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.
So you expatriated in August 2008 under the HEART rules. The 8854 would have been due June 15, 2009.
@Duke…for green card holders, the rules say you expatriate for tax purposes when you formally abandon your green card by filing i-407, not the date you actually leave the country.
Date of termination of long-term
residency. If you were a U.S.
long-term resident (LTR), you
terminated your lawful permanent
residency on the earliest of the following
dates.
1. The date you voluntarily
abandoned your lawful permanent
resident status by filing Department of
Homeland Security Form I-407 with a
U.S. consular or immigration officer.
2. The date you became subject to
a final administrative order for your
removal from the United States under
the Immigration and Nationality Act and
you actually left the United States as a
result of that order.
3. If you were a dual resident of the
United States and a country with which
the United States has an income tax
treaty, the date you commenced to be
treated as a resident of that country and
you determined that, for purposes of the
treaty, you are a resident of the treaty
country and gave notice to the
Secretary of such treatment. See
Regulations section 301.7701(b)-7 for
information on other filing requirements
if you are such an individual.
@RMA
In practical terms does that mean that I go through the expat tax? and give them my life savings because I ddid not file a couple of forms on time?
@TiredofThis..there is a ~$600,000 (in 2008) capital gain exemption on the exit tax, so it depends on your personal circumstances.
@RMA
but I have RRSP and pension plan!! RESP for the kids etc. It is awful by my look of it.
So in your opinion there is no other way?
Has anyone here dealt with the IRS on a similar case?
Thanks.
The Streamlined program only demand 3 years of back returns, and they have said that expatriates can file for the 5 previous years and avoid all penalties. In General, the IRS requires only the last 6 years of taxes filed.
Someone expatriating in 2008 would only need to file for 2008 under those rules. If the 8854 were filed under streamlined, they’d probably waive the $10,000 penalty for late filing. No FBAR required except for 2008 under that program as well.
Tired. You said the I 407 was signed by the agent with a date of abandonment in 1999.
In my opinion 8854 is irrelevant .
Ask Em what happened to her when she filed a belated I 407. As far as I can remember, ( it’s a bit confusing) she sent in a I 407 in May of 2012 and spent some time worrying about it.
She never heard a single word. Not a ‘thank you’ not a ‘received’ nothing.
You should relax.
@RMA
does it mean I would then avoid the expat tax (on my pension and RRSP) or would it still apply?
@ Duke of Devon
Sorry, I am new here. How do I find EM?
I’m pretty sure others will chime in with their opinions as well on what you should do. I’m sorry to hear you are having your OMG moment right now, but people here are quite supportive and helpful.
Also, hodgen had the following to say in to be somewhat similar to your situation..http://hodgen.com/deliberately-choosing-covered-expatriate-status/
@Duke, my suspicion is that the IRS isn’t receiving i-407s like they are CLNs, so they can’t really track them.
@ TiredOfThis
I’m in the same boat as you (and who knows how many others), except my boat has more holes than yours. My I-407 was never acknowledged. My greencard is gone but I have no official proof. I can only hope the current government statement of no CRA collection from Canadian citizens continues to hold and I keep contributing all I can to ADCS (my CPP & OAS cheques). My future is so uncertain that I am considering it a blessing that I am old and aging rapidly beyond my years.
Tired. I once had a phone conversation with a well known and well connected US tax attorney who was formerly the chief of the IRS CID
He told me that decisions such as yours are not legal decisions or moral decisions. He called them ‘business decisions’
You balance the probabilities and do what’s best. Relax.
@ TiredOfThis
I should also mention that I am Em (look down below in “Stories of Some Participants”). Plus I have not been to the USA for almost 20 years and I will never even think of going there in the future.
Tired. Em’s story starts with a link at the bottom of the IBS site under profiles of some participants. It’s a long thread but in your case probably worth reading. It will help you in your understanding and in avoiding a world of pain. I believe she is now known as EmBee.
@RMA
I though that once I had given up my green card, I could not go back on the late filing, that once I was a covered expat, I could not just put myself back on a clean exit track.
Tired, whoa!!!!!!! You are not a covered expat. Go over this again.
@ Duke Of Devon
Yours is not the first or likely the last time I will be used as a bad example. My advice is don’t do anything I have done … except contribute to ADCS. 😉
@EmBee
I would greatly appreciate pursuing this further with you but I must go now. I will be back here later. I will read your story carefully and post a few questions I am sure.
Thank you so much and also to @RMA and @DUKE.
Keep posting if you have more thoughts and are here. I will see them soon.
