Liberty and justice for all United States persons abroad

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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.

3,618 thoughts on “US expat tax and FBAR: Discussion thread (Ask your questions) Part Two”

  1. @Cdn

    If your spouse is a US citizen, you are able to gift an unlimited amount tax-free to him/her, I believe. But to answer the question: the $5.34M gift tax exemption applies to anyone, USC or non-USC.

  2. From Tom Alciere on another thread with respect to doing nothing.

    I.R.S. sends you harmless papers in the mail. I.R.S. threatens, you better pay up or we’ll mail you another paper with a different inscription.

    Priceless and SO TRUE.

  3. While it is easier for a camel to pass through the eye of a needle than for a rich man to go to the kingdom of heaven, it is far easier for a rich man to pass through the FBAR needle than for a poor man to reach compliance. To a man with a million dollars, the $10,000 FBAR penalty is only 1% but to a man with little more than $10,000 it’s 100%!!

    The US Treasury can easily correct this egregious injustice and violation of the constitutional principle of proportionality, by changing the absolute one-size-fits-all $10000 penalty to, say 1% of the amount involved. Not only would it encourage compliance on the part of the minnows but it would also increase deterrence to – and revenue from – the right targets, the whales. A 10 million dollar account would get a penalty of $100,000, not just $10,000 as it is now.

    For simplicity this illustration assumes nonwillfulness and only one account involved. The disproportionality gets even worse for the innocent minnows since they tend to have multiple small accounts in different financial institutions where they live outside the US.

  4. My question is, would it indeed be easy for the Treasury to implement the change? And would it be willing to do so?

  5. @charlie5131

    Minnows shouldn’t have any penalties at all – that’s what makes them minnows. Had the reporting amount of $10K been indexed to inflation it would have been something like $70K today. Best it’s tossed out altogether, as the Republicans say they’re going to do through their upcoming legal challenge:

    According to James Bopp, the lawyer handling the case:

    “FATCA and FBAR violate the US Constitution on three grounds. First, the international governmental agreements (IGAs) signed by the U.S. government have not been ratified by the Senate. These agreements, therefore, are unlawful under U.S. law, because Article 2 of the Constitution establishes the Senate’s sole authority to ratify foreign treaties. FATCA’s and FBAR’s heavy penalties also violate the 8th Amendment’s ban on cruel or unusual punishment and their information reporting violates the 4th Amendment’s protection of personal privacy.”

  6. I know people who are snowbirds and am trying to warn them to be sure what they are doing re taxes in US. I am confused myself. As long as they spend less then 180 days in the US they don’t have to pay taxes??? The fuss recently is if this new visa allowing them to stay up to 240 days is approved. Is that all correct? As well if they are in the US<180 days and buy a condo does that have any impact?

  8. Cheryl, 183 days is just what a lot of snowbirds think. To be safe, they should not be in the U.S. over four months unless they timely file IRS Form 8840 to prove a closer connection to Canada (or another country). Hopefully, they are better getting the word on this. It’s very important that they have the correct information not to be deemed another of those *US Persons*.

    Here is another that those who are *US* Canadians need to consider for they don’t have the same benefit as ordinary Canadians as pointed out:

    In time for the annual migration of Canadian snowbirds and for contemplation when they celebrate U.S. Thanksgiving: From: “Moodys Gartner Tax Law Blog” — Updated IRS streamlined filing program: snowbirds beware. This refers to the “Dual” US-Canadian Snowbird, including those “Accidental Americans”.

  10. Of course, the snowbird thing isn’t simple to understand either. I know several Canadian-only snowbirds who go to the US yearly for 181 days or so and file Form 8840. This has been going on for a long time and appears to be safe and normal. Without Form 8840, the limit is much less than 4 months per year. You use that 3-year formula that takes a different percentage of each year.

    Even though the US (Congress/Immigration dept) has or is looking at increasing this from about 6 months to 8, one must be careful about the IRS rules and Canadian provincial and federal rules. They don’t line up. Moody has written about this as well. I don’t think the IRS has increased their limit from the 6 months. Alberta increased their limit from 6 months to 7 months last year (for health care coverage). I don’t know about the CRA rules.

    I read the new Moody article a few days ago but I’m not sure I understand it. I think it says that dual-citizens can’t be in the US for more than 30 days per year period unless they have been filing taxes their whole lives! Yet another feature of being a second-class Canadian citizen.

  11. And don’t forget that each entry into the U.S. counts as a day…like crossing the border to gas up, shop, attend a concert, etc. Doesn’t matter if it was 24 minutes, or 24 hours, it’s seen by the U.S. as one day.

