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.
@fred
Well they say the only things certain in life are death and taxes. Compared to some, 3000 euros seems a bargain ! My concern about filing going forward would be the threat of fbar fines , that could wipe you out. Can you not try filing yourself to the best of your ability, some here have done just that…with a little help from their Brock friends.
http://www.natlawreview.com/article/eye-opening-fbar-survey-results-report-foreign-bank-and-financial-accounts
(For those of you who remember *Brain* Mahany from TaxConnections, this is from that firm.)
Interesting read of what the under-funded IRS is doing.
http://www.taxconnections.com/taxblog/irs-targeting-california-as-its-booming-economy-overtakes-brazil-as-the-worlds-seventh-largest-economy/#.VM0etSwYFDR, broken down into topics:
How IRS Targets California Taxpayers
Non-Filers
On-line And Virtual Currency Transactions
Employment Taxes
Undisclosed Foreign Bank Accounts And Unreported Foreign Income
The Stakes Are High!
from Phil Hodgen – re US taxes and freelancers – using a Canadian example”
http://hodgen.com/if-a-and-garble-garble-garble-then-b-fatca-logic/
As usual, caveat, I am not posting this as an advert or as an endorsement.
Thanks, @Badger. It’s always a pleasure to read Phil’s missives, and an even greater pleasure when they don’t apply to me! Of course, massively helpful when he writes about a problem one is facing, as has been the case. His notes on claiming treaty exemptions were the only bit of clarity on the subject I found.
@badger
I LOVE Phil’s line:
“FATCA law is a massive, steaming pile of poo”, which I might add, Canada stepped in.
@Rev Susi, yes, Phil manages to make me laugh even through tears of anger and frustration at the unjust and oppressive complexities and pitfalls that the US imposes and demands of those abroad – like taxing and FBARing the birthday and education savings of minors and the disability benefits and savings of those deemed legally incompetent while denying them recourse or relief via renunciation.
@bubblebustin,
Yes, Phil’s telling it like it is is very satisfying when our own Canadian government tries to Con us (like MP Weston, who is “thrilled”) and tells us that what we smell is really attar of roses (and not the stench of betrayal and the FATCA IGA BS they’re selling).
For newbies, I should have included a link to an example of the Con I refer to above, wherein the stink of US FATCA as imposed on Canadian soil is sold to us as the finest perfume:
I refer to this missive wherein MP Weston of the Cons states that he is; “…. thrilled to report that on February 5, 2014, Canada and the
United States signed an inter-governmental agreement under the longstanding
Canada-U.S. Tax Convention. This agreement brings a series of lengthy
negotiations to a conclusion which, I believe, will be of great benefit to
dual citizens and Americans living in Canada………”
http://isaacbrocksociety.ca/2014/03/06/a-letter-from-john-weston-regarding-the-iga-we-need-to-educate-the-mps/
@Fred
Although there are no guarantees, there have been no known reports of people getting hit with penalties who have become compliant using either Streamlined or Quiet Disclosure. I personally favour Streamlined as that’s the official means of becoming compliant, but others will disagree.
https://petitions.whitehouse.gov/petition/put-end-fatca-and-stop-taxing-americans-around-world-simply-being-american-citizens/X3PzK5jy
Can this be redone
Just an FYI;
This sounds like an interesting event, which McGill Faculty of Law and Prof. Allison Christians are involved in:
http://www.mcgill.ca/tax-law/events/call-papers-citizenship-taxation-symposium
“We invite paper proposals for a Citizenship and Taxation Symposium, to be held at the University of Michigan Law School, Ann Arbor, Michigan, on Friday, October 9, 2015.
This symposium will focus on ongoing developments regarding the unique US practice of taxing citizens who live permanently overseas. With the adoption of regimes such as the expatriation tax added by IRC § 877A and the Foreign Account Tax Compliance Act (FATCA), the taxation of non-residents with US person status now has serious and tangible implications….”………….
I sure hope the symposium organizers don’t give the filming rights to ACA Global Foundation.
@ badger
Allison Christians and Reuvan Avi-Yonah who wrote “THE CASE AGAINST TAXING CITIZENS” are collaborating on this symposium so it should be outstanding. October seems like a long time off but it will be worth the wait I’m sure.
@tdott: thanks. I need to look closely at streamlined, but do not like the idea of entering a program of theirs. Oh well.
@Fred
Putting my head in the lion’s mouth was indeed hard for me. I held onto my completed tax submission for about a week. However, once I had mailed it a weird serenity came over me – the die had been cast and that was that.
This fear existed even though I had done my due diligence and was 100% confident that this was the correct course of action for me.
My 2 cents.
@tdott
What Phil Hodgen describes as giving the IRS the bullets and hoping they won’t use them against you.
