Liberty and justice for all United States persons abroad

US expat tax and FBAR: Discussion thread (Ask your questions) Part One

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Expat Taxes and FBAR

 

Please ask your questions here about US Expat tax and FBAR.


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578 thoughts on “US expat tax and FBAR: Discussion thread (Ask your questions) Part One

  1. @Billy There are many possible answers to your question. The first one I ask is did you become a Canadian citizen? Were your parents US citizens when you were born? What were they doing when you were born there (on a temporary job assignment, permanent residents, US citizens, or diplomats?)

    The US birthplace is problem for you if you want to continue going back and forth. The US considers you a US citizen. But what about you? Do you even want US citizenship? Is it important to you?

  2. Thank you Petros and Just me.

    My dad (Canadian at the time) was going to university in the USA. My mom was a US citizen at the time I was born but became a Candian in the 1980’s. I was registered in Canada in 1965 as a Canadian born abroad.

    I am 50 now and had been thinking that it might be nice to retire in Phoenix in 10 – 15 years, however, I would be willing to renounce if there were benefits. Like not having to file. I have RRSP’s and an RESP for my kids. I am legally separated. Net worth is a couple million. I just bought a $500 timeshare week in Idaho. In my RRSP and RESP I own mostly US stocks – MO PM and MSFT.

    If I continue to to travel to the USA, what could happen?

    What are the costs and benefits of filing in order to become compliant?

  3. @ Billy: If you have un-filed FBARs there is a problem. If you file your back FBARs, you have to have a lot of trust in the United States that they will not fine you heavily. Do you trust them? You also have to worry about potentially owing taxes because of differences in US and Canadian taxes (such as if you have gains in TFSA, Canada eligible dividends).

    Do you even have a Social Security Number? If not, you are off the radar for now. The FATCA legislation will make that impossible for you. If the banks comply, your bank accounts will now be fully exposed to the United States. If the banks don’t comply, your US investments become illiquid, and you will have to get rid of them before Jan 1, 2014, or selling them will result in a IRS 30% withholding.

    You are safe as far as Canada is concerned because the CRA will collect from you neither FBAR fines nor US tax. But your US investments give the IRS leverage against you. The border guards are also harassing people with a US birthplace on their foreign passports, may even deny entry. If you want to live or travel in the US, this problem is not gonna go away.

  4. Hi Billy:
    I am responding to you because we are in similar situations. I too was born in the U.S. in 1964 and lived there for 6 months and was born abroad by Nov. 1964 when we moved back to Canada. Both my parents were Canadian. I have very little to do with the U.S. beyond travelling there a few times a year and like you, my husband and I had hoped to retire in Arizona.
    Our money situations are also similar however I have no RESP’s as my kids have used those all up thank goodness as the U.S. doesn’t except them. Based on my dividend income I receive from my husband, I would owe taxes and therefore owe penalties. I would also have to do FBAR reports as I have substantial RRSP’s. I have done the math and could owe anywhere up to $500,000 if the I.R.S. wanted to unfairly hit me with the penalties owed dued to my dividend income. I have made the personal decision not to comply for obvious reasons and will continue to work through my bucklist of travelling to the U.S. until it is clear I can’t cross the boarder anymore. I went to Florida a month ago and they took notes at customs on their computer. I didn’t dare ask but I am assuming it was because my Canadian passport says where I was born. My husband and daughters passports passed through just fine.
    As Petros mentioned, you also have a great deal of U.S. investments which they could target. Moving to a small credit union that doesn’t do business in the U.S. and won’t comply with FATCA might be a good decision for you.
    Everyones choice is personal. It is a big sacrafice for us if we can’t travel to the U.S. anymore but based on principal and how Canadian I really am, I won’t give them a dime. To renounce means to tax comply. The accounting fees alone for me could run me $30,000. It is such a damned if you do damned if you don’t situation. I wish you good luck in whatever decision you make. Who knows, maybe the whole thing will settle under the mat and go away but right now it does not look that way. The U.S. will grab money where they can.

  5. Thanks to all especially Accidental.

    I am going to do the same as accidental. Thank you all for sharing. It made my decision easy. Thanks very much!

