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.
First, forgive me as I’m sure this has been asked before but I can’t seem to find an answer in 1,450 comments (not that I read them all but quite a few!). Anyway, it should be pretty straightforward:
I’m a U.S. citizen resident of Canada. Assuming that I will owe no taxes to the IRS, can I just file going back 5 years all at once and reasonably expect not to be penalized? I’m only talking about the 1040 here.
Every time I read something that seems to imply – or even says outright – that this is indeed doable, I seem to come across something that contradicts it, or at least casts enough doubt to make me uncomfortable. There’s a lot of conflicting information out there, and before I shine a big ol’ spotlight on myself I want to be sure.
Thanks in advance!
Wren,
Some discussion on ‘quiet disclosures’ on this thread / here’s one: http://isaacbrocksociety.ca/fatca/comment-page-89/#comment-1123180
@Wren…
If you are going to file 5 years back, then I would probably look at the streamlined program as your method of choice. QDs are controversial, given that the IRS has frowned on them as the means for compliance for offshore filing failure. Stupid of them, but they want the chance to see if penalties can be assessed so they can add to their revenue That is why they want a noisy disclosure instead, and that is what the Streamlined is. In the streamline program, we have NOT had any reports of folks being penalized.
And if you want to be really confused about QDs, and hear a full blown argument between attorneys, this blog post from the past might be helpful for you…
Why is the Quiet Disclosure (QD) so controversial between Practitioners?
The US love affair with Switzerland continues. (Jack Townsend will love that headline)
Amazing how many crackdowns the US and DOJ need these days.
U.S. Examines Swiss Insurance Products In Tax Crackdown
Products Can Be Used Legally By Americans to Defer Taxes
http://online.wsj.com/news/article_email/SB10001424052702303775504579396514114519286-lMyQjAxMTA0MDIwNDEyNDQyWj
the FATCA spin from Jack Townsend :
“I think that how you view this is a matter of perspective. Taxpayers renouncing because they don’t like FATCA are simply making a statement that they do not want to pay the price of citizenship in the U.S. — which means paying taxes. That is a choice that everyone can make if their desire for U.S. citizenship is driven only by their pecuniary interest in avoiding taxes. From that perspective, it is probably best that they renounce. They will be happier, and the the U.S. will be better off by having fewer people that think they have a right not to contribute their share to the country.”
Is this guy serious with his perspective about paying your fair share as an expat ?
Wow, what an asshole.
@notamused ….. yes the a—- word came into my mind as well here but I think we should pay his blog a visit and offer some more balanced comments and factual perspective on the subject of paying your fair share to the Homeland as an expat.
@anon0percent
What really enrages me is that I’m quite certain that he (and others in a similar position who utter similar nonsense) does indeed know the facts very well, but, despite that knowledge, freely chooses to propagate the “tax cheat” narrative.
Granted, my comment wasn’t very well balanced – but it was from the heart.
@notamused yes from the heart is always preferable than from the wallet . But Jack Townsend really ticks me off – he used to be sympathetic to our cause but that has seriously changed since last year.
Is he trying to provoke because he has nothing else to say or publish anymore besides his usual swiss bashing headlines ?
@anon0percent, Jack has it backwards. Renunciation comes not from an unjust desire to avoid tax, but from a desire to avoid unjust tax. Weird how he’s changed tune over the past couple of years, isn’t it?
I also noticed how much is narrative has changed over the past couple years. He used to be a lot more compassionate to the case of expats and immigrants, almost saying outright in his blog (always based on the facts) that people who made honest mistakes shoud not enter OVDI.
Now, he says the program is fair and that of you don’t like it, you should just opt out.
I wonder if he got a friendly circular 230 reminder from the IRS.
Wren Yes that is exactly what to expect. File 5 yrs showing you owed nothing and you will never hear a word from them.
@anon0percent
Do you have the link to Jack’s comment. I haven’t been reading him much recently, but I think I will put up a response…..
That said, it is fair to say, if you don’t want to be impacted by the U.S. Tax, Form and Penalty Club and can not afford the membership dues, then renunciation is the best thing to do. It is simply a cost vs benefit analysis in the most crass terms.
Wren, a couple years ago I backfiled the past 7 years of returns (QD). I have called the Philadelphia IRS office (they handle international returns) twice to verify things are ok, and they said yes both times. (They never write so one must call them).
@ Just Me
http://federaltaxcrimes.blogspot.ch/2014/02/administration-insists-that-fatca-will.html#comment-1257392357
btw. just breaking :
$CS CEO to testify at U.S. Senate hearing on tax evasion
Credit Suisse Group AG Chief Executive Brady Dougan is scheduled to
testify on Wednesday at a Senate subcommittee hearing on “offshore tax evasion,” the Senate Permanent Subcommittee on Investigations said on Monday.
Dougan will be one of four officials of the Swiss bank to testify, along with U.S. Department of Justice officials, the subcommittee said. The hearing will continue the panel’s inquiry
into tax avoidance involving banks.
http://www.reuters.com/article…
(btw. the other 3 are the 2 PB co-heads and 1 legal counsel)
@anon0percent
Thanks… I will try to comment later today when I get some time. See if I can avoid too inflammatory language to get him thinking from a different perspective. Probably not, as this subject is like religion to some people. It is like convincing a Muslim that he should be a christian, or telling the Pope he is NOT gods representative on earth. If you are in disagreement with a True Believer, (not sure Jack is in that category) then arguments about why they might be wrong, are almost impossible to make.
