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.
Unlike Canada, there’s no motivation to pay off your home and save when you can write off mortgage debt.
@Money, 1040NR schedule NEC is only for US source income not effectively connected blah blah blah. Your non-US income is not taxable to the US, nor do you have to tell them anything at all about it. In your case it sounds like the only stuff you would put on the 1040NR would be just the condo gains (actually, losses) and its withholding. Simples.
http://www.irs.gov/Individuals/International-Taxpayers/Aliens—Which-Income-to-Report
“Nonresident Aliens use Form 1040NR or 1040NR-EZ to report only income that is sourced in the United States, or that is effectively connected with a United States trade or business. “
KalC
How many nasty letters did you get.
Did they ever send you a registered letter?
I will even give all the money back to them on condo sale to keep them happy as long as I can live in peace in Canada owning non US equity.
Money Just ignore them.
The IRS could away demand the closing company pay my taxes. They then bring up a lawsuit in USA that I will not fight. They can claim the whole gross cost is capital gains then a 45% penalty for failing to file as long I do not have extra penalties. I would pay them, if they tried collection through a Canadian court.
I just wish I would have defaulted on those condo fee and let the condo sell the place for nothing. I even talked to a supposed expert Canadian/US tax lawyer and I told him I would not file taxes to recover withholding. I showed the letter from Flaherty on the issue.
I also plan to take a whole bunch of capital gains this year. Shove 30% into my CRA installment You can always get the money, out if necessary. If necessary buy dam Canadian saving bonds. Buy real estate even though the price is high. No way that can be frozen. Rent it out.deposit in bank that does not have an electronic connection to my main bank that I made a deposit. Get registered copy of various Canadian equities.
I would be killed with deemed disposition if I had to go through the formal procedure plus Fbar would have applied a massive penalty.
Has anybody ever heard of a case where The Canadian has been extradited regarding perjury by not applying for a Taxpayer ID we are taxing small dollars.
The wording in the document never said I had file for Taxpayer ID it said my seller ID was my name
formally it should have said my name Taxpayer ID is __________ That would have indicated to me I had to apply. I remember on some small interest from a bank they had my name as taxpayer ID. TGhe document went to closing company. If it went to IRS directly it could be considered no issue
I would have walked away from condo if I knew I had apply for Taxpayer ID
I remember on some small interest from a US bank they had my name as taxpayer ID
In addition would this not also be considered an IRS issue, not a perjury issue. CRA will not do anything .
Canadian courts no.
#FBAR form TDF 90-22.1 (more affectionately known as #FuBAR) replaced by FinCen Report 114 http://bit.ly/13wpMLG
@Just Me:
OMG! More than 70 pages of FBAR-114 instructions!!!
C’mon Congress – some people simply cannot afford such idiocy!
After 30 intensive hours of struggling to prepare my 15-year old computer for Fin-Cen’s requirements, I had been looking forward to the moment of politely declining the US’s most generous offer to graciously accept two months of my essential food budget in order for them to open one envelope and key its brief contents into their fbar system – which would take them well under an hour – say a pay-rate for them of about $800 an hour!
And that would be in order for me to receive the further amazing privilege of avoiding losing everything I have to live on for the next two years! – say a pay-rate for them of $10,000 for ????? hours! Such an extraordinary privilege!
So the 70-plus pages of these new fbar form instructions, while obviously intellectually superb and the product of many well-paid and well-qualified experts, which could well be admired in the abstract, are completely out of context with the realities of the fbar for many it affects.
The unpaid daughter looking after terminally ill overseas parents, working round the clock to care for them, may have as little as 10 minutes a day to herself. She likely has little contact with the outside world and no money of her own, and probably no computer. And yet, if her parents quite reasonably delegated power of attorney for her to pay their bills, the authors of fbar feel justified in threatening her with $20,000 a year penalty???? – for a compliance she is powerless to provide?????
A nuclear missile to catch sharks won’t work, and it will rather mess up your pond. Grow up Congress! Wake up! Your minnows are trapped, frightened, and increasingly angry. But it is your pond, too, that you are ruining by setting tax policy for greed and revenge rather than equity. It is your own sons and daughters that you betray when you let fear of terror drive you to become terror yourselves. It is their future that you give away when you allow paranoia and greed to override sensible policies like only-one-subject-per-congressional-bill, campaign-finance-limits, and the recommendations of the Taxpayer Advocate….
And thankyou, IBS for making sure we minnows are not voiceless!!!
Minnow power to the fore!
@ Sad-in-the-UK
70 pages!!! Are you TD eff’n 90 kidding me? I’ve told my husband to not even open the link to that form 114 on our home computer. He’s going to have to find an alternative. (I don’t want our ISP address on file at FinCen.) This is really horrible. There simply must be a way for people who do not have computer access to get the damn form sent in. What happened to that telephone number we were supposed to be able to use to beg off the e-filing? I really feel this Johnny Paycheck song now …
And here’s the lyrics …
Well you can tell them boys at the IRS
This ol’ boy, hell I’ve had enough
The way the big man rakes it in
The little man coughs it up
Well the bite keeps gettin’ bigger
And the paycheck keeps gettin’ small
You know the IRS, they ain’t gonna rest
Til they think they’ve got it all
They got the bluff on a lotta folks
But honeys I ain’t one
From now on, I’m keepin’ my pay
Ain’t gonna deduct nothin’
Take the 1040 forms and shove ’em
Straighten out their own damn mess
You can write me off
Cuz I ain’t givin’ a dime to the IRS
How can I keep my arm around my woman
With Uncle Sam’s hand in my pants?
If I can’t pay the fiddler
Well how the hell am I gonna dance?