  6. Billy , I think you need advice from a good professional. My guess is you can’t afford to become compliant. It might cost you hundreds of thousands. There may come a time when your timeshare is useless. Retiring in Phoenix also is problematic. So too are your US investments. Anyone anywhere, US citizen or not, has to file an estate tax return if they own more than $60,000. worth or US assets including stock shares. In most cases, there would be no estste tax owing but the paperwork burden is very onerous.

  7. This web site is a wonderful opportunity for people to vent about the new IRS initiative to focus on offshore compliance. I would guess that most people fall into one of two categories: those who are “off the grid” and do not file nor do they have any intention of becoming compliant with their US federal tax obligations and those who are sincerely attempting to figure this all out and determine what to do and then make a good faith effort to comply. For those in the second category, here is a thought from a 30 year IRS veteran attorney. The name of the game here is the abatement of civil penalties (assuming your tax problems do not arise from an illegal activity). Under widely recognized IRS procedures, civil penalties can be abated upon a showing of reasonable cause. That could mean reliance on the wrong advice of a professional, or ignorance of the law, say for someone who has lived in Canada all their lives and is an “accidental” US citizens who never had any reason to know about FBARs or FATCA. At the present time, the IRS is under an enormous amount of pressure to “be reasonable” in its administration of these new penalties and statutes. If you happen to “get caught up in the system” and the IRS comes after you, you can be sure at some time you will get a computer generated notice with penalties stacked up automatically. If you choose to cooperate and play the game, it is usually an easy matter to get to talk to a human being and talk some sense into them and agree to pay the tax owed but get all the penalties abated.

  8. @30yr IRS Vet
    Perhaps you misunderstand. We are not here to “vent” as if this is some kind of gab session. Neither are we here to figure out some way to reduce civil penalties as though we admit being some kind of tax cheats as the media in the United States has constantly called us. Nay, we are here to fight the IRS and to encourage the politicians in our countries to stand up for us.

    Many of us aren’t even really Americans, at least not according to international law. We are of dominant Canadian or other nationality. But your portrayal of our activity here as “venting” is condescending. If you want to help us, then please help us by fighting. We are not going to back down, and we are not going to compromise with the IRS.

  9. Welcome–and Thanks IRS Veteran. Did I read correctly that are also an IRS veteran attorney?

    Be prepared to be swamped with questions. Let me be the first!

    When I became a Canadian citizen in 1973, I was told by American Consulate I was renouncing my U.S. citizenship. I also recall a Consular Official who met with me just before my citizenship ceremony and had me sign a document confirming my understanding. I did not receive a copy of that document or a CLN.

    I took my oath of Canadian citizenship with the full knowledge intent and expectation that I was no longer a US citizen. Since 1973, I have only ever identified myself as Canadian–not as a dual citizen.

    I have only ever had a Canadian passport, but twice US border officials have told me I should get a US passport because I was born in US. They have insisted I am US citizen. I have insisted I am not..

    Based on recent developments, it seems US and IRS are now trying to reclaim me. Many others on this website are in similar positions. We understand there are different rules which apply to when you became a Canadian citizen.

    I have not earned any income in US since 1970, have no assets or investments there, and do not own property there. My American SSN (which I don’t even remember!) has been inactive since 1970. I have always paid my taxes in Canada. My income is below the $92,000 which I understand is exempt for foreign earned income.

    Based on this, do you recommend I continue to do what I have been doing? Would going to American Consulate to formally relinquish my American citizenship and apply for CLN help or would it put me on the radar of the IRS? Do you know if I can be forced to get a US passport in order to visit my elderly mother, who is in poor health?

    I know what I think is best, but your inside advice would be very helpful. I also know others would appreciate answers to these questions.

    Thanks!

    T

  10. @30 Year IRS Vet – Thanks for coming on here!! Welcome! I don’t know if this was your department, but I think a lot of people, me included, are very curious to know why the US wants to tax people who make (zero) money in America, yet receive zero benefit or services from America? Or even “file” for that matter? I don’t even make enough to pay taxes in America, so for me to file costs the IRS money money to process my $0 return. I’m sure everyone connected with this site would love to hear something. But like I said, I don’t know if this was your specific area, so no pressure at all…

    I don’t have FBAR problems, but I have a feeling this FATCA is going to make me an “undesired” person by banks or any financial institution for that matter – all over the world. This is what I can’t have happen, so I’m renouncing as soon as I can. Misguided? Very! My parents have been really good at telling all of my extended family, and no one blames me at all.

