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.
Any thoughts on just sending in forms instead of going to Streamlined? I can’t fathom why people MUST go to Streamlined. What are the consequences if you owed zero tax of just sending the forms in.
I saw this update about the online FBAR – which seems to include a drop down for reasons for late filing.
http://www.taxabletalk.com/2013/10/03/the-fbar-has-changed/
‘The FBAR has changed’
..
…”The data-entry portions are the same; however, there is now a pull-down menu on page 1 for the reason for late filing (where applicable)”
@AtticusinCanada
As I understand it, Streamlined gets you a pass on penalties for not reporting various things (FBAR, 3520 & 3520A (RESP,TFSA), RRSP election). AFAIK, you just pay taxes and interest (if any). Quiet disclosure does not get you that pass. OTOH, I don’t believe there are to date any known cases of Canadians doing QD and getting dinged by these penalties. So, for all practical purposes, there may be no difference in that respect (to date). I suppose that if you had no RRSPs, RESPs, TFSAs, RDSPs, and bank account aggregate over the FBAR threshold, and owed no tax, then there is no difference at all.
One definite difference is that QD usually requires 6 years of returns, whereas Streamlined requires 3. If, for example, you realized a significant capital gain on the sale of your principal residence 4 years ago, you’d likely want to go Streamlined.
Can I ask why you wouldn’t want to do Streamlined? The accompanying questionnaire is trivial compared to everything else that needs to be done, so it can’t be that. Streamlined is the IRS’ advertised (and thus preferred) route for coming into compliance, so all else being equal (which it never is), that would seem to be the best way to do it.
I had no requirement to even file until 2011 where I had an inheritance from my mother. They took tax off the top and remitted to IRS before giving me any checks. They took too much so now IRS owes me six hundred dollars. In addition according to the question sheet for that one year I would have held accounts in U.S. For less than a month in order that the monies could be paid out to me by Edward Jones. So I will have to tick off “yes” to a few questions that seem to result in me being considered “high risk” despite not owing anything to them. Even having a refund due to you is considered “high risk.” I am considering entering zero in the section that asks what refund you are claiming and just quiet filing. I do NOT like the idea that suddenly as a stay at home mom with zero income of my own that one year I paid them too much so now I’m “high risk.”
If that is how it’s going to be then what’s the big deal with just sending in the forms. As far as FBARS go it seems outrageous that I’d get a penalty on those as again I think I was only over the threshold to even have to file that for one year. I plan to do six though and five years of tax returns four of which will be filled with zeros as I had no income on those other years. I have relinquished and want to be sure they get all the required paperwork. After January I will file 8854.
I had been calling IRS over the years and at no time including when I called them for guidance on 2011 was I ever told about FBAR. Streamlined scares me and I do not trust IRS at all. QD scares me too but, it’s starting to look like I am damned if I do or don’t so why not just QD.
As far as the question sheet not being a problem. For me it is. It seems it is quite tricky as to how you are going to be treated even for minor activity for all the years you are filing. I owe zero tax and only had one year that the FBAR would have been required of me.
@AtticusinCanada
I’ve got a couple of accounts in the US as well, however, I’m *guessing* that what they’re really after is whether you have any accounts in say, Switzerland, Lichtenstein, or any other country that is not Canada or the US. I could be wrong, but I’m not aware of US accounts as being show-stoppers.
The $600 refund does appear to be something of an issue. However, it’s not really possible to say how much of an issue as it’s one of several criteria that the IRS says may increase the risk level. Would it be possible to not claim the refund and then later on (after everything else is out of the way), file an amended return to get it?
I seem to remember you having a discussion with Phil Hogan about tax matters, did these concerns come up at the time?
I don’t place any trust in the IRS either, but it would seem to be overly ludicrous to treat Streamlined returns more harshly than QD returns. OTOH, rationality is not exactly a IRS strong suit, so ….
I realize this may not be the place to ask this question but I was wondering if anyone else has filed the 8854 and how long it took to get a response from the IRS? I included this form with my 2012 US tax return and still haven’t heard anything.
itacaf,
My husband and I and my daughter filed 8854’s with our 1040NR’s for 2012. We haven’t heard anything, but I don’t expect to (have others in the past?) — unless it is bad news.
@itacaf
I’ve also filed 8854 with the 2012 US tax return. Apart from getting a refund on my overpayment, I haven’t had any response, nor do I expect or want one. Ever.
calgary411 and notamused, thanks for you comments. I kind of figured it would take a while for this to come through. Keep me updated if anyone hears anything new.