I don’t mind kickin’ in my fair share
I might even back up and say yes
But the big man plays while the little man pays
So the hell with the IRS
They got the bluff on a lotta folks
But honeys I ain’t one
From now on, I’m keepin’ my pay
Gonna deduct nothin’
Take the 1040 forms and shove ’em
Put ’em where the sun don’t shine
You can write me off
Cuz I ain’t givin’ a dime to the IRS
You can write me off
Cuz I ain’t givin’ a dime to the IRS
My son just took out a business loan and ran into the “are you a US citizen?” question.
He didn’t see any problem with it and gave them his SS# etc…
He was born abroad and has never filed but does have a US passport and has used it. From my meager understanding if he were to file he would probably be double taxed as he is self employed.
I don’t know what to advise him if at all. My children are just ignoring the FATCA/FBAR problem; should I tell them to spend heaps of money to front up to the IRS and file taxes?
not happy 🙁
@Shunrata
Where does your son live?
Shunrata, it just depends on what they plan to do with their lives. If they never or rarely want to go back to the States, then renounce or simply drop using the American passports. If they were born abroad then border control isn’t likely to pick them up easily when travelling on a Canadian passport. However, having taken out a business loan then, if he isn’t prepared to do his US tax filing, warn him that he might find the account closed with little notice if the bank ever finds out he isn’t tax compliant.
Is there any particular reason, apart from ease of crossing the border, that they want to keep US citizenship? It really isn’t worth it, if that’s all they want it for.
@shunrata
I and my grown children are renouncing as we have filed to become compliant. I agree with Medeas reasoning and advice. One additional thing – if a person is on the ladder to a well paid international job it is a liability to be a USC/USP. Many non-US firms that operate internationally avoid employing a USC/USP exactly because of the expensive and complicated compliance requirements.
@Maria Medea allou
He lives in Israel which as far as I can tell is just rolling over and doing whatever the US says.
There are heaps of expat Americans there (and their born abroad US citizen children). Some of them are in a panic, some have resigned themselves to the ridiculous filing and reporting regimes – there was a local email list thread a while ago about FBAR for funds that were in the account a week (i.e. transferred from the US to buy an apartment and used immediately). Others are still trying to ignore it, especially the children who in many cases have never set foot in the US.
My son and his siblings don’t want to renounce because 1) they still have a somewhat positive view of the US and want to have the option to enter/work/settle there, and 2) if you think using a US passport opens you up to negativity and risk try using an Israeli one. 🙁 I can see their point.
Given those factors I think he has to either proactively start filing US tax returns, or he’s going to get a rude awakening one of these days. He’s an adult and it’s up to him, all I can do is give him the information.
What Shunrata described, is what i fear might happen on a large basis. People who are still unaware of FATCA and CBT(I agree with Atticus – there are LOTS particularly in Canada), and who think it is pretty cool to have a US connection, will not hesitate for a second to volunteer a ‘yes’ answer when a bank employee asks them where they were born or if they are a US citizen or if they have a green card.
Yes Shunrata, that is true for the apartment funds. It doesn’t matter how long the money is in accounts. If the aggregate sum comes to more than the equivalent of $10,000 then it must be reported on a FBAR. So say you have an account that comes to around $8,000, you put $30,000 in and then take it out again, the highest sum for that account that year will be $38,000 and must be reported as such. If you tried to split the figure over serveral accounts it still doesn’t work because the total of all the accounts comes to $38,000 so they all have to be reported.
The other worry is that his bank could close his accounts if he’s not tax compliant as the banks here in Switzerland are threatening to do with their US clients. They don’t want the hassle of doing all the 30% withholding tax thing if they can avoid it so could easily be looking for any excuse to dump a client who doesn’t file US tax properly.
Like it or not, he needs to start becoming compliant both for the IRS and to keep his bank/s happy. Also, there are mutterings up on Congress hill that getting a new US passport should be tied to being tax compliant so if he’s not he may not get a new passport when it comes time to renew it. It’s not law yet, but it has been suggested as a way to enforce more compliance.
These are all things he needs to know and keep an eye on because they could change his life and lifestyle in very fundamental ways.
Under FATCA, foreign financial institutions will be required to do electronic searches of accounts of $50K or more, however as I understand it, it may just be easier to have the software designed to search ALL accounts for US indicia.
@shunrata
If he’s self-employed and he’s not paying into the other country’s Social Security system he will be liable to pay into the US S.S. system and Medicare as well. In many (but not all…) countries US S.S. benefits can be collected upon retirement outside the USA, but Medicare is a complete loss if you’re outside the USA. In any case the IRS requires quarterly advance payments in USD. He really shouldn’t be taking all this lightly.
I posted this on the Fatca board, but it is also relevant here. The reporting thresholds may apparently be higher in future.
@all – I found this in a letter from Democrats Abroad to USP/USC in Indonesia, letter written by Joe Green. Does anyone know if this will be the 2013 reporting limit – $400,000 US for single filers and to $600,000 for joint filers?
“We also want to tell you that, while the implementation of the FATCA regulations is still being worked out amongst and between the IRS and various foreign governments and financial institutions, the threshold for reporting financial holdings by overseas Americans has been raised to $400,000 US for single filers and to $600,000 for joint filers.”
Is that the threshold that was originally $50,000? And is that per account?
@allou
You may want read this:
http://isaacbrocksociety.ca/2013/01/15/demsabroad-is-out-with-a-memo-on-fatca/comment-page-1/#comments
I believe those threshholds pertain to the form 8938 which individual filers have to do. It’s nothing to do with banks reporting threshholds.
@notamused
He is paying into the local equivalent of Social Security (it’s mandatory). Never heard of having to pay into Medicare. Does anyone actually do that?
@shunrata
Yes, the “self-employment tax” is part Social Security and part Medicare contributions.It’s good that he’s paying in elsewhere.