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.
@WhatAmI
But, if you are going to renounce, why bother with the Streamlined Procedure?
In simple terms. Renounce, File past returns, ignore the FBAR, and move on.
I think Streamline applies best for those that voluntary chose to continue on as members of the U.S. Tax, Form and Penalty Club so they can get all the discount coupon bonuses and IRS FATCA newsletters.
@Just Me
Sure, that’s an option. It sounds like a “quiet disclosure”, which has its own potential issues and FUD.
Over a year ago a Brocker reported a conversation with the IRS. The agent told him to do a quiet filing because “we don’t care about you”. Can one reply on that advice?
@Just Me, but if you file returns and any foreign accounts were over the aggregate $10,000 wouldn’t you need to file them too as they’re part of your tax returns?
“Reporting and Filing Information
A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.”
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR
@MedeaFleecestealer
Read Phil’s blog. Yes, you have to report any interest received from the so called “offshore account” Title 26 requires it, but again, the FBAR is NOT a Title 26 form. It is NOT part of your tax filing. That is a separate requirement to a separate FinCin office and is NOT requested, that I know of, on your 8854. Separate those two things in your mind…
I have no interest in turning over more info. than necessary to the tax agency of a foreign state, but my goal here is to make a clean break. It does seem like 5 years backfiling is sufficient to renounce and avoid covered status, but I would be worried that they would come back to me later and want to hit me with FBAR fines. Doesn’t it seem like doing both would be the best way of not having to worry about any of this again?
@WhatamI
Of course you can NOT rely on anything the IRS agents tell you on your phone, but it probably is true. Just look how audit rates are at an all time low…
You are peanuts on the floor compared to all the BIG JUICY Plums they are looking to plunder from OVDP disclosures alone.
However, you are exiting the system, and the “we don’t care about you” is even MORE true for you. Once you are gone, what can they do? Shame you on a list. Who cares? You already have Canadian assurances that they will not enforce IRS penalties on you, so I do think you might worry too much, imho…
If I were exiting the system, and I am not, I would be focused on the 8854 requirements and not the streamlined requirements. Now, if you are staying in the system, than that is a different issue, again, in my humble opinion. Others might disagree with me, so take it for what it is worth.
@Just Me Your argument makes sense here, the 8854 requirements are what I’m worried about and those focus on backfiling tax returns. Still, there are so many unknowns and opinions and those of us who want to exit don’t want to ever hear from the IRS or any other U.S. government agency again, hence the caution.
I’ve heard from more than one accounting firm (3 in fact) that to be as sure as possible to be done with the IRS when renouncing one should file back taxes even though they have been under the yearly income threshold for filing 1040s. Yes, of course, these accountants have an interest in doing all the extra work for you. Not trusting the IRS, it does seem reasonable to me. It depends on what you’re being charged though. If it’s $3000, yeah, sure. For $23,000, yeah, no.
@WhatamI
It comes down to your personal tolerance for risk, and the odds that any effort the IRS has to collect penalties on you, after you are officially holding a CLN, will come to anything. If you have NO assets in the U.S., then what’s the worry? CANADA again restated in their FATCA FACTS document on the IGA, that they would NOT go after IRS penalties. Do you trust Canada more than the IRS? I guess that is what it amounts to…
@MedeaFleecestealer. Re: post at 11:56 am.
The instructions for Form 8938 say that if you are not required to file a tax return, (income below the filing threshold), then you are not required to file Form 8938 even if your specified foreign assets exceed the threshold for having to file 8938. I think this is because 8938 is always filed with a 1040; it’s not a stand alone form like FBAR. The threshold for 8938, of course, depends both on your filing status and whether you live in the US or abroad.
The last 1040 I filed was actually below the filing threshold for my filing status. (I filed it anyway because I wanted to keep current on my 8891 elections.) I attached a note saying that even though my specified foreign assets exceeded the 8938 threshold, I didn’t file one because I was not required to file the 1040.
I never heard anything from the IRS. If I had known back then what I know now, I never would have filed anything with the bastards!
