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.
@final filing info
Thank you Rev. Susi – here is my update. I was a dual US/EU. In May 2013 I filed 2006-2013 -1040, 2555, Schedule B, Fbars and took the FEIE on all years with letter of explanation (I knew nothing of having to file as I have lived in Europe most of my life) . Send all registered post and made copies of all postal receipts. Received no feedback from IRS. Renounced US in August 2013, received CLN in May 2014. Filed 1040, 2555, Fbars, Schedule B and 8854 in May 2014. Am well under the covered expat amount. Have heard nothing except for email confirmation that Fbars were processed. I had only earned income from job in EU plus a very little interest on EU bank accounts. Did this filing as DIY with much appreciated input from IBS persons. Have knowledge of other ex-US persons who have done the same. Some are also still waiting for their CLN after 6-9 months.
@allou, great! You’re all done too. Congratulations.
Thank you Medea F. – you have been very encouraging in this process. Best wishes for the future 🙂
@allou, to you to. It’s certainly going to be more simple now that America is out of the picture.
How stupid am I?
I have been a US resident (green card holder) from South America. I have been working for the UN for 15 years now. I was under the assumption, wrongly (!), that working for the UN I do not have to pay income taxes to the IRS. How stupid. I have, therefore, not filed my income tax or 15 years – very stupid and ignorant, indeed! I only this week, in a discussion with an American colleague, found out that the UN has a payback system to its staff, AFTER the taxes have been paid. I am totally ready to file my backlog of 15 years in taxes and pay the taxes. Please advice on how to proceed. And will I have to pay a huge penalty?
Business is booming for those making money off expats trying to become US tax compliant in Canada – in order to renounce, or just going forward, etc.
See sample price list for getting storefront chain R&R Block help to be US tax and reporting compliant annually, even for those with little income, and no US tax owing. Check out the price of help with an 8854 (Form 8854- Expatriation ‘Premiere’ tier category of forms: Starts at $1050 + Time* Time charge may apply to all complexity tiers at $100 per hour”) , or a 3520 and 3520A for registered accts like the TFSA, RESP or RDSP.
http://www.askbernice.com/uploads/2014_US_Pricing_-_July.pdf
2013 mid year did the closure. 8854 in 2014.
114 , still need to file in 2014 for 2013 till June 2013?
Went ahead filing 114 but only under name of spouse as all previous yrs (both did the closure), maybe should do one for myself too due to final yr filing for 2013 in 2014? Too late?
Hat off to all DIY filers, how you manage? Need help!
@Rev Susi how to email privately?
USResident_inNepal,
Sorry that noone has weighed in to answer you yet. I don’t understand the scenario re the UN, so can’t offer anything knowledgeable or constructive. I do question whether you would need to do 15 years worth though, so wouldn’t jump into this without further investigation to see what your options are. The US has been very draconian about those trying to ‘come into compliance’ – particularly if actual US tax might be owed. Then there are the FBARs/Form 114 if one has had bank or other financial accounts held outside the US while one is deemed a ‘US taxable person’ even if not a US resident.
Perhaps someone else here might be better able to answer you.
USResident_inNepal,
I should have said welcome, and I hope that something here may be of help to you.
I found this, http://www.un.org/Depts/oppba/accounts/tax/forms/us_tax_reimbursement_procedures_at_unhq.pdf
and this;
http://www.un.org/depts/oppba/accounts/tax/pubs/sticlatest.pdf
http://www.un.org/Depts/oppba/accounts/tax/index.htm
but have no idea at all what it all might mean for someone in your situation – particularly in terms of backfiling.
Hopefully perhaps another reader/author might be able to offer some helpful comment, though we are not experts in US taxation and don’t offer expert US tax or other US reporting advice. Yours is a scenario I haven’t come across here before.
I don’t know enough about your current residency and past US residency, to understand your situation, as well as which non-US country you were also a citizens and taxpayer of. You may not want to provide specifics in an online forum such as this, for privacy and security reasons.
Before actually jumping into filing anything, I would read and research much more, and find out what likely types of scenarios you might face – in terms of total US tax that would be assessed, the requisite penalties and interest on the unpaid tax, any reporting forms that would have been required (ex. Form114 – formerly the FBAR), and the penalties that might be applied for those. That might help you to decide what options and risks and consequences you can live with; whether to comply going forward, or to backfile some number of years with a letter of reasonable cause, etc. 15 years is a lengthy backfiling. Some reporting like the FBAR has a statute of limitations of a fixed six years, and so filing more than the most recent 6 for years still open may not be advisable or required. Other forms and reporting requirements may have no statute of limitations, but 3 or 6 years may be sufficient – it all depends on your specific facts and circumstances.