@Duke @EmBee
Do you have references or any case reported on this blog or anywhere, where we can see the position that the IRS took in a similar case?
@Tired…FWIW…I’ve never heard of a single person on this site being audited over an 8854. They are information returns, and rarely audited, and from the little out there are usually audited only in the context of a larger audit. The IRS has limited resources–even more limited due to severe budget cuts in enforcement and taxpayer assistance. Given that overseas citizens rarely owe tax…I read 80% don’t owe any, and another 10% owe little, and out of 150,000,000 returns filed each year, only a tiny fraction would be subject to expatriation provisions, it’s not an area of familiarity to most IRS agents. One person even asked their tax law a question on a simple question regarding determination of an expatriation date, and they said it was too complicated for them to answer–to consult with their website or professional sources (i.e. CPAs or lawyers) that specialize in tax expatriation. It is unlikely you are going to find out more than that–LPR abandonment knowledge gets even less attention than relinquishment of citizenship.
@Dillmore
Given these stats, are you suggesting to
1) Ignore the whole affair;
2) File just 8854 retroactively without the prior 1040s;
3) File back the missing years of 1040 (presumably under the new streamlined amnesty system) and then 8854?
It would be great if you could clarify your thoughts on that.
I had a previous question which is, once the i-407 has been obtained, is it even possible to file the missing 1040 that predate that?
I no longer have my returns for those years anyway, although I am pretty sure I could find my gross income and even without subtracting anything else I would not have to pay under the Canada-US treaty. But if it still possible to make a clean exit, I should not completely toss it out.
Thanks again.
@RMA,
You wrote earlier from the IRS website regarding the determination of abandonment. Now, item 3 is this:
3. If you were a dual resident of the
United States and a country with which
the United States has an income tax
treaty, the date you commenced to be
treated as a resident of that country and
you determined that, for purposes of the
treaty, you are a resident of the treaty
country and gave notice to the
Secretary of such treatment. See
Regulations section 301.7701(b)-7 for
information on other filing requirements
if you are such an individual.
Correct me where I am wrong. When I left in 1999, I was not a LTR since I had been in the US for only 6 of the previous 15 years.
However, when I filed my 1040 and 1040NR (for the two parts of the year), I clearly indicated Dual Status on the top of the 1040NR and explained the circumstances and date of my departure in the space reserved for this in the form. Now, I certainly have come to understand that this was not the proper form to declare my expatriation on, but at least in spirit, isn’t it exactly what this third test above is all about (i.e. a non-LTR filing for non residency under treaty and announcing my departure from the US in that document)?? Did I not simply moved back to Canada under a treaty that views me as a permanent resident here? Why is test 3 not applying to me then (other than because of the form I used). Seems there must be something else I do not understand about my status in 1999.
This is what frustrates me the most about this whole situation. I can accept that I read the instructions wrong and filed the wrong form, but it should be obvious that I was not trying to hide anything.
Tired. Why are you trying to make this so difficult?
You filed your I 407 and the border agent put down 1999 as the date you abandoned your green card.
Em, Dillmore, RMA and I have all told you in various ways to forget about it. Relax.
Hi Duke.
I appreciate it that your opinion is that I should relax. I want to, trust me, but I am not there yet because that is not what I hear from the others.
– EM says she will have to live the rest of her life with the uncertainty of being found through FATCA reporting
– RMA says I am a covered expat (subject to the expat tax. That is about the worst possible state of the world.
– One way of reading Dillmore is that I should file my 8854 because they probably won’t audit it.
I am not ready to relax because I need to understand if, for instance, I need to avoid ever having a balance of $50,000 in the bank for the rest of my life because my bank has my old US driver’s licence info in its records. If the trace is still there (and I am guessing it is), and I ever sell my house, triggering a large deposit, the bank needs to ask me for my status and and look for the electronic trace. Would I get flagged then because of the conflict of information triggering a FATCA reporting? There are several other scenarios like this that could affect me and my family in serious ways and I would rather know where I stand than just relax until stuff hits the fan.
So all I am trying to do is figure out how I need to go about my business, in the immediate with the IRS, but if I do nothing, I also pretty much need to know how to arrange my business from here on. There is an awful big difference between stating that my status is actually OK, and that it is NOT OK but I can relax.
So, I apologize if I am not quite relaxed about it yet. Perhaps you could explain WHY you think the 1999 abandonment date is good enough when @RMA says that the 2008 filing date of the i-407 is the relevant one (with all of the baggage that the 2004 and 2008 laws have brought), it would certainly help me relax.
Thanks.