As to whether to file FBARs for the exit procedure, I would read the 8854 instructions and follow them EXACTLY. If there is no mention of FBAR then skip FBAR. My $.02. I’d trust Hodgen’s analysis on this one.
@maz57
Exactly!
@Maz57, thanks for that. I hadn’t really looked into the 8938 form yet, just seen references to it being a new form for reporting accounts to the IRS. Had seen the currency threshold figures and I don’t think I meet them, but that’s as far as I gotten so far. Admittedly my tax preparer hadn’t mentioned it, but as it seems to be fairly new I wasn’t sure when exactly it came into use.
@Just Me, thanks for clearing up the tax return/FBAR reporting too. Not having to do any 1040’s I wasn’t sure what needed to be reported on/with them. If you don’t need to do FBAR’s as part of that to get compliant then certainly don’t bother with them!
@all
Re: thoughts about final filings
I have recently downloaded all the forms and instructions for my last filings since I have renounced. Compared to a year ago it is a very different feeling to use the IRS website. Having used so much time, energy and worry last year – to update and send 6 years back filing, I now feel almost “at home” on their website. A very small part of me thinks “too bad we have to part like this”. A much bigger part of me feels very very thankfull for all the advice and encouragement I received here at IBS, which enabled me to get this far.
The questions to myself were:
“Can I be certain that I will be able to do these returns when I am much older and possibly infirm?”
Answer: NO.
“Where is my life actually based, where would I not want to have to leave?”
Answer: here (in Europe) , where I have lived for decades.
So the US system of CBT has forced me to look at my basic needs, and the inevitable decision was, that I am no longer a dual citizen.
Congratulations @allou.
Nick,
Can I ask you, do you have a social security number? If not, will you try to get one before filing your 5 yrs (and then renounce)? Or are you considering renouncing first and then dealing with the SSN and filing issue?
@allou
I am happy for you to finalize your release from US citizenship.
I printed your words to inspire me and enforce why I do not want to be a US citizen anymore. I would put in Canada where you put in Europe. May you have a long and happy life.
Here are your inspiring and wise words:
“The questions to myself were:
“Can I be certain that I will be able to do these returns when I am much older and possibly infirm?”
Answer: NO.
“Where is my life actually based, where would I not want to have to leave?”
Answer: here (in Europe) , where I have lived for decades.
So the US system of CBT has forced me to look at my basic needs, and the inevitable decision was, that I am no longer a dual citizen.”
@Mr. A I actually do have a SSN. I was born in the U.S. to Canadian parents and lived the first few years of my life there so I guess they applied for one. I have never used it (never worked or earned income in the U.S.) and didn’t even realize I had a SSN. Fortunately, my mom keeps good records…I gave her a call and she still had it written down somewhere in her old files. I guess this saves me an additional hassle.
I am a dual citizen and want to submit my FBARs electronically. However, I need to apply for an EIN number first. I have attempted to do so but have been immediately stymied as I don’t seem to fit any category that is eligible for an EIN number. Any ideas how I should proceed to obtain an EIN number if I live and work in Canada but do not have a trust or limited partnership, etc.? thanks, Greg
@greg You can’t. As a US citizen you have to get an SSN.
Thanks. I do have an SSN. However, when I go to submit my FBARs electronically, it requests an EIN number. Am I missing something? Thanks, Greg
@Greg
What does EIN number stand for? I have NOT yet going through the electronic FBAR filing, but I understand you have to register first and get some kind of number first. Is that what is being referred to?
http://americansabroad.org/issues/fbar/fbar-e-filing/
Employer ID number. Can’t see why an individual would need one.
@Kalc..
Oh, ……well that does indeed seem strange. I guess he should call the FBAR help desk and see what the issue is. I do know, or have been told, that the system only works with Internet Explorer…
@Nick –
FWIW what you’re proposing is what I ended up doing – five pretty basic returns (I did the FBARs too) with the five-year box checked on the 8854.
I agree about the bloodsucker accountants. I like the firm that suggested doing one year as a correct example, so you could crib the rest from those – this is basically what I did with the final-year 1040.