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.
@notamused… it seems you are interpreting the rules to your own liking I am afraid !!
Actually I have 5 offshore checking accounts in 3 different countries. Using the $ exchange rate the max. value was between $9100 and $10250 combined over the last 3 years. Since 2 accounts were closed and the balance was transferred – with you wrong interpretation – my aggregate max. balance would have been close to $20K. I never filed an FBAR.
For other local reasons I was selected last year for a normal civil audit . I had always declared all income from my offshore accounts , checked the box etc. just never filed the FBAR form.
The examiner was totally fine and said to me that I did not need to file one either just because I was $250 over for 1 year and confirmed the method I used for counting the max. balance.
@Limitup
“to your own liking”? Actually it makes no difference to me either way as I’m not a USP, just offering my interpretation. Based on the information and arguments I’ve seen thus far, I’ve no reason to change it. In any case, I need to get on with other things, so I’ll not be responding here again.
@notamused
I am not sure what your point really is ?! As we all know one can interpret the IRMs and statues many different ways. The IRS knows it , CPAs know it and tax lawyers know it. So who cares. What is important are real life consequences.
Even if you would be correct with your interpretation , which you are not, what difference does it make during an audit ?
As we have seen during OVDI/P the examiner never had a problem – when you can proof with account statements – taking out the “double counted” balances moving in and out different accounts.
The same principle exact applies here. What is so hard to understand about this !
It probably doesn’t hurt to over-report if in doubt though, to be on the safe side. However, my understanding was that over $10,000 in aggregate meant the maximum value in total at any one time during the year rather than adding up the individual maximum amounts per account.
I think Notamused has a scenario as follows;
Note that this all occurs on the same day August 6.
Account A, has $3,400 in the morning and it is transferred in full to Account B at lunch time.
Account B at tea time is transferred in full to Account C.
Statements for A,B, and C will show the high balance of $3,400 all on the same reporting day for a total of 10,200.
Is FBAR required because of the total on that day?
You could say yes based on daily reporting.
You could say no based on hourly reporting.
Now we must say that Notamused has pointed out a huge flaw in the FBAR system working with FATCA!!!!
Existing IGA say they report on the year end value, but whats to stop them from asking high balance during the year. If they ask for that, then lots of people will be hit.
Surely first of all the IRS is trying to establish if you have more than $10,000 stashed away in a foreign account or accounts that you are not telling them about.
So a simple way of looking at it is to ask yourself “on any moment of any day of the year, if you withdrew all your money from all of your ‘foreign’ accounts, would you have more than $10,000?”
If the answer is No, then no Fbar reporting.
If the answer is Yes, then the max value of each account for that year has to be reported, even though it may be the same money that has moved from one account to another.
‘Simples’
Newest by Allison Christians;
http://taxprof.typepad.com/taxprof_blog/2014/08/christians-.html
‘Allison Christians (McGill), Regulating Return Preparers: A Global Problem for the IRS,’ 75 Tax Notes Int’l 391 (Aug. 4, 2014):
“The IRS is in charge of a juggernaut of a tax system, the likes of which there truly is no equal in the world. And as all too often appears to be the case, in the enthusiasm to improve the functioning of this regime, its authors and enforcers appear to have forgotten that this unique system is perfectly global in reach, thanks to its unique inclusion of citizens and others with legal residence status no matter where in the world they live.
The problem of regulating all foreigners in service of U.S. citizenship taxation plagues FATCA in the details, and it will plague the project of tax return preparer regulation as well. It won’t be easily solved unless Congress can accept that the universally practiced norm of residency-based taxation is really the only viable option in a globalized world. If not, as the world adjusts to the ongoing expansion of U.S. regulatory power through more — and more complex — financial regulation, everyone will have to accept that virtually every tax move Congress makes has global implications.”