The IRS demands abject ‘compliance’ and obeisance to US extraterritorial taxation of citizenship, while increasing the burdens on and incomprehensible formcrime enforcement campaign against those it insists are ‘US taxable persons’ ‘overseas/abroad’ around the entire globe, but laughably claims that “…. technological advances in communication have made the overseas field offices expendable……..”……
http://www.newsmax.com/Newsfront/irs-budget-shrinks/2015/01/14/id/618441/
http://thefranco-americanflophouse.blogspot.ca/2015/01/irs-closes-international-tax-offices.html
I apologize for not being able to read through all of the thread – I tried looking for answers as I am sure it is there somewhere but here is my situation/question:
I have filed via streamlined and one year (2013) my required returns and FBARs (5+6 respectively). So I am “current”. I renounced on early January 2014. I only had 2 days of work before my renunciation appointment.
2 part question:
1. Along with my 8854, if I don’t have any US source income (no 1040NR), do I even need to file a 1040 (as my 2 days of work will be below any 1040 filing thresholds)? I will have complied with the previous 5 years…
2. What is the consensus (if any) of filing an FBAR for your expatriation year? I’ve heard some say they don’t, some do. If so, for things like RRSPs where they generally have a “year end value” (Dec 31 2014) – what do you report when it is the first week of January 2014?
This whole thing is such a joke. I want to see it all go down in flames…
Thank you so much IBS for your support and sanity. We are not alone!
The answer to both questions is the same. It doesn’t matter whether you do or not. If you don’t mind the extra work, why not?
GAO reports (yet again) that the IRS is still giving away money to fraudsters and enabling identity theft http://www.forbes.com/sites/robertwood/2015/02/19/irs-paid-5-8-billion-in-fraudulent-refunds-identity-theft-efforts-need-work/ .
This is of course while the IRS/US Treasury continues to demand money from those living OUTSIDE the US and receiving NO BENEFIT. This is while the US persists with FATCA extortion of the rest of the world, and in threatening and persecuting those living outside the US and ALREADY paying taxes in full to the non-US tax authorities where they actually live and receive benefit.
I love this phrase from the latest GAO report regarding IRS assumptions and their lack of any documentation for their rationale;
“…While IRS’s fraud estimates note the relevant cost assumptions used to develop estimates, they do not provide the rationale or analysis to support them. Officials stated they did not document the rationale because of the time and resources required. Best practices suggest that agencies should document assumptions…”.. from http://www.gao.gov/products/GAO-15-119
‘Identity and Tax Fraud:
Enhanced Authentication Could Combat Refund Fraud, but IRS Lacks an Estimate of Costs, Benefits and Risks’
GAO-15-119: Published: Jan 20, 2015. Publicly Released: Feb 19, 2015.
http://www.gao.gov/assets/670/667965.pdf
Sounds so very familiar – just like the entirely non-existent documentation / back of a cocktail napkin figures that the IRS/US Treasury uses for its estimates of the tax gap it attributes to those abroad – who are living and already paying taxes in full to the tax authority of the countries where they actually live – outside the US.
The IRS cannot ensure the security of the information it already collects from US homelander taxpayers. It wastes significant resources paying out to fraudsters who have stolen US taxpayer identities (the GAO report says; “..IRS estimated it prevented $24.2 billion in fraudulent identity theft (IDT) refunds in 2013, but paid $5.8 billion later determined to be fraud. Because of the difficulties in knowing the amount of undetected fraud, the actual amount could differ from these point estimates. IDT refund fraud occurs when an identity thief uses a legitimate taxpayer’s identifying information to file a fraudulent tax return and claims a refund…”).
So, when FATCA data starts pouring in under the IGAs, why would anyone think it would be secure?
Another reason to donate to the ADCS legal challenge and assist in blocking any transfer of Canadian citizen and Canadian permanent resident personal and financial information to the US under the FATCA IGA !!!
See the latest efforts of the ADCS legal challenge against FATCA as applied inside Canada:
“LITIGATION UPDATE:
In response to Government of Canada-imposed delay in our lawsuit we instructed our litigator Mr. Joseph Arvay to bring a legal proceeding in Federal Court aimed at preventing Government from disclosing information from banks to U.S. It is Mr. Arvay’s opinion that if this application is successful it will have a better outcome than seeking an injunction, since an injunction will only be effective until trial. ”
http://isaacbrocksociety.ca/2015/01/25/99750-more-needed-in-94-days-to-make-the-may-1-2015-payment-for-canadian-fatca-iga-lawsuit-il-nous-reste-99750-a-ramasser-pour-notre-poursuite-judiciaire/
https://adcsovereignty.wordpress.com/2015/02/21/from-the-desk-of-john-richardson-co-chair-adcs-adsc-ca-responding-to-the-government-delay/
We’re all familiar with the non-existent ‘benefits’ conferred on US citizens abroad. Now even those who qualified to receive SSA benefits are having them clawed back retroactively by the US Treasury – with no statute of limitations.