Also, the UN reimbursement of US taxes may only go back a certain time period? And would probably not help you with any interest and penalties levied on the US taxes assessed. You need to know what size of tax you would have been assessed for, and financial form reporting penalties you would be facing in order to decide what path you can live with and how to go about it. Some of that, and your options may hinge on your length of US residency, whether you currently live in the US, or if abroad now – intend to return to live in the US either for another time period or permanently, intend to become a US citizen, or whether you are remaining outside the US forever, have an expired green card, etc.
You may or may not also have had a state tax obligation – which is yet another layer of complexity, potential penalties and risk.
I am not advising that you post all of those things online here, but you might after reading and researching decide whether your own unique facts and circumstances might change which option you choose, or narrow them.
Unfortunately, the US IRS and Treasury do not make it at all easy or palatable to correct even small and indadvertent errors and omissions in filing US taxes if one has also had financial reporting burdens/obligations for accounts and savings and certain types of pensions held OUTSIDE the US, (even if they originated in your country of origin before your greencard and US residency, but you kept them and didn’t report them once you became a US resident – I am referring to the rules for the FBAR/Form 114, Form 3520/3520A, PFICs, etc.). Having any even ordinary bank accounts or savings or pensions held outside the US during the time you held/hold a greencard or are a US citizen can be seen and treated by the US as practically equivalent to having a secret account deliberately hidden in the Cayman Islands – even if to you the accounts were local and originally opened where you actually lived previous to becoming a US resident in order to receive wages, pay bills, and other entirely pedestrian banking transactions.
I don’t know if they make any exceptions for UN employees on work assignments which require one to reside outside the US.
Jumping in before researching and getting a very very good grip on the consequences, options, reporting required, tax owed, and cost of getting US tax accounting (and any necessary legal help) is not to be recommended. Unfortunately, the US can make it very very hard and very very painful for those trying to maintain US tax compliance from abroad, or come into compliance if they live or earn or bank abroad.
badger,
You have advised USResident_inNepal much better than I could have.
USResident_inNepal, working for the UN, there must be some human resource department / person with whom you can consult regasrding the situation you find yourself in — without committing yourself to other authorities before you find out what assistance you can get from the UN that employs you. It sounds like you would be throwing yourself to the mercy of those who could have / should have given you direction in the how-to of filing your US taxes in the first place.
Anyone else that can weigh in on this?
@USResident_inNepal
Not to be too personal… did u receive a W-2 from your employer or do u have diplomatic protection? Do not start going crazy… there are lots of americans in the US that don’t file taxes so don’t think that u need to jump in to solve your issue right away without planning exactly how to proceed. Do not talk to a tax preparer… If u need help… speak to a tax attorney who will then refer u to an accountant/preparer to use whom the attorney will contract for u… attorney/client confidence… can’t be used against u if an issue comes up… they can not legally discuss your situation with anyone. Not that I am saying… jump to an attorney…. they may not know any better then u… I have learned that the hard way… Best way perhaps is to ask around for some names of tax attorneys at the UN since that is a unique situation and u may require an international tax attorney… research the attorney as best as u can because they are not above squeezing every penny out of u in the name of helping u… Maybe someone here has better ideas on what u should do… but working for the UN may have a different set of solutions that can help u
@USResident_inNepal;
You might consider weighing some of these good suggestions from Calgary411 and US_Person_Foreigner above:
As @calgary411 says ; “…consult regarding the situation you find yourself in — without committing yourself to other authorities..”, and also the comment by @US_Person_Foreigner who suggests; “…Do not talk to a tax preparer… If u need help… speak to a tax attorney who will then refer u to an accountant/preparer to use whom the attorney will contract for u… attorney/client confidence… can’t be used against u if an issue comes up… they can not legally discuss your situation with anyone…..”.
Clarify for yourself as much as you can what is your current tax status and potential liability – ex. are you a US citizen or US permanent resident/greencard holder now , how long permanent resident for, etc. in case the 15 years you cite do not all include a US tax obligation. Is it only US taxes you’d owe, plus penalties and interest on the tax assessed, OR would you ALSO have the issues that arise from holding accounts, savings, pensions, etc. outside the US during the time period you were/are considered by the US to be a ‘US taxable person’? The US is on a confiscatory and punitive crusade against all accounts held outside the US by anyone they choose to define broadly as a ‘US taxable person’, even if they are held local to where we live permanently abroad, filled with legally acquired funds such as our local wages, etc. and even if they do not earn any taxable interest, or are joint with a non-US person, or even if we only have co-signatory powers on a non-personal (ex. employer’s) account. Many of our ordinary retirement, education and disability savings plans outside the US are being punished as ‘taxable foreign trusts’. The pitfalls really depend heavily on many specific variables such as your actual US status, any tax treaty terms in the country where you were located if you paid local taxes, the types and location of your accounts (inside the US vs. outside), etc. and how the UN deals with the situation of wages and benefits of those employees who may have a US tax burden. If you are considered a tax resident of NY State, that adds another layer of complexity.