Could this turn into a windfall for the IRS/US government? Boris Johnson hopes to get back into the UK Parliament at the next elections. If at some future date he became Chancellor of the Exchequer would he need to report all the UK government accounts he would have (theoretical) signatory rights over on US FBAR’s as he’s still a US citizen?
http://www.bbc.com/news/uk-politics-28673113
In other news Walgreens are planning to buy up the rest of the AllianceBoots shares they don’t already own, but say the company HQ will remain based in Chicago rather than moving overseas.
http://www.bbc.com/news/business-28674140
As posted also on another IBS thread:
A Must Read re the FBAR,
from Allison Christians
http://taxpol.blogspot.ca/2014/08/fbar-e-filing-violates-taxpayer-bill-of.html
Tuesday, August 12, 2014
‘FBAR e-filing: violates Taxpayer Bill of Rights, challengeable under Haar’
“Eric Kroh of Tax Analysts has a story today [gated] on the basic nonsense that is the FBAR (foreign bank account report) e-filing system…….’……
……”……Remember, we are talking about millions and millions of people who have “foreign” bank accounts because they live in foreign countries; most are citizens of those foreign countries where they live; and their banks are local to them. Congress treats these people as if they live in the United States, when they do not. But Congress does not similarly treat their local bank accounts as local (Congress should do so, and would fix many problems if they did, as I argued in a Tax Analysts column in 2012). This mismatch of fiction against fact does not make people money launderers or tax evaders. Many, many of these individuals are unjustly caught up in the US tax net because of the madness of citizenship taxation. Also: consider that the FBAR instructions even say that kids ought to fill out their own FBAR forms. Come on….”….
I’m new to this site, so forgive me (or point me towards the answers) if these questions have been answered previously or elsewhere: what documented or anecdotal evidence do folks have of tax or FBAR non-compliant dual citizens having difficulties at the border, while inside the US or even at home in Canada? And if one holds no U.S.-based investments or income, is there any significant risk from the IRS to Canadian-based holdings. I understand that Canada will not collect taxes or penalties on behalf of foreign governments.
(I am an accidental American, born of Canadian parents who were temporarily in the U.S. Unfortunately, I took the advice of a U.S. customs/immigration official twenty odd years ago and obtained a U.S. passport and hence a Social Security number, so presumably someone in the U.S. government knows I exist and perhaps even where I live).
Thanks, and as I learn more I will look carefully at supporting the lawsuit.
DMichael
DMichael. So far there is no evidence of problems of the type you asked about. There is no way for the IRS to threaten Canadian assets. As you are aware, they are trying to get access to account numbers and total holdings. FATCA was designed for US residents with offshore assets. No one thought out the unintended consequences. Actually , no one thought.
@DMichael,
The congressmen who sneaked FATCA into the HIRE act may well have intended it for US residents, but the law as it was enacted includes all US persons regardless of residence.
Thanks to our Canadian government, if you lie to a financial institution about your US citizenship, you are breaking Canadian law, not US law. Will any of your FIs ask you due to your existing accounts? Reading the letter of the FATCA law, Canadian IGA and enabling tax act changes won’t answer that question. You have to wait and see. Most new account openings now have questions about your US tax situation and/or citizenship and heaven forbid, maybe even birthplace (I don’t recall if this has been documented to have happened).
Many people guess that it’s just a matter of time before scanning your passport at a border crossing will cross-check your tax status. It only makes sense, because as of July 1 the passport scanning system registers your days present in the US to see if it exceeds 182 days – for tax purposes. Canada shares the info for similar reasons: Canadian tax residency and provincial health care eligibility.
DMichael. You asked for evidence. What Am I gives you conjecture.
@KalC
Yes, but at least I include the word “guess” when I post conjecture.
@WhatAmI
“It only makes sense, because as of July 1 the passport scanning system registers your days present in the US to see if it exceeds 182 days – for tax purposes.”
I don’t recall my passport ever being scanned on departure from the US (other than by the airline personnel)
Does anyone know how this will work?
@Kalc
Re ” There is no way for the IRS to threaten Canadian assets”
The Canadian Gov does not have to do the dirty work, the banks can do it for them.
In Switzerland just the threat of a Fatca 30% withold has been enough to persuade the banks to freeze “non compliant” accounts, or to close them until the account holder shows them Fbar filings. I don’t know the legality of this but it seems no one has been able to challenge this action. Who knows if the Canadian banks will follow suit? It’s a big stick the US are wielding over them.
@Heidi,
The US scans you when you enter. When you return to Canada, Canada scans you, and notifies the US. And vice versa. So now both countries have an accurate count of your days present.
http://www.moodysgartner.com/canadian-snowbirds-beware-2014-border-crossing-rules-increase-stakes-for-day-count/
I don’t know if this is done with any other countries.