  13. Re the latest “snowbird” Moodys article, that’s how I read it too, WhatAmI. That is quite stark and, if it is the case, that fact needs to be emphasized — that this is another discrimination for we second-class Canadians who are *US Persons*.

    It will also affect those who *think* they have been filing correctly all along and this new *US FATCA stuff* is no problem. See Publicus latest comment: http://isaacbrocksociety.ca/2014/10/26/cooking-the-books-at-the-federal-register-what-has-the-executive-branch-been-feeding-you/comment-page-1/#comment-3665620. (I sometimes wonder if I am deluded or if these persons who think they have no problems with the US are!!)

    Cheryl, that’s another good link you’ve provided. (Is hype or drama needed, like being whacked by a 2 x 4, to get people’s attention?)

  14. I think what the Moody’s article says is that dual citizens who haven’t been filing and who also spend too much time down south are ineligible for streamlined. Nothing more.

  15. But what is the definition of “too much time” for those dual-citizen people? That’s the bit I wasn’t sure of. It sounded like only 30 days.

  16. I am dual. What are the ramifications of my dear Canadian husband simply removing my name from our ‘investment account’ — it’s relatively small, we are small fry. I became compliant three years ago, but I am charged by my little local accountant for every extra form, Sched. B. 8398(?), and FBARs. (I don’t live near a big city.) Is there some form to fill out? As it stands, it is only his SIN number listed for the dividends.

    Should dear husband pass away, then what happens in terms of inheritance and US filing?

    Can you please direct me to a link that might explain the issues involved?

  17. Veritas. Your husband is already declaring the dividends. You can easily take your name off the account. Just ask your bank to do it. There shouldn’t be any issue.

    If he finishes the back nine before you, then it becomes yours and you have to include it on your US returns. There are no US issues with regard to a Canadian estate passing to you. Since you are compliant, it would be easy for you to renounce.

  19. The IRS National Taxpayer Advocate Nina Olson predicts;

    “…..The filing season is going to be the worst filing season since I’ve been the national taxpayer advocate; I’d love to be proved wrong, but I think it will rival the 1985 filing season when returns disappeared,” she told the audience of tax practitioners, according to Forbes…..”

    And for those outside the US who try to be ‘compliant’?

    “……It will be even worse for those filing outside the US. “If they are overseas, who are they going to call? There is not toll free number,” Olson noted……”

    So much for all those ‘services’ and ‘rights’ US extraterritorial tax apologists like to cite to justify US taxation forced on the rest of the world based on accidental US birthplace or parentage. Some of those making those claims include US homelanders who’ve left the homeland nest temporarily in order to come up here and strike it rich in the goldfields of crossborder taxation – mining the local assets of Canadians being extorted by the US. According to some of these homeland opportunists recently; “… US citizens are afforded many privileges and have access to benefits that non-citizens do not enjoy, including protection abroad, consular services, the right to vote, and easy access to the US job market…. “.

    Yeah. But can they get the IRS on the phone? The Taxpayer Advocate says not.

    And we have a firsthand account of a consular official in Canada stating that certain ‘consular services’ and exercising the right of a US citizen to renounce – sought by those in Canada are of ‘low priority’ and are going to stay that way – even when those US citizens pay 2350. USD for the privilege of the ‘service’ that is their legal right. http://isaacbrocksociety.ca/2014/11/04/my-november-4-2014-conversation-with-toronto-consul-general-of-us-new-renunciation-appointments-extended-to-september-2015/

    Many can’t ever vote in the US from Canada because they have never lived in the US, never lived there long enough, or didn’t have a US parent who would have qualified. Over half the US states do not allow absentee registration and voting from abroad without a minimum period of US residency – even some of those who may have had a US parent who at some point resided in a US state, are subject to rules about the voting eligibility or residency of the US parent http://www.fvap.gov/citizen-voter/reside .

    And as for ‘protection abroad’? Oh yeah, that must be the US drones and US Homeland security enforcers all set to operate on Canadian soil – but demanding to be exempt from Canadian laws http://www.huffingtonpost.ca/2013/07/30/border-security-us-police-legal-exemptions_n_3678240.html . We need protection from them, not protection by them.

