Liberty and justice for all United States persons abroad

The Isaac Brock Society

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. I was able to say “No, I am done, renounced, filed 8854, fini! But, this may be important information for others here.

    We are following up on our earlier emails to see if you are interested in our services for 2013 tax preparation. If applicable to your circumstances, please note that the deadline for filing an extension for Form 3520-A is Monday (March 17), so we are sending out a reminder in case you would like us to file this for you. Form 3520-A reports information regarding foreign trusts, which includes TFSAs and RESPs (and RDSPs). Please note that there is the risk of a substantial penalty for late-filed 3520-As.

  4. @All
    This was on a google FBAR alert today.
    Perhaps you might find it of interestl
    http://federaltaxcrimes.blogspot.ca/2014/03/outstanding-presentation-on-fbar.html

    Outstanding Presentation on FBAR Assessment and Collection (3/11/14)
    Caroline Ciraolo, a major player in tax controversy generally and in OVDI/P specifically, has prepared a great presentation titled Assessment and Collections of the FBAR Penalty. Caroline’s bio is here. The presentation is here. Although the presentation is dated April 10, 2013, Caroline advises that the materials presented are still current. Let me just say that Caroline drills down and asks and answers the questions most readers might have thought about with regard to FBAR assessment and collection.

  5. http://www.lawfulmoneytrust.com/ anyone who demands to be paid in lawful money does not have to pay taxes. look at 12 U.S.C.; subsection 411. they hid the remedy so they can get you to back the private credit of the very private Federal Reserve system. this is called fraud by omission! the taxes taken only go to pay the interest on the national debt and nothing more!. read the Grace Commission report of 1984 which was commissioned by Ronald Reagan. the true taxes of the republic are still just import, export and excise taxes! look into your state codes and you will see the word state means Washington D.C. all states have been taken into the Federal jurisdiction and are merely subcorporations of the Federal corp.(SEE 28 U.S.C. section 3002, paragraph 15 a, the US is defined as a federal corporation) the demand for lawful money is still there and an awesome way to save your property from theft of the IRS. This info was posted on Yahoo today and was removed from the comment section within 15 min under the “Why expats are ditching their U.S. passports” article” http://finance.yahoo.com/news/expats-ditching-u-s–passports-151127757.html

  6. @Mule,
    We have already paid one full set of taxes to our country of actual residence and often, where we have non-US citizenship – by birthplace, parentage, or naturalization.

  7. Anyone know what they do with the FBAR info? I am dual – born in Canada, never lived in the US don’t have a SSN. I want to get caught up on my taxes – the taxes part doesn’t worry me, I am completely compliant in Canada and I don’t make very much money at all. However I am a saver, I have saved as much as I can my whole working life. For someone who makes what I make I a have a bit of savings (around 150,000 cnd ). But I am scared when I submit my FBARS they will think I am suspicious because I have savings – most are in RRSP’s. Also I am joint on my mothers account so I have to report all that too……. and what about money that started in one account and moved to another – it will look like I have way more money then I really do. I am just terrifed of the IRS………Any suggestions from people who have gone threw this would be great…….

  8. Lori,

    Thanks for coming to Isaac Brock and looking for answers. You have a Canadian birthplace on your passport. You can say you are Canadian. Most here would say to hold off doing anything at this point.

    Advice and guidance is to start researching and reading. There is understanding and support for you here.

    Do start reading at the sidebars on the right-hand side of the page, including about the information sessions offered and the Canadian Charter Challenge discussion on how we are trying to fight FATCA, combined with US citizenship-based taxation. Read, read, read — and then ask your questions. Become as informed about this issue as you can, but don’t worry and don’t do anything that might prove a stupid move right now. (Besides, you’d have to apply for a US SSN to start the whole process of shooting yourself in the foot, from the USA if at any speed — and you would then be putting yourself on the radar and proving to the US that you do feel yourself a US citizen. Without a US SSN, I presume (but not necessarily so) that you don’t have a US passport and would not have voted in the US and haven’t filed any US tax returns or FBARs in your life) — don’t change any of that if it is the case.

    We have at the moment (for Canada) from the US / Canada Tax Treaty and from the mouth and pen of (now former) Canadian Finance Minister Flaherty, variations of saying:

    Please be aware, we have been clear that penalties imposed by the IRS under FBAR will not be collected by the Canada Revenue Agency (CRA) on their behalf. While the Canada-United States Income Tax Convention contains a provision that allows for the collection by a country of taxes imposed by the other country, this does not apply to penalties imposed under laws that impose only a reporting requirement.

    Furthermore, the CRA does not and will not collect the U.S. tax liability of a Canadian citizen if the individual was a Canadian citizen at the time the liability arose (whether or not the individual was also a U.S. citizen at the time).

    It is all obscene that someone like you could even get caught up in this absurdity! Take care and don’t worry too unnecessarily.

  9. Lori. Don’t do anything. If you were to do something silly, you would be telling them that you accept the process whether you do or not. Advice from Prof Christians, John Richardson and many others is to forget about it, get on with your life and sleep well. Mark Matthews , former IRS deputy commissioner has stated they only go after a few thousand people a year ( out of millions of possibilities) . They haven’t time or resources for anything other than high profile cases for strategic reasons. Anyone who tells you differently is merely trying to separate you from your hard earned savings.

