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.
@HC
Last time I looked at the FBAR form, there were options for those without SSNs.
Since you are eligible for a SSN, it seems you must apply for a SSN for tax filing, not an ITIN. The website uses the would “should”, but most people here interpret it as “must”.
I have a question about the definition of ‘aggregate maximum balance for all foreign accounts’ exceeding $10,000 at any time during a given tax year as a requirement for filing FBAR. Does this mean having more than $10,000 in all accounts combined at any one time during a calendar year; or does it mean that the same $5000 I have in checking in January that I then transfer to my savings account in April that then gains $0.05 interest by December qualifies for having exceeded the aggregate maximum balance limit for FBAR? My checking an savings account numbers are different even though they are attached so they count as two accounts. I am concerened about past unfiled FBAR’s and the collosal fees that go with them and welcome any help/comments on the subject.
@Joan, say you have $5,000 in one account in March, another $3,000 in an account in May and a third account has $3,500 in December then you have to report all 3 bcause the highest total during the year is $11,500.
However I would guess that moving the money around as given in your second option would also trigger it because you’ve gone over the limit because one account had $5,000 at some point in the year and the other had $5,000.05 at some point in the year. As far as I know it doesn’t matter that it’s the same money, it’s purely on the highest figure in each account during the year and whether the total passes the $10,000 mark.
@Joan
If the sum of the maximum values of each account at any time during the year is >= $10000, then all accounts must be reported. It’s particularly onerous. So if you have 3 accounts, A, B, and C and have $3400 in A and during the course of the year transfer it to B then C, the aggregate value is 3 x $3400 = $10200, and all accounts are to be reported. Or to use your example, $5000 in a checking account gets transferred to a savings account and has a highest value of $5000.05, then the aggregate total is $10000.05 and both are to be reported. There are indeed collosal fees for non-compliance. That’s the official story, make of it what you will.
@Joan and @ notamused…..
I do not think your answer to Joan is correct !!
http://www.mnp.ca/en/media-centre/blog/2014/6/15/attention-americans-foreign-bank-accounts-reporting-fbar-online-filing-is-now-mandatory
If the sum of the maximum values of each account at any time during the year is >= $10000, then all accounts must be reported ?? I had $6K 1/1/2013 in a Checking account which I transferred 10/1/2013 into a savings account. I still have only $6K but 2 accounts for 2013. Was I supposed to file FBARs on 6/30/2014 ? Thank you for your help.
Bubblebustin: Based on your facts, because the total was never over $10K at any one time, you need not file an FBAR.
@Joan
By my reading, no FBAR. The FBAR rules carefully specify the “aggregate amount(s) in the account(s) exceed $10,000”, so sum across accounts then max, not max then sum. Your $5k can only be in one account at a time, giving you a $5k “aggregate” maximum (or $5000.05 with interest).
@ Joan
the answer Medea Fleecestealer and notamused gave you are not correct !!
@Corrections explanation is the appropraite one.
You need not to file an FBAR !!
@Watcher, Researcher, Correction – sorry, but the full phrase is:
E.The aggregate amount(s) in the account(s) valued in dollars exceed $10,000 at any time during the calendar year.
As far as I know you take the highest figure on each account, no matter what time of the year it occurred. So $5,000 in month transferred to another which earns interest pushing it up to $5,000.05 means both accounts have to be reported. If anyone has evidence otherwise please share though.
@Medea, parse the quoted phrase carefully. Aggregate first, then see if the aggregate exceeds $10k. Doing it the other way around generates meaningless results if you have more than one account. For example, $1 moved (infeasibly!) around 10,000 accounts.
Medea. You can’t figure out IRSese without hiring a lawyer at $500 an hour. You hire 10 lawyers you get 10 answers. The best thing to do is what works for you or as Dan said in the early days of IBS “only tell them what they already know”
By the way, Researcher & Watcher got it right.
@Watcher, KalC, nope I still don’t see it. How can you aggregate account figures unless you pick a particular day of the year to use?
Agree with Medea. Both US accountants that I used said that was the way they interpreted it, even though it looked like I had at least twice as much money than I actually had.
Right or wrong, I’ve no idea, but my husband reported the highest amount in each account — no matter what date that occurred and no matter if it was the same money being reported twice because of a transfer. (We live on our savings therefore money has to be transferred from savings to chequing in order to pay bills.) So if 10K went from savings to chequing in the same year it totaled 20K on his FBAR. Since he had an untouched savings account that was always over 10K anyway the FBAR was already required but the double reporting is certainly annoying.