A must read here!
Touches on the quiet filing issue vs. the Streamlined, and is recent.
This lawyer gets it and has tried to get the IRS and Treasury to get it too. Caveat – this is NOT a personal endorsement, I don’t know anything about this professional, have never contacted them or used their services but I would like to contrast this blog – its tone, advocacy and utility with some of the others we commonly come across. Actively communicating with the IRS to try and get them to see some reason.
http://www.accidentaluscitizen.com/letter-to-irs-director-of-individual-international-compliance-about-tax-and-financial-account-reporting-by-long-term-non-resident-dual-citizens/
“Letter to IRS Director of Individual International Compliance About Tax and Financial Account Reporting by Long Term Non-Resident Dual Citizens
Posted on October 19, 2013 | Comments Off
DEAR MR. HORTON:
The Service’s approach to tax and FBAR compliance by US citizens who are dual nationals and long-term residents of other countries needs to change. The existing compliance programs do not reflect the demonstrable reality that there are many genuinely innocent delinquent US taxpayers living overseas.
Enclosed with this letter is a proposal for an alternative procedure that recognizes this reality. The procedure is based on a questionnaire designed to assess a taxpayer’s culpability for non-compliance. If a non-compliant, non-resident US taxpayer’s answers to the questionnaire indicate a strong likelihood that their non-compliance was not intentional, the taxpayer’s returns and FBAR’s would be processed without penalty.”……..
I also recommend you read the entries on this site about ‘accidental US citizens’, the problem of duals, renunciation, etc.
Here is the same site – their blog entry about the FBAR and their proposal to the IRS for a process other than the Streamlined for solving the problem faced by those expats who live abroad, trying to come into compliance without any way of being certain that they won’t be obliterated for doing so.
http://www.doingbusinessacrossborders.com/flott-co-suggestion-for-new-fbar-compliance-procedure/
Just to avoid any possible confusion. Please note that in the Flott blog post linked above, this is their proposed solution that they are presenting to the IRS as a process that they believe the IRS should adopt (instead of Streamlined) for Long Term Non-Resident Dual Citizens to be able to come into compliance from abroad without FBAR or other penalties. It is their PROPOSAL http://www.doingbusinessacrossborders.com/flott-co-suggestion-for-new-fbar-compliance-procedure/ to the IRS – it is not a currently existing IRS blessed option. They sent it with this cover letter http://www.doingbusinessacrossborders.com/letter-to-irs-director-of-individual-international-compliance-about-tax-and-financial-account-reporting-by-long-term-non-resident-dual-citizens/ .
@Badger…
As we know there have been many proposals to the IRS on how to do “compliance” better, and except for the limited Streamline, they pay little attention. I hate to be cynical, but they should expect more of the same with this one, but give them credit for trying…
Change of subject…
For Immigrants with GreenCards, this from Phil is important to note…
U.S.#Greencard received in 2006? Give it up in 2013, to avoid overdose of tax pain in the form of the exit tax! http://bit.ly/17GloeZ
Greencards should come with this notice: To avoid Exit Tax liability, Give it up by this date!
A good start and I’m glad a law firm is addressing this category of ‘US Persons.’ I wish there were a way to comment — I have previously to this site and corresponded directly to Mr. Flott, but got no reply.
One group of “accidental Americans” not addressed — those with what the US considers ‘mental incapacity.’ If there is a sensible way for my son and others like him to ‘come into compliance’ (which is distasteful to me as my son was never registered with the US, never lived in the US, never had any benefit from the US, but leave that aside), I then want a way for my son (and others) to be able to RENOUNCE / lose that ‘supposed’ US citizenship — if that is what his/her parent, guardian, trustee deems best for that person. A CHOICE. I do not want my son (or others who do not wish that) to be chained to the US year after year after year for no taxes owed to the US. It is called ENTRAPMENT into US citizenship and is wrong / immoral. There must be a way OUT for these individuals too.
PS: Thanks, once again, badger. Your many comments are ALWAYS informative, helpful and supportive to readers here.
@Badger
As aware Mr Flott is of the challenges that face US persons abroad, his recommendations are based on the assumption that anyone finding themselves a US taxpayer would feel the obligation and motivation to come into compliance. For those who may face huge tax liabilities (such as selling a home without knowing it was taxable) there’s no landing that’s soft enough. His suggestions for a new FBAR compliance procedure are restrictive and as a result create too many losers to make it attractive as a rule. Citizenship based taxation is a pig that no amount of lipstick will make pretty.
