

    See also: http://www.gao.gov/products/GGD-98-106

    Other estimates of the foreign-based US population are as high as 6.32 million
    http://www.aaro.org

    US military resident abroad: 1,388,028
    (2012, does not include dependents)
    http://www.vetfriends.com/US-deployments-overseas/

    There are perhaps 12,000 US Foreign Service Officers (including those in Washington) and at most a few tens of thousand other American Government assigned to diplomatic missions abroad.

    US tax returns filed with APO/FPO and foreign addresses: 1,110,020
    (2011, IRS data based on addresses written on forms 1040)
    http://www.irs.gov/pub/irs-soi/11in52oa.xls

    A total of 14,922 complete and over 10,000 incomplete applications for OVDI had been filed as of December 1, 2009.
    http://www.treasury.gov/tigta/auditreports/2011reports/201130118fr.html

    At least 12,000 applications were filed under the 2011 OVDI
    http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2012/CPA/Feb/2012IRSFBAR.jsp

    Most of these applications seem to be from US-based taxpayers.

    Senators Jack Reed and Chuck Schumer’s proposed law to reinforce the existing statute (thus far not applied by the State Department out of Constitutional doubts) barring tax expatriates from re-entering the USA says it all: http://www.reed.senate.gov/news/release/reed-offers-amendment-to-prevent-ex-citizen-tax-dodgers-from-reentering-the-us

    Finally: although I do not currently accept new clients I get technical questions from time to time. The latest was this: “Do I have to file an FBAR even if my account was overdrawn throughout the year?”

    Since overdrafts as such violate FRB Regulation E the issue was apparently never thought of by the drafters of the regulations implementing the FBAR statute. Similar questions cross my computer screen all the time and have for the past 20 years, often in relation to security deposits and signature authority where the taxpayer simply has no access to the information.

    Years ago the now-defunct law firm of LeBoeuf Lamb told (scammed, but that’s another story) investors in Lloyd’s of London to state their interest in such accounts and write gobbledygook in the description space.

  15. ….”A claim to US nationality may succeed or fail on the basis of proof of a prior US residence, long ago, on the part of a parent……”

    Thank goodness that in many cases, there is no way to prove the length or existence of a parent’s US residence. Especially if the parent is unwilling or unable to provide such proof or any other related information.

  17. Greetings fellow US expats and friends:

    I would like your opinions about incorporating as a way to make the US tax system more compatible with ones country of residence. A summary of my thoughts on the matter are presented below. There could be problems with the approach described, and I would be grateful if you pointed out what they might be. By way of context: I am a US citizen who immigrated to Canada, where I have since remained and obtained citizenship.

    I’m wondering whether expatriated Americans who incorporate in their country of residence can use their “foreign” (from the US perspective) corporate entities to hold capital-gains generating property, and thus avoid the US tax liability to which a US citizen would be subject for any capital gains generated by such property. I assume that each such “foreign” corporate entity would have as its only shareholder, its only officer and its only director just one person who would be both a US citizen and the former owner of the capital-gains generating property held by the corporation. Each such corporation could pay its shareholder-officer-director (SOD) a salary, which would be subject to the tax rules of both the US and the SOD’s country of residence, but that salary would be claimed on the SOD’s US tax return as earned income. Any capital gains or other income enjoyed by the corporation would be subject to the tax rules of the SOD’s country of residence only. The salary would also help to limit the corporation’s tax liability to the SOD’s country of residence, as the salary would reduce, and in some cases eliminate or even more than eliminate, all of the corporation’s income.

    I’m guessing that this approach probably wouldn’t work as described, and that no single approach of this sort would work in every country where US expats are found. I’d like to know what might be wrong with it, and what might be revised to make it work, country by country. Sorry if that’s asking a lot, and thanks for the opportunity to ask.

    Regards,

    A would-be Merry Old SOD

  18. Received all my FBAR forms this morning. Now all signed and ready for posting off recorded delivery this afternoon. Whew, will feel better once they’re on their way.

  20. FBAR’s are on their way. Posted this afternoon recorded delivery. Just next year’s FBAR and 8854 and I’m done.

    Now, if only the cookbook I’m STILL waiting for would arrive ….

  21. @Medea Fleecestealer

    Cooking is waaaay more fun. Have you watched any of Anthony Bordain’s “Parts Unknown” series?

  22. Nope, I don’t tend to watch cooking/food programmes much – Man v Food was the last one I watched. But I enjoy cooking although I’d say I’m only okay at it. It’s just that I saw what looked like an interesting diabetic one (always looking for new ideas) so I ordered it and another diabetic one from two different companies. One arrived just a few days after ordering it, but I’m still waiting on the one I wanted in the first place (sigh).

    It’s weekly shopping day today so will make up my shopping list once I’ve sorted out what we’re eating next week.

  23. COOKIE NOTE:
    I’ve just observed the website http://www.irs.gov leaving a persistent cookie labeled “youtube.com” on the visitor’s browser….

    Yes, really. Go figure….!

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