Medea read it again and think . You use
@heidi, @EmBee,
It looks like twice as much because you report the max in each account each year, so yes, that looks like ‘double accounting’ of the same cash on a filed FBAR. What we’re discussing here though is how to calculate whether you meet the filing threshold at all, and for that you aggregate first, then find the annual maximum of that (on each month, week, day, hour, minute or second in the year, depending on your tolerance for pointless busywork).
Yes, it’s confusing, pointless, and arbitrary. It’s the IRS, so what else would you expect?
@ Medea,
Correction after further thoughts
I think KalC and Watcher are correct.
If ANY day of the year your aggregate is over 10,000 in one or multiple accounts then you have to report all accounts .
If the aggregate is below 10,000, on every day of the year..eg 5001 moving from one account into another. then you do not have to report..
@Heidi, not convinced. The aggregate to me can’t be below 10,000 every day of the year because on one day one account had 5,001 and on another day another account had 5,001. The two together – at any time of the year – add up to over 10,000. I can see what you’re saying but for me that only works if the FBAR regs said you had to use the account figures on a particular day. That would make sense because on, say, 30th June one account would have zero and the other would have 5,001. But that’s not what the regs state. It’s “… exceed $10,000 at any time during the calendar year.” At any time of the calendar year both accounts have had 5,001 in them so are over the non-reporting threshold.
It just goes to show how sloppy writing and not using a set date works in the IRS and tax preparers’ favour.
My husband who files our FBAR’s offers up a practical solution: call the IRS for an opinion. Also, don’t forget that those account balances are to be converted to USD’s.
@medea
I think he way to look at it is to ask yourself the question
On any day/moment of the year did I have over $10,000 total in any or all of my ‘foreign’ accounts?
If so you are over the threshold and have to report, then all the other nonsense about max value of accounts (even though it’s the same money but moved from one to another) kicks in.
Just catching up.
@Bubblebustin
The IRS call-centers consistently give wrong information, don’t understand the problem, or just make up the answers on the fly. Through discussions like this at IBS, we are much more likely to find a correct solution than they are.
I also still disagree with the position taken by Correction, Watcher, Researcher and KalC.
Consider the following 2 scenarios:
1) Joe has accounts A1, B1 and C1 at 3 different banks: A, B, and C. He deposits $3400 into account A and then transfers it to B and then to C.
2) Mary has accounts A2, B2, and C2, also at banks A, B, and C. She runs a business selling XYZ which costs $3400 and recieves income from 3 sales in each of her 3 aforementioned accounts. She withdraws that income after each sale.
In each case, if banks A, B and C were asked by the IRS what the maximum value of the accounts were, they would each – correctly and truthfully – respond: $3400. So there are 3 banks with an aggregate account value of $10200. In either case 1) or 2), neither the banks nor the IRS have any grounds or justification for assuming that the $3400 is the “same” $3400 in each individual account, and cannot readily distinguish them. (As it turns out, in case 1) it is the same, in case 2) it isn’t.). In each case, the banks and the IRS must treat the amounts as being distinct.
Correction, Watcher, Researcher and KalC got it right !
sorry @notamused but you got it wrong.
Your example does make not much sense either. Neither the IRS or the banks care about $3400 in your offshore account. Your $3400 can only be in one account at a time, giving you a $3400 “aggregate” maximum. Aggregate first, then see if the aggregate exceeds $10k at any one time.
My tax lawyer was of the same opinion and I did not file an FBAR either.
@Anon
You haven’t understood the examples. Please read again.
I don’t see how you can aggregate first, unless you use specific days to do so. The fact that an account has 3,400 in it one day and zero the next, doesn’t negate the fact that at some time during the calendar year there was 3,400 in it.
@notamused….. lol you have seen too many bad IRS movies and are infected with the fear mongering virus !
Since when has the Service the resources to ask banks about anything outside the $50K threshold.
If your offshore banks are bored and do some over-reporting and submit account information to the IRS via FATCA of your 3 little $3400 offshore accounts, guess what with 99.99999999999999% certainty nothing, zero, zilch, nada, nichts, niet will happen. Case closed !
Worst, upper worst scenario is a normal audit in which you show the examiner that all 3 accounts handle the same original $3400 amount via account statements. The same result….. Case closed !!
@OC
You’ve completely missed the point. It’s not about who reports what, it’s about interpretation of the IRS rules.