See what the SSA and US Treasury is doing to US taxpayers, and the pushback via lawsuit;
http://www.forbes.com/sites/kellyphillipserb/2015/02/19/taxpayers-sue-treasury-ssa-alleging-improper-refund-seizures/
“At least 400,000 Social Security beneficiaries are thought to have similar stories: their tax refunds have been seized to repay old debts, some dating back to when they were children.”…
..”In 2008, as part of changes made to the Food, Conservation, and Energy Act of 2008 (or the “farm bill”), Congress affirmed that debts subject to refund seizure had no statute of limitations. In other words, the law made it so that Treasury can pretty much seize refunds indefinitely. SSA rewrote its own regulations shortly afterwards, expanding its own authority (fun how government can do that, right?)…”…..
..”With fresh laws and regulations in place, Treasury started pursuing debt collections fairly aggressively. In 2014 alone, they took in nearly $2 billion in refund seizures. Of those seizures, more than $75 million were linked to SSA overpayments dating back more than 10 years old. In some instances, the taxpayer never even had actual control over the monies: checks were paid on their behalf to an adult.”…
@BorninCanada. Technically, because you expatriated in very early 2014, you owe them a 2014 1040, a 2014 FBAR, and Form 8854. All three will cover only the first few days of 2014 that you were still a US citizen.
If you choose to file a 2014 FBAR the numbers don’t really matter because it is strictly an informational form. You could use the Dec 31, 2013 numbers because they are likely the closest to your expatriation date that are available. (I.e. probably the same figures reported on your 2013 FBAR.)
If you decide to go by the book, it might be a good idea to file a perfunctory 1040 even though you are well below the filing threshold just to indicate that fact.
Again, by the book, for Form 8854 you will then be able to certify the 5 previous years + current year compliance. It might be fun to just write “NO US ASSETS” across the balance sheet portion of 8854. Or you could just do a rough balance sheet.
Or you could do as Duke suggested and blow the whole thing off. I expatriated Dec 2012 and filed a 2012 FBAR in the spring of 2013 because I was a USC for all but the last 2 weeks of 2012. I didn’t file a 1040 because I was below the filing threshold for 2012 and therefore wasn’t obligated to file. (As I had established on previous year 1040s.) I took one look at the 8854 and was so disgusted I swore I would never file one. (Personally I couldn’t see any upside to giving them what is, in effect, a shopping list.) I have heard nothing from the IRS. I don’t think we need to be too concerned if we color outside the lines here. You already have what you really want; your CLN.
This may already be on IBS somewhere, but it is useful, including the comments at the end about the option in December factsheet FS 2011-13 from December 2011 :
http://blogs.angloinfo.com/us-tax/2015/02/16/2860/
FAQs Part IV GCC Country & US Dual Nationals (Unreported Accounts, Options to Remedy Delinquent Returns or Incorrect Filings) Virginia La Torre Jeker J.D
February 16, 2015
@BorninCanada
#1 – There’s a thought that because you’re a NRA on the last day of the year (2014 in your case), you file a 1040NR. Additionally, you file a 1040 to show where some (many? all?) of the numbers on the 1040NR came from. I know of someone who renounced in 2013 and that’s what their cross-border accountant/lawyer did (Canada). It’s what I’ll likely do (subject to accountant’s view) when my time comes.
#2 – You’ve already filed FBARs for a bunch of years – one more year won’t matter much and may make the difference between sleeping well or not (especially if the IRS decides in the future that that final FBAR is really important). As far as values go, should look at your statements and use the highest value for the (short!) period you were a USC. Barring detailed statements, I *suppose* you could 1) use the closing value of Dec 2013, or 2) use the closing value of Jan 2014, or 3) pick some number that should be well above the highest balance (there’s no penalty for over-reporting).
FWIW, there’s a $10,000 penalty for not filing a 8854. How collectible it is is another question, but it’s something to be aware of so you can make an informed decision.
@BorninCanada and tdott. I read somewhere recently (sorry I can’t remember where at this moment) that under the US/Canada treaty a Canadian resident is always permitted to just file a Form 1040. If this is the case and there is no US source income involved then this can simplify your final year filing. I’ve heard discussion about filing a 1040NR that is mostly zeroes with a 1040 attached for the part of the year one is still a US citizen, but this special provision would make that unnecessary. In the end it probably doesn’t matter what (if anything) you file. It is more for your own peace of mind. The IRS is far too busy sending out fraudulent refunds to the scammers; they won’t even notice.