If you can get a reference for a competent US tax lawyer – (who are expensive), and if you can afford one, then they may be more appropriate to consult with initially, rather than just a tax preparer or accountant or IRS enrolled agent in order to clearly see the options and the pitfalls, because of the seeming complexity of your situation, and because of the important iissue of ATTORNEY CLIENT privilege – if necessary, the lawyer can then directly retain and instruct a preparer – under Kovel (see example explanation here http://federaltaxcrimes.blogspot.ca/2013/04/using-kovel-experts-to-protect-attorney.html ) to prepare whatever number of years of filings the attorney advises should be prepared and filed. You may be able to obtain an initial hour or two consultation with an attorney in order to know where you stand, and identify your options. The run of the mill preparer or accountant is probably not at all familiar with UN procedures re taxation issues for those employees with a US taxable person designation, nor their process of reimbursement.
Note that US tax lawyers, enrolled agents and CPAs are bound by Circular 230.
Be wary if you are told that your only option is entering the Offshore Voluntary Disclosure program. There are now also new versions of the Streamlined Process – for those who are US residents, as well as those living abroad, but not much is yet known about its potential pitfalls, and how it will be applied http://federaltaxcrimes.blogspot.ca/2014/06/the-new-streamlined-processes.html
http://federaltaxcrimes.blogspot.ca/2014/07/rumors-on-workings-of-streamlined.html
One of those might also be an option – depending on the unique specifics of your situation – which we can’t advise you on.
While waiting for some guidance here. Some more questions:
1. always filed joint. For final yr return, divide all joint asset and report half for 1040, NR and 8854?
2. the 1040 NR is reporting the whole year and 1040 the effective months only?
3. div, i believe is mostly declared at year end, so entire amt on 1040 or prorata?
4. tax liab on 8854, is that the total tax line of each yr 1040?
Many thks in advance for helping.
At death, a non-compliant US Citizen’s estate is subject to US claims for back taxes and penalties. I assume the IRS can come to know of the decease in various ways: such as via termination of Social Security payments, or tax forms from the US person’s country of residence shared with the US via the IGA? If however the estate is settled and property distributed before the IRS is informed, and can present their demand what then?
Does anyone know if there is a limitation on this?
Also the executor of the estate is liable I believe if IRS requirements are not met. Better that he/she not be a US person?
@ Gordian
Good question. Perhaps the answer is to try to avoid probate altogether. This site might be helpful:
http://www.wikihow.com/Avoid-Probate-in-Canada
I’ve heard of a situation in which a deceased person was put thru Streamlined for the sake of the executor (who, I think, was a law firm or accounting firm).
http://profwilliambyrnes.com/2014/07/18/revenue-from-the-offshore-voluntary-disclosure-initiatives-ovdi-fbar-and-fatca/
‘Revenue from the Offshore Voluntary Disclosure Initiatives (OVDI), FBAR, and FATCA’
Posted by William Byrnes on July 18, 2014
…..”…Substantial Money Laundering Penalties – But Not Tax Collection
The substantial majority of the $6.5 billion OVDI revenue is FBAR penalty, not tax collection and not tax penalty….”
…”The Senate Permanent Subcommittee on Investigations issued a report March 4, 2009 entitled “Tax Haven Banks and U.S. Tax Compliance.” This report examined how tax haven banks facilitate tax evasion by U.S. clients that cost U.S. taxpayers an estimated “$100 billion each year”. This Report has been widely cited as authority for the claim that $100 billion is lost in taxes because of evasion of tax through tax havens.
However, the reports citation for this $100 billion figure is only its footnote 1 that cites five magazine articles unsubstantiated information, that also varied widely in terms of opinions regarding the amount of tax losses the U.S. incurs. The five articles mentioned as the foundation for the $100 billion amount do not refer to any empirical study, do not provide any empirical evidence, and do not provide any statistical methodology.”……..”Mr. Shulman: “……… I mean, estimating how much money that is overseas and not being paid to the government. As far as I am aware, there is no credible estimate because it is kind of a chicken and egg. It is over there and we have not found it, it is hard to estimate what is there. And all estimates that I have seen have not broken down criminal versus civil because, again, until we see the cases, it is hard to say.””………..
