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.
Thank you for your reply Calgary411.
I think I am ok with filing the 3520 and the 3520-a late (on April 15), as this is my first US filing ever as an immigrant, and I have a pretty good reason for being unaware of the correct forms and deadlines.
WhiteKat – Unfortunately, my wife and I lived apart for the last 3 years due to work and we finally decided that I would move down since she is getting tenure next year and my career is more portable.
I called the international IRS number again and I talked to another person who gave me some guidance to just report it on the first page of the 1040. This guy tried to help, but I can tell that he was just making an educated guess without knowing how it is going to actually be treated. I am probably just going to put it down this way and hope for the best.
On the Serbinski accounting forums, it seems that people who have filed the 3520 and 3520-a late and incorrectly are eventually getting the penalties waived by the IRS:
http://forums.serbinski.com/viewtopic.php?t=6735&start=0&postdays=0&postorder=asc&highlight=penalty+letter
Wondering what a person should do if they renounced December 10th 2013 and is still waiting for a CLN with regards to filing taxes.
The consulate officer said to act as an American until one receives a CLN. So would one then keep filing taxes as an American until a CLN is received or file a partial ending on the 10th? (date of renun)
Thanks
@ghost66
Whether you file till Dec. 10th or Dec. 31st may not make much difference, depending on whether you have significant tax events which occured between the 10th and 31st of Dec. Form 8854 is more critical. If you don’t file it, you’ll most likely be classified as a “covered expatriate”, so you should file that whether you have your CLN or not. (IMHO, that is.)
@notamused
I am familiar with form 8854 however the consulate staff said to wait for the CLN because they will package the pertinent Tax forms with it (as they could be outdated?). Does it make sense that they would tell someone to act as an American, including filing, until the CLN is received?
On a side note, I have filed 4 years Tax previous to my renunciation along with a few Fbars, I am young and my assets are much less than the 650 or some-odd thousand for the exclusion limit for a covered expatriate. So with that in mind, would it matter if I am a covered expatriate?
Thanks
@ghost66
I’ve never heard of a consulate packaging tax forms with a CLN. They can’t possibly know which tax forms you’d need to file, and in any case all (past and current) forms are available on the IRS website. Renunciation is a matter for the State Dept., not the IRS.
I know the consulates say you’re American until your renunciation has been approved. Yes, that’s common practice. However, they take your US passport and it makes a significant difference on how and how long you file taxes, so in my view it’s disingenuous for them to tell people that. Apart from one very strange case, I’ve never heard of a renunciation be denied by the State Dept., so for all intents and purposes, you’re no longer American once you renounce (in my view). In any case, I personally wouldn’t want to risk being classified as a covered expatriate, even with assets below the exclusion. The US govt. is very unpredictable and vindictive towards expatriates. For example, there may be legislation in the future preventing covered expatriates from entering the USA.
@ghost66
I’ve never heard of a consulate packaging tax forms with a CLN. They can’t possibly know which tax forms you’d need to file, and in any case all (past and current) forms are available on the IRS website. Renunciation is a matter for the State Dept., not the IRS.
I know the consulates say you’re American until your renunciation has been approved. Yes, that’s common practice. However, they take your US passport and it makes a significant difference on how and how long you file taxes, so in my view it’s disingenuous for them to tell people that. Apart from one very strange case, I’ve never heard of a renunciation be denied by the State Dept., so for all intents and purposes, you’re no longer American once you renounce (in my view). In any case, I personally wouldn’t want to risk being classified as a covered expatriate, even with assets below the exclusion. The US govt. is very unpredictable and vindictive towards expatriates. For example, there may be legislation in the future preventing covered expatriates from entering the USA.
@notamused
Understood, so since I have only filed 4 years before, should I file another year prior to that? (so for the year in question, 2008)
And when I renounced, since I had only filed 4 years prior, is it too late for me and will I be deemed a covered expatriate now or can I do something about it?
Also, could I file the years 2008, 2013 and then the Form 8854 when I receive my CLN?
Or should I file the 2008 and the Form 8854 now?
Thanks,
@ghost66, it is my understanding that you have until the following June to file 5 years’ worth of returns and FBARs, after which you can check off the “5 years filed” check box on the 8854.
@ghost66
I think if you’ve already filed 2009-2012 and now file 2013 with 8854 (i.e. 5 years in all) you should be OK and will not be deemed a covered expatriate. I don’t think you’d need to file 2008. Perhaps others here can comment/confirm.
@ghost66
Here is some further information regarding the consequences of covered expatriate status:
http://hodgen.com/deliberately-choosing-covered-expatriate-status/
@ghost66
My mother renounced on Dec 12, 2013. It’s seems clear to me that “5 previous years” of filing includes 2008 (and FBARs back to 2007 for the Streamlined Procedure in her case). We are filing everything without waiting for the CLN as if the renunciation will be approved. The accountant filed for an extension for the tax returns, which includes extending the due date of the 8854. I think the idea was to allow time for the previous years to be processed before filing the final tax and 8854, just in case, so it’s all in the system by the time they get the 8854.
@ghost66
Everything I have seen agrees with what WhatAmI is saying – you need 2008 filed in order make up your 5 preceding tax years. 2013 does not count because it’s a partial year. In my own case, renouncing in 2014, I will have filed 2009-2013 (5 years) plus a partial for 2014.
Okay, noted. Thanks guys
@CanuckDoc
Was your POA done in the US or in Canada?