    If you decide to ignore us and get caught up, you can do the streamlined process. Google IRS and streamlined. There will be no penalties.

  10. Lori, calgary and D of D give good advice.

    You don’t say how you are a US citizen – I assume due to an American parent (US citizen born abroad) – were you registered as a US citizen with the State Dept. when you were born?

    John Richardson (our helpful lawyer) advises that the first step is to decide if you WANT to be a US citizen – if yes then some would say to look into becoming tax compliant – but read plenty first as calgary says.

    If you don’t want to be a US citizen then I would do nothing – you are a Canadian born in Canada – no bank can detect any US indicia on you – you are safe. Don’t act as a US citizen in any way (no SSN, no US passport, no voting in US elections & NO TAX RETURNS)

  11. @Lori, unless your parents registered your birth at an American embassy when you were born, then you may not even be American. You might be able to claim American citizenship if you wanted to, but you DON’T have to do so.

    A couple of links on American citizenship:

    http://travel.state.gov/content/passports/english/abroad/events-and-records/birth.html

    http://travel.state.gov/content/travel/english/legal-considerations/us-citizenship-laws-policies/citizenship-child-born-abroad.html

    You have a Canadian birthplace and have lived all your life in Canada. Try as it might America can’t claim you if you don’t want them to.

    The question is what nationality is your mother? If she is American then supposedly she should be filing tax returns and FBARs. If she took Canadian citizenship though, she might be able to make a case for having relinquished her American citizenship when she became a Canadian.

    Take your time and read and research thoroughly before making any decisions. All of us here know what it feels like to be panicky about this, but hasty decisions are not what you need right now. Find out as much as you can and apply what you learn to your particular set of circumstances. Only then can you make the right decisions to take you forward.

  13. This is NOT tax advice. This is NOT an endorsement. I am only noting the little scrap of information embedded in this *link below, which implies that there could be potential upcoming changes to the Streamlined program to “broaden” it to apply to more people, and that the IRS might actually issue some kind of clarifications/modifications in writing – for the millions of affected member of the PUBLIC – which individuals the US claims as ‘taxable persons’. The program was first made available in September 2012, but then there was total silence and lack of any further guidance despite confusion, and questions from professionals as well as the average person considering how to proceed.

    I am not vouching for the accuracy of the content at the link but it will be interesting to see what follows. And given the IRS threats and statements since 2011 (and before) I doubt that much substantive ‘transparency’ or ‘education’ will be forthcoming, but we’ll see.
    http://www.doingbusinessacrossborders.com/irs-steamlined-filing-compliance-process-revisited/

    .”.One of these submissions resulted in a request for a follow up telephone conversation during which the Service clarified which taxpayers could use the SCP. We were asked why we did not use the program for the specific taxpayer that was the subject of our submission. We responded that the Service had not yet changed any of the guidance, most particularly the warnings about the amount of tax and the “simple” return criteria that appear in the questionnaire that must be submitted with an SCP filing..”.

  15. @bubblebustin, I would not expect that they have discovered even a tiny bit of concern for what is destroying the community of US citizens abroad, or stumbled on some vestigial concern for what is ethical and just, but perhaps only from a practical perspective the IRS have come to some tiny bit of realism as per their ability to process thousands or more of returns from people abroad – many of whom will owe them little or nothing, live abroad and have done for decades or for life, who have no intention of ever living in the US – and may never have even set foot there, or who are filing compliant going forward, or who backfile in order to put the US compliance burden behind them forever and expatriate. And I am hoping that this clarification of Streamlined, and the fact that they have not resolved your case after all this time means that they are reconsidering it in a way that is more likely to be in your favour. Or perhaps they have reconsidered the wisdom of continuing to act in a confiscatory and double tax manner towards people who are not US residents deliberately hiding money ‘offshore’ and who came forward in the only noisy manner they prescribed in order to demonstrate that. Is bad press getting in the way of their remaining IGAs? Who knows.

    Because by now, it seems obvious that those abroad who can are going to continue to formalize their separation from the US, and if they can’t do that, they’ll just take whatever other steps they can. The sentimental and symbolic bonds have been severed beyond repair.

  16. I am struggling through my final year tax forms (I refuse to pay big bucks for someone else to do it) I think it might be helpful to have a thread dedicated to “Final year tax forms” ie 8854, etc. I know it would not be professional advice. It would just be nice to have someone talk to about them. I’m sure I’m not the only one struggling with them

    So here are my questions
    1)It appears that one can use the full 2555 exclusion of income earned abroad, even if only a US person for 3 months. Is that what other people understand?
    2)If a “non resident alien” at the end of the year, the dual status tax form has to have a “statement showing income for the part of the year you were a resident” which can (but doesn’t have to) be a 1040.
    That suggests to me that I only need to show my income, which would not include 8938’s which I have had to file in the past.