…………”Is it likely that noncompliant money represents almost double the M2 money supply (Federal Reserve data of March 6, 2014 about $11T, see http://www.federalreserve.gov/releases/h6/current/) and about 20 times the actual amount of paper dollars that are in circulation?”
Read the whole thing to understand these excerpts. Slowly slowly some people have noticed that the emperor is naked and are coming out to state publicly what we already have been saying for years now – that the IRS and Treasury are and have been making claims to justify the FBAR and FATCA crusade against those abroad with no substantiation, no robust research, no robust data….
The IRS and Treasury have been unchallenged on their wild claims and their fudging of facts by generating and promulgating imaginary statistics re the tax evasion they allege is being perpetrated by those living ‘abroad’ with ‘offshore’ ‘foreign’ accounts. They have been using FBAR penalties as an alternative revenue generator, in lieu of the US taxes that they cannot assess when none are owed.
And this is the US tax system and foreign authority that the Conservative MPs state that they ‘respect’?
@badger
Glad to see William pointing out what many of us have known. Eric did a good post on the GAO report showing the disproportional application of penalties on Minnows in the OVDP. I did my own calculations from that report where I concluded that penalties made up 66% of the revenues collected and trumpeted as success. It will NOT be re-occurring annual revenue..
Also CF&P also published a copy of a letter showing how phony the $100 Billion number was. It was truly pulled out of a lawyer’s ass (WAG) and repeated by the asses in Congress as FACT.
@Just Me,
No better way to put it than; ..”..truly pulled out of a lawyer’s ass (WAG) and repeated by the asses in Congress as FACT”
Greatly enjoyed the characterization!
Thanks EmBee. A helpful link.
http://blogs.angloinfo.com/us-tax/2014/07/21/overstayed-your-welcome-substantial-presence-in-the-usa/
‘Overstayed Your Welcome? “Substantial Presence” in the USA’
Virginia La Torre Jeker
July 21, 2014
“Under US tax laws, any individual with a “substantial presence” in the United States runs the risk of being classified as a US person for tax purposes. Those who are physically present in the United States for a long enough time may find themselves owing taxes on their worldwide income to the IRS even if they are neither a US citizen nor a green card holder, and even if they earn no income from US sources.”……………
Very interesting blog post and comments developing at Jack Townsend’s site:
://federaltaxcrimes.blogspot.ca/2014/07/time-for-irs-ass-kicking-herein-of-lack.html
Monday, July 28, 2014
Time for an IRS Ass Kicking? Herein of Lack of Honor and a Dumb Decision in OVDI/P and Streamlined (7/28/14)
See also:
http://federaltaxcrimes.blogspot.ca/2014/07/rumors-on-workings-of-streamlined.html
“OVDP Hotline Nixes Practical Use of New Streamlined Program”
http://blogs.angloinfo.com/us-tax/2014/08/04/ovdp-hotline-nixes-practical-use-of-new-streamlined-program/#.U98oiKgMbO8.twitter
So once again the IRS/Treasury make it clear that they cannot be trusted! If the streamlined program is not intended for the kind of people outlined in here article, then clearly it is useless for anyone who thinks they can easily come into compliance. On the contrary, it appears to be a trap to get people to come out of the woodwork and then throw the book at them!
Hi all,
Looks like more and more I will be considered a USC. With that said, I am at the very beginning stages of planning how I will become compliant. I did not know I had to file a tax return until finding out by accident a week ago. (never earned US income etc) Anyhow, I don’t like it but have to deal with it I guess.
Questions: (As a Canadian dual Cit)
> What are the pros/cons of the 2014 streamline process?
> When I file, I wont have an ITIN # as this will be applied for at the same time. Since I wont have the ITIN # right away, do I wait to file FBAR’s until I get it?
> Do I have to provide account statements with my FBAR’s?
> Do I have to report every account no matter the balance or status under the IGA?
> I am concerned that it might be difficult to get the information for my FBARS, has anyone here had experience with retrieving 5 or 6 year old information form their financial institutions?
Thanks in advance
@HonestCanadian, to answer a couple of your questions
no, you don’t have to provide account statements with your FBAR’s.
yes, every account if the total of all accounts comes to more than the aggregate figure of $10,000. So if you have 3 accounts and they have the amounts of $5,000, $3,000 and $3,500 they all have to be reported because the total amount is $11,500. It’s also at any time of the year if your account/s go over, not just at year’s end so for example the $5,000 happened in March, the $3,000 in May and the $3,500 in December. Not sure on the status side – what account types are you thinking of?
Don’t you keep bank statements? That’s the easiest way to check as you have to go through the whole year.
I found the Streamlined okay, but then I only needed to file FBAR’s as I don’t have any income. It’s still quite new so I don’t think there are any long term views on how well it’s working or not.