I also hold POAs for some of my elders in the family… some in the US & some in canada… a few also are in early stages of dementia… I have not opened any new accounts yet… their day-to-day accounts were already set up years ago with me as a joint… both in US & Canada… I am in the process of looking at how to free myself… but the only way I can do it is to give up the GC… I can’t do that because of my family…
Can anyone comment on the following, in particular the taking of an oath? I did so to become a Canadian, and that would appear to me to be a “potentially” expatriating act. Thanks, Fedup
Potentially Expatriating Acts
Section 349 of the INA (8 U.S.C. 1481), as amended, states that U.S. nationals are subject to loss of nationality if they perform certain specified acts voluntarily and with the intention to relinquish U.S. nationality. Briefly stated, these acts include:
obtaining naturalization in a foreign state upon one’s own application after the age of 18 (Sec. 349 (a) (1) INA);
taking an oath, affirmation or other formal declaration of allegiance to a foreign state or its political subdivisions after the age of 18 (Sec. 349 (a) (2) INA);
entering or serving in the armed forces of a foreign state engaged in hostilities against the United States or serving as a commissioned or non-commissioned officer in the armed forces of a foreign state (Sec. 349 (a) (3) INA);
accepting employment with a foreign government after the age of 18 if (a) one has the nationality of that foreign state or (b) an oath or declaration of allegiance is required in accepting the position (Sec. 349 (a) (4) INA);
formally renouncing U.S. nationality before a U.S. diplomatic or consular officer outside the United States (sec. 349 (a) (5) INA);
formally renouncing U.S. nationality within the United States (The Department of Homeland Security is responsible for implementing this section of the law) (Sec. 349 (a) (6) INA);
conviction for an act of treason against the Government of the United States or for attempting to force to overthrow the Government of the United States (Sec. 349 (a) (7) INA).
@Fedup, yes, you definitely performed an expatriating act if you took the oath with the intention of giving up your US citizenship when you did so. When did you gain your Canadian citizenship?
I took the oath approximately five years ago. Thanks
Then you can make an appointment to go to an American embassy/consulate in Canada and inform them that you relinquished your US citizenship 5 years ago and get a CLN. I assume you haven’t used your US passport, voted in US elections, etc, since becoming a Canadian citizen.
Thank you: you have been really helpful. What is a CLN? And my passport has been expired for a while now (at least 10 years)–are there any implications for that? Again, thank you.
@ FedUp,
It’s Certificate of Loss of Nationality. That you did not renew or use your passport since performing your relinquishing act is a positive indicator that you did relinquish your citizenship.
Here’s some links you may find useful.
Department of State forms for renouncing/relinquishing
Synopsis of Information Session given by John Richardson. Lots of useful info here.
Consulate Report Directory. People’s reports on their consulate meetings.
A Certificate of Loss of Nationality of US Citizenship. If you have an American birthplace shown on your passport then if you visit the US you could be hassled by the American border control if you don’t have an American passport with you. All Americans are supposed to use their US passports when entering or leaving the country. A CLN proves that you’ve given up your US citizenship and no longer need the blue book to cross the border. A CLN will also prove useful once FATCA comes into force in July. If your bank knows you were American you may be asked to prove whether you still are or not. A CLN shows that you aren’t and therefore your accounts aren’t subject to reporting requirements under FATCA.
There are no implications for letting your US passport expire. But it’s difficult to make a case that you’ve relinquished your US citizenship if you’ve renewed your American passport and have been using it since you took Canadian citizenship. Likewise if you’ve continued voting in US elections, etc.
@WhatAmI
@tdott
Thanks for you input. I wasn’t quite sure about that one. Leave it to the USG to make simple things complicated, like counting to 5…
U S foreign person
My mothers POA was done 10 years ago in Missouri, where she continues to live.
Fortunately, I put my name on her regular bank accounts before I renounced.
My attempts to figure out how to deal with her investment accounts have been met with nothing helpful, other than one advisor is willing to work with me “unofficially”. He will keep me in the loop whenever there are decisions to be made, but it will still be up to my mother to say yes or no. Now he also says he can’t take direction from me because of SEC regulations, because he is not licensed where I live!
When my mother can no longer make decisions, it seems I will have to put in all in the hands of someone else (will probably have to be a corporate trustee)
I asked her lawyer before renouncing if it would cause any problems. She said no, but what does she know?
What I really don’t get, is how come US banks have millions of deposits from foreigners, but I can’t exercise a POA7 for the benefit of my US citizen mother.
I have no regret about renouncing, but is sure is making everything complicated
I am new here and I just had my OMG moment with regards to filing 8621s (PFIC) .
I am an italian citizen married to an american . I still have a GC but live and work currently in Italy,
my wife lives in the US . We are filing married filing jointly.
My bad facts are that I only filed always 1 FBAR for 1 account but left out my other 4 italian accounts and mutual funds. (accounts > $50,000)
My italian bank does not know that I have a GC …. I have an italian address as well.
Do you think here that coming 7/2014 FATCA will rat me out to the IRS ?
I am planing to correct GF my past compliance errors and report for 2013 all accounts on FBARs and file form 8621 with the correct PFIC calculations.
@Ricardo
1. You have no US indicia, so why would your bank report your information?
2. Think twice about declaring your PFICs. My US accountant advised me to get out of them ASAP and I did. The taxes were more than they were worth. If you use the default method to declare them, you may owe nothing now, but when you sell, you will suffer.
3. Check the tax treaty with Italy. Some pension funds are specifically named there as recognized and only taxable where you reside Maybe one of your PFICs will fall into this category. Italy did a good job on the tax treaty with the US as things like IRAs and pensioni are considered.