  17. Canuck Doc If you google. ‘ FEIE part year,’ it would appear you are supposed to prorate the exclusion.
    It seems to me you don’t need to file a 1040 NR for the period after you renounce if you don’t have US source income that hasn’t been taxed at source. I.e. You have apple shares and tax on dividends was deducted. Don’t worry about them for the period after you renounce.

    It appears that the 8938 is supposed to be filed if you are over the 300 k threshold during the period before you renounced.

    Of course, this is all BS. You could put down almost anything and they aren’t going to bother you. There is nothing in it for them and they haven’t the resources. As Dan posted here long ago, ‘don’t tell them anything they don’t already know
    You may have my email from before, feel free to contact me if you do.

  18. KalC
    You are probably right. They don’t have the resources to question me. But I just don’t want some computer spitting an automated notice that something is missing, that will be a headache to sort out

    Staying out of the US is not an option. My mother in the US is getting dementia, and I have to go and keep an eye on her while she is still living independently. That is giving me enough headaches already. It appears that none of the financial institutions will accept my POA (which was all set up properly when she was very competent), because i am Canadian…..

    Anyway, i have decided against the 2555 , and am going with what I know, the 1116. But who writes the instructions for these things. If I didn’t know better, i would think they were making it incoherent on purpose. I would, however, “never attribute to malice that which is adequately explained by stupidity”

  22. Cannon to right of them,
    Cannon to left of them,
    Cannon in front of them
    Volleyed and thundered;
    Stormed at with shot and shell,
    Boldly they rode and well,
    Into the jaws of Death,
    Into the mouth of hell
    Rode the six hundred.

  23. I am one of the few that made the choice to become a “US Person” by moving and becoming a Permanent Resident of the US.

    I have to say that I thought I was prepared to make my first filing with the IRS this April 15th but I just found out that I have already missed the deadline for the 5340a filing which was on March15th.

    Even worse, after I managed to work through the 5320 and the 5320a myself, I couldn’t figure out where to put the capital gains and dividends on the 1040.

    I called the IRS international line and the guy straight up told me that they don’t offer any help or instruction on the 5320 forms over the phone and that I would need to get a CPA.

    At this point I am about to have a nervous breakdown at how overly complicated the IRS tax system is. I am scrambling to find a professional and I am pretty sure that I will need an extension in the US.

    The awful feeling of going through this is like nothing else I could ever imagine.

  25. Jon, did you move from Canada to the US as a Permanent Resident?

    I couldn’t find your forms here: http://apps.irs.gov/app/picklist/list/formsPublications.html?indexOfFirstRow=125&sortColumn=sortOrder&value=&criteria=&resultsPerPage=25&isDescending=false

    Are you referring to filing of 3520A by March 15th: Form 3520 and Form 3520-A: http://www.americanbar.org/publications/probate_property_magazine_2012/2013/july_august_2013/article_kayan_weyenberg_foreign_trusts_form_3520_and_form_3520a.html
    http://www.offshorepress.com/AICPA/form3520a.htm

    Very generally, a U.S. person is required to file informational foreign trust returns based on the following rules.

    Form 3520. U.S. persons must file Form 3520 at the time their individual income tax returns are due. Form 3520 is used to report certain transactions with foreign trusts, distributions from foreign trusts, and receipt of certain large outright gifts from foreign persons (currently more than $100,000 from foreign persons or $14,375 from foreign corporations or partnerships, in the aggregate). A U.S. person failing to file Form 3520 is subject to an initial penalty of the greater of (1) $10,000 or (2) (a) 35% of the gross value of the property transferred to a foreign trust, (b) 35% of the gross value of the distributions received from a foreign trust, or (c) 5% of the gross value of the trust. IRC § 6677. Additional penalties for subsequent filing failures may follow.

    Form 3520-A. A U.S. person treated as the grantor/owner of a trust for U.S. federal tax purposes is required to file Form 3520-A. Conflicting authority exists for whether the grantor/owner must file Form 3520-A by the 15th day of the third month after the close of the trust’s tax year or within 90 days of the occurrence of a reportable event. This discrepancy is discussed further in the analysis below of CCA 201208028. Generally though, taxpayers file Form 3520-A by March 15. This date often comes as a surprise because the individual’s return is not due until April 15. It is possible to extend the 3520-A, on Form 7004, to September 15.

    For purposes of Form 3520-A, a reportable event includes the following: (1) the creation of any foreign trust, (2) the transfer of any money or property (directly or indirectly) to a foreign trust, and (3) the death of a citizen or resident of the United States who was either the owner of the trust for U.S. federal tax purposes or all or a portion of the foreign trust was includable in the person’s gross estate. IRC § 6048(a)(3)(A).

    For any failure to file Form 3520-A, the U.S. owner is subject to an initial penalty of the greater of $10,000 or 5% of the gross value of the trust. IRS § 6048(b)(1). For continued failure to file past 90 days after the IRS mails notice of such filing failure, the U.S. owner is subject to an additional $10,000 penalty for each 30-day period during which the failure continues (subject to certain penalty thresholds).

    I had to file for the “foreign trust” Registered Disability Savings Plan (RDSP) that I hold for my son. There is no way I could have comprehended to successfully complete these forms so I had to hire professionals for a US tax law and accounting firm.

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