1) Someone at a retail bank opened up briefly about who they have identified as USPs in their customer base (and who will then be outed as part of the Swiss-US Programme if they do not prove their US tax compliance). She said that they are duals, mostly with a historical connection to the US and with some having lived here for 40 years or longer or always. The majority did not know they had to file a US tax return until they received a letter from this retail bank two months ago. She said that they had difficult discussions with many of these people regarding next steps and many are frightened. The bank has advised many of them who to contact for US tax advice as they don’t know where to start.
2) I resent Jack Townsend’s off-base comments about the Swiss banks. He has failed to grasp the difference between wealthy Americans transferring money made in the US to Swiss private banks, possibly hiding their accounts behind legal structures, and USPs who have always lived in or emigrated to Switzerland, work and are taxed in Switzerland and bank at retail banks under their own names. He fails to understand that citizenship-based taxation is unique to the US. Although his technical analyses may be worth reading, his political comments show a lack of understanding of the world outside the US borders.
I would also add that he appears to have no idea of how difficult it can be for an American to go abroad to live and work, with language, legal and cultural differences and often without the support of family and friends. Like immigrants to the US, we have to work twice as hard as the others and can be the first fired in a downturn. Add in the USG hunting down USPs abroad through the banks and FATCA and you can feel at time that everyone is against you. The fact that more and more Americans feel forced to give up their citizenship has mostly to do with wanting to remove the bulls-eye on their backs to allow them to lead normal lives in their country of residence.
Another item:
She also mentioned that the bank plans to sue their customers for damages if the bank has to pay fines (20% to 50% of the balance) because the customer does not demonstrate US tax compliance.
Privileges for the USA
It is becoming apparent that Washington is reserving some benefits for itself by refusing to offer full reciprocity and introducing exceptions for trust and offshore rules. The inevitability annoys Geiger. “The US is not adhering to the standard, which reflects its clout in the world.”
http://www.swissinfo.ch/eng/politics/Switzerland_to_back_OECD_tax_treaty_.html?cid=38014420
………the american hypocrisy – No surprise there !
@Innocente, this picture is just very wrong. Why isn’t the Swiss government protecting those people?
Also I was wondering if the US embassy/consulate could do anything to help these people, like expediting the renunciation process. As Victoria mentioned about the AXA French dual who got outed, they should at least allow these people to renounce/relinquish their US citizenship in one day and solve their problem.
This is just very sad…
@calgary411, @Just Me, @Duke of Devon, @kermitzii
Thanks a lot for your input. For others’ benefit I tracked down the IRS description of the Streamlined Filing Compliance Procedures, here: http://www.irs.gov/uac/Instructions-for-New-Streamlined-Filing-Compliance-Procedures-for-Non-Resident-Non-Filer-US-Taxpayers
“Quiet Disclosure” – To be clear, is this essentially Streamlined but without writing “STREAMLINED” across the top of your 1040s? Is it “quiet” because it isn’t part of a program?
And one more:
Would it be better to renounce before filing (according to Streamlined procedures) or after? Or does it matter? When I file those 3 years I want it to be the last time!
You guys are the best – thanks! I’m actually doing research for my whole family so that’s karma points multiplied. 🙂
wren,
You can renounce before filing. You should be asked nothing about your tax filings at your renunciation meeting. The Streamlined Program’s three years will not be enough to certify on Form 8854 (due NLT June 15 of the year following your renunciation) that you are compliant for the requisite number of years. The Streamlined Program is meant for those who will go forward with their filings, but the program can be used so you are complying officially (rather than QD), adding the additional years of filings if you are to “sign out” of the US officially. Others are more versed in this than I am.
@wren
As calgary411 said, the 3 years in Streamlined is a floor not a ceiling. You can submit more years to reach the magical 5 required for a clean renunciation.
See http://www.mnp.ca/en/media-centre/blog/2012/9/2/details-on-new-irs-streamlined-relief-for-americans-in-canada
wren,
As @calgary441 says: the Streamlined procedure is 3 years of taxes and 6 years of FBARs assuming you will continue to file. Renouncing requires 5 years of taxes and 6 years of FBARs.
I just wanted to point out that it’s not as simple as writing “STREAMLINED” across the top of your 1040s. Streamlined procedure filings go to a special address in Texas as you can see in the instructions that you
found.
My mother renounced in December so she only has until June this year to file. If you renounce now, you have until June 2015.
I think a “quiet disclosure” is called quiet because you send it to the regular address for tax filings with no indication that it’s late and hope they process it without noticing (or caring) that your returns are late.
Wren. Streamlined is designed for those low risk lost sheep who wish to return to the flock. After you renounce you are supposed to file 5 yrs of returns and the exit tax return (8854) . Since fbars are under a different law, some do not believe it mandatory to file fbars.
Streamlined requires 3 yrs of returns plus 6 yrs of fbars. But to conform to 8854, you need to file 2 more yrs.
Assume you renounce in 2014. You are supposed to file for 2009-13 plus partial yr for 2014 plus a 1040NR for the balance of 2014. Most think the 1040NR applies only if you have reportable US income for that partial yr when you are no longer a citizen. The fear behind QD is an audit. If you have no taxes owing and are a non resident an audit would be truly remarkable.