@Whatami
So it looks like the agreement is just between the US and Canada at present?
How about this scenario
A Canadian leaves Canada and travels to his vacation home in Florida, stays 3 months, then flies from Miami to Paris to stay with his daughter for 4 months, he then flies directly back from Paris to Canada.
Doesn’t it appear to the US authorities that he has been in the US for 7 months?
@Heidi, “Doesn’t it appear to the US authorities that he has been in the US for 7 months?”
Yep, I think thats another one they did not think through.
Me thinks some people may face problems because of that.
@heidi, george, no because if you fly into any place in Europe you’ll get a stamp in your passport to say when you landed. Certainly if you fly into the Schengen Area of the EU this is the case because as a tourist you’re not allowed to stay there for more than 90 days in 180 so the dates in and out are taken and kept on their computer system.
@Media, Canada is using an automated system to record days in the US.
1. You enter the US on a Canadian passport. It is scanned and the entry date is sent electronically to Canada immigration.
2. You leave the US to South America. There are no exit controls out of the US. In South America they simply stamp your passport.
3. You then return to Canada where you are scanned electronically as arriving.
Canada will likely have you recorded as being in the US for “x” days. You will have a record based on passport stamps but the electronic chip scan will not consider any stamps elsewhere.
Again as others have said, not thought out through.
Thanks, George. Re the new automated shared Canada-US border crossing system — this surely will be a big problem as much travel from Canada is to the US and then on to another country.
More regarding Canadians crossing the border: Canadians Crossing the Border: The IRS Is Now Collecting U.S. Passport Renewal Information, which of course is another US Tax Compliance Industry sales pitch to have them help you come into compliance.
and comments at that actual MNP.ca site:
Wednesday, August 06, 2014 – 03:58PM GMT | Sheowahya
Next step, cancelled passports for delinquent tax filers! Can you imagine the repercussions of that?!?! You’re in a foreign country on a visa attached to your US passport. The second the US state department cancels your passport, You are in a foreign country with NO VISA!! People think I’m mad for predicting this, We’ll see who’s mad.
Wednesday, August 13, 2014 – 01:43PM GMT | IAN
Shortly the US and Canada will be exchanging entry exit dates for citizens travelling back and forth by sharing computer info via passport swipes on each side of the border. You say that Canadian passports are not considered acceptable then folks (dual citiziens) could use a US passport on entering USA and their Canadian passport coming back to Canada. Now, how cam they reconcile that person’s entry exit dates?
which for now goes along with what the ACA letter that Badger posted that : http://isaacbrocksociety.ca/2014/06/24/its-back-passport-revocation/comment-page-1/#comment-2614165.
@Calgary, good morning…but half the day is gone already since your earlier posts. 😉
That cross border program is like the entering and leaving on a US Passport requirement which does not recognize the needs of the receiving country.
Duals and Non-Happy Duals give a US Passport to check in at a US Airport. They then arrive in the EU and present a EU Passport. The airline had already transmitted passport information to EU Country and presto there is a miss-match. I know of people that have had delays because of that.
@George, yes but at least you do have proof you weren’t in the States for that long if anyone queries it. I agree though the system doesn’t work at all well. My OH when he has to travel to the States always has problems because the system can’t recognise that a British national doesn’t always live in Britain! The fact that he has a Swiss address throws the whole system into denial.
The other stupid thing is the fact that it DOESN’T check people going out. So how do you know they’ve left the country? You don’t – crazy. People planning harm can fly/drive in, disappear into the wilderness and there’s no way of even knowing they haven’t left the country as planned. Considering the whole thing was set up to improve security they’ve done their usual hodgepodge job of it.
Just as with FATCA and any other control, cross border information is going to produce a lot of false-positives that will force the accused to have to prove their innocence, and will grossly interfere with the natural migration of people around the globe. Sickening, really how our freedom is being sacrificed in the name of security, or whatever it is they’re calling control today.
@medea
You don’t get a stamp in your passport if you are a dual and also have an eu passport to enter Europe.
But that is not the point, it’s the fact that if you travel on to another country after entering the US before re entering Canada (after a 6 month absence) you will be flagged by the IRS and will have to prove to them that you have not overstayed your allotted time. I suggest everyone keep all their boarding passes!