  20. Source for the quote above from the Taxpayer Advocate, located here: http://rt.com/usa/202991-irs-warns-tax-season-delays/

    See also;
    http://www.journalofaccountancy.com/news/201411270.htm

    In light of FATCA crossborder data extortion by the US, you’ll be happy to know that the IRS says it is doing a better job assisting US taxpayers who’ve been prey for identity theft:
    “…… Koskinen outlined the IRS’s efforts to combat tax identity theft, calling it “one of the three or four most important issues we’re dealing with.” The problem “exploded” in 2010 through 2012…..“We’ve gotten most of the amateurs off the street; what we’re left with is organized crime here and organized crime syndicates around the world,” Koskinen said.”

  21. From the Canadian Expat Network: http://www.canadianexpatnetwork.com/public/1745.cfm (not dated)

    ..we’re constantly studying up on IRS procedures for purposes of counseling our clients. As we recently discovered through our research, the IRS has created a little known database called TECS.

    This database has major implications for Canadians who like to frequently cross the border to shop, vacation or do business in the US because now the IRS has its own way to track your travel in and out of the US to determine if you qualify as a US tax resident under the substantial presence test.

    This database contains information about specific dates of past international travel and locations of travel for individuals over a period of several years. TECS contains records of air and sea travel, records of border crossings, and the specific dates that individuals have traveled to and from the US. While the TECS historical travel information will provide both US entrance and exit information for non-resident aliens, it will only provide US entrance information for US citizens and Green Card holders.

    Using this information, the IRS can now easily determine a taxpayer’s status regarding US tax residency under the substantial presence test.

    (I thought all crossings, from Canada into the US and from the US into Canada would be shared starting July 1, 2014? The Entry/Exit Initiative: http://www.moodysgartner.com/canadian-snowbirds-beware-2014-border-crossing-rules-increase-stakes-for-day-count/)

    http://tax-expatriation.com/2014/01/19/should-irs-use-department-of-homeland-security-to-track-taxpayers-overseas-the-irs-works-with-department-of-homeland-security-with-tecs-database-to-track-movement-of-taxpayers/

    9.4.2.4.2 (08-09-2004) Information Available From Treasury Enforcement and Communication System

    All information retrieved from TECS must be stamped OFFICIAL USE ONLY.
    The US Customs Financial Intelligence Branch (FIB) Financial Information Database provides information via TECS as follows:
    Form 4789, Currency Transaction Reports (CTR)
    Reports of Foreign Bank and Financial Accounts (FBAR), Treasury Form 90-22.1
    Form 8362, Currency Transaction Reports by Casinos (CTRC)
    Suspicious Activity Reports (SARs), Form TDF 90-22.47

  23. The insanity and inhumanity of the US taxing our children abroad result in the absurdity and injustice of making children born and living outside the US into US taxpayers and subject serfs. Levying US taxes on their education and disability savings grants and birthday money accounts held lawfully and locally – yet denying them the very same exemptions for those savings that the US IRS urges US residents to benefit from.
    Ex.

    ‘Children, Taxes and FBAR’s – Not Mere Child’s Play!’
    November 24, 2014

    “Many people forget that their young children may also have US tax obligations……..”………
    ..”Generally, a child is responsible for filing his or her own FBAR report………”……..

    http://blogs.angloinfo.com/us-tax/2014/11/24/2452/

  24. Sorry about cross-posting this from the Boris Johnson thread, but I was afraid it might not be noticed there and it’s about extradition and collection in general.

    @Anne Frank
    @George
    @Polly
    @EmBee

    On extraditing Boris from the UK or Canadians from Canada:
    To sum up and reassure EmBee (and me) about extradition, am I correct in these assumptions:

    1. It is the conduct and not the name given to it that deterimines whether the two countries punish an act and consider it extraditable.
    2.Britain and Canada do not punish their citizens for not reporting income earned in another country while legally resident there.
    3.Therefore they would not extradite a US person for such behavior, regardless of whether both countries have a crime called “tax evasion “. In the same manner, if the US considered selling cafeine a serious drug offense, Canada would not feel obliged to extradite coffe sellers as drug dealers.

    I would like to suggest a permanent thread on IBS entitled “IRS Collection and Extradition”. Even though the subject is often enough brought up here and there, it seems a lot of us are a bit lost in trying to distinguish what the IRS WANTS and what it can ENFORCE. A thread where we could read up on this topic would be very helpful.

  25. Please tell me why, apart from principle, I should care? Accidental American, born of two Canadian parents in 1949, left the US at age four, have a US passport because they told me I must, never worked or earned in the US, no US assets or property …. what can they do to me?

    I would contribute to the lawsuit because of the outrageous nature of the US overreach, but not on principle alone. Again, what’s at stake for me?

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