I’m afraid that Mr Flott is just a condor of the kind we haven’t seen the likes of much. I do however appreciate his sharp criticism of the IRS in its “stunning lack of awareness” and attention he brought to Commissioner Shulman’s either incompetent or apathetic response to issues facing US persons abroad.
Come to think of it – why doesn’t Mr Flott push to abolish the redundant and too-low-a-threshold FBAR anyway?
This explains why Mr. Flott is so reasonable. He is probably dual but at least an honorary Canuck.
Unfortunately, I agree with Just Me that he is likely whistling in the wind; (a more polite way of saying pissing in the ocean)
@ Just Me
Interesting bit.ly about green cards but it does me no good. The USCIS ignored the return of my long expired green card in 2012. I got no response to subsequent snail mail inquiries (no phone number or e-mail address to be found unfortunately) so I’m “covered” and cannot ever visit the USA (not that I want to anyway). Time will tell if they will attempt to persecute me here.
@ badger
I skimmed through Mr. Flott’s suggestions but it was all about compliance. Why didn’t he simply suggest that any US citizen or person living outside the USA for more than 5 years (or some reasonable amount of time) should be exempt from FATCA and all IRS reporting altogether? Not that the USG would consider that suggestion either but it makes more sense.
@bubblebustin
I guess, you have to look at the audience he is addressing. He knows the IRS can not change Citizenship Taxation on their own, even though ending it, addresses all the issues he is bringing up for a solution.
That said, he is trying, as many have before him including ACA with their compliance solution, to give the IRS a method to deal with the reality they administer. He is basically parrotting Nina Olson’s line in the TAS Reports to Congress that no one pays attention to. That said, another voice is helpful, so hats off for the effort. Remember Jack Townsend also provided a post for feedback on better solutions to the OVDP.
@Just Me, do you know if Jack went the extra mile of trying to provide the feedback from this open forum to his connections at the IRS, or attorney groups, like this other lawyer did?
There are people with connections, and there’s the rest of us. So far, us, little people filing IRS systemic issues reporting the issue, and contacting Senators about it had done nothing.
The lobby must also come from bigger groups, who have direct contact with the people who can make things change.
I am surprised and disappointed that as a law firm in the US, his letter did not touch on the immigrant’s similar issues as well.
I would even go further. I am not even sure that the decision to create the streamline program had anything to do with the complaints from inside the US. I believe that it was directly related to the concerns and outrage of the Canadian government – maybe in relation to FATCA. And the US tried to do something to appease those concerns.
Foreign government should start to think of protecting their expats as well, and start to mention them in those type of discussions.
I tried to engage my consulate about these issues, post things on the blog of senator responsible for citizens abroad. I got NO answer from my consulate. Not even an acknowledgement of my concerns, and my posts about FBAR and FATCA on the senator’s web site were deleted.
Depressing.
@All,
Why not just give every ‘accidental’, and for that matter every ‘innocent delinquent US taxpayer’ living outside the USA two options: 1. renounce with no strings (no playing catch-up on filings), and 2. file going forward with no queries into the past.
Of course if they did that, there would be few if any ‘US persons’ living outside USA, but this is where they are eventually going anyway, so why not make it easier for everyone.
@just me
I’m always suspicious of anyone whose income is dependant on CBT, but I guess anything that might penetrate into the so called minds at the IRS making them more sensitive to our issues is a good thing.
I’m surprised he is as supportive of FBARs as he is. If IRS can’t get rid of FBAR, Mr Flott could have at least suggested that the thresholds be increased to today’s values and index them to inflation.
@Whitekat
I’m afraid that like witches, we have to die to prove our innocence.
You’re probably right @Chris, and again, no help for those living in the US with pre-existing accounts, or those who go abroad and need local accounts.
In the US and Canada we don’t routinely stripsearch and cavity search ALL individuals just in the random offchance that they might be someone carrying something which just might possibly be connected to a crime. Why is it okay to do the financial equivalent to all individuals living outside the US with local legal accounts, or those who immigrate to the US and who have pre-existing accounts and assets – which were local legal accounts predating any US relationship? Just in case our everday local chequing accounts, our children’s RESPs, the parent-teacher fundraising committee, our church, the little league baseball team accounts, and our Canadian employer might all be in a vast conspiracy to avoid paying off the US domestic debt – because anyone and any account outside the US is automatically deemed to be equally likely to be terrorfundingdruglordmoneylaunderingtaxevaders.