  11. ^^^ what I was trying to say is that the FATCA was misguided. See what happens when you live too many years in a foreign country!!! 🙂

  12. Pingback: Comment from a 30-year tax lawyer | The Isaac Brock Society

  13. Dear Petros. Touche’ and I applaud you and respect your anger. Having done federal tax for 41 years I have never seen something as controversial and volatile as this issue. I must say based on my experience in working for the IRS that the Washington never considered or could have anticipated the problems with the new rules which are specific to Canadians. We don’t want to alienate our good neighbors to the North. I can tell you that Washington is certain to consider the problems of Canadians under FATCA and I am sure they will be addressed in the regulations once they are published and the whole world has a chance to comment.

  14. 30 Year:
    This is affecting a lot of people, even people in Brazil.

    Canada is not the only country that has US Citizens. There’re tons here (and everywhere), especially the naturalised variety.

  15. @IRS Vet: You have far more confidence in the IRS than we do. They have given us no reason to trust that they will listen to reason. This has caused considerable anxiety and stress for many responsible, law-abiding American citizens and former citizens. Many of us have health or family challenges and we do not need the threat and bully tactics of the IRS intruding into our lives far removed by choice from the US.

    The December IRS Fact Sheet did nothing to alleviate the frustration, worry and anger people are feeling. Do the IRS, DOS and elected representatives have any idea what this is doing to the US reputation world wide? Do they know how much they have alienated people from their country or birth–or from their parent’s country of birth? Do they care?

    After my mother’s death, I will never again travel to U.S. There are far more interesting and welcoming places in the world where I can travel on my Canadian passport to spend my money!

  16. @IRS Vet: It’s very nice to have you here though I expect you will be bombarded by questions and may regret it. 🙂

    I wonder if you have any ideas about the TAD delivered by TAS. We have all been waiting for Comm. Shulman’s response, which was due last Thursday. Nina Olsen seems to have quite a lot of guts. If IRS does not concede, do you think she will take it to the Congressional Oversight Committee? Is this a rather rare situation?

  17. Well It sure looks like I stirred up a hornet’s nest! I just came back from a week in Panama talking about FATCA with people who have an American connection down there. I thought they were angry!? Let me say that my legal ethical requirements as an attorney prevent me from giving specific advice here, but for those of you who wish to contact me directly, I may be in a position to be more helpful. On this web site, I can say what the law is and give some history or perspective and answer some very general questions regarding the law.

    First it is important to note that your anger should not be directed at the IRS but rather the US Congress. The poor folks at the IRS are simply trying to figure out what Congress meant when they passed FATCA, and do their duty to administer a very difficult law. The examples you all cite here are situations which simply must be addressed in the final regulations which are set to be published any day now. That publication date starts a comment period during which Canadians and others do have the opportunity to make their views known.

    I would urge everyone of you to write to the IRS Commissioner and express your concerns. Believe me, I used to work in Washington for the Commissioner’s Chief Counsel. The IRS does read these comments and each one is carefully considered. I can assure you that simply by the volume of your comments, you will be heard. A literal application of the FATCA rules to Canadians simply cannot stand. Moreover, whatever the final regulations say, the IRS would not have nearly enough resources or the desire to pursue Canadians over this except for the most egregious situations which is what the law was intended to cover in the first place.

    http://www.mopsicktaxlaw.com

  18. Pingback: Comment from a 30-year tax lawyer | The Isaac Brock Society

  19. @ IRS Vet of 30 years…

    I want to salute your courage in being willing to post comments on this site. We know some IRS agents lurk around, but rarely do they make comments and identify themselves, and so to you I say, …”Bravo”

    I am mulling over what exactly to say to you, and help you understand the situation that many have been going through the past 3 years. I think I will reserve my comments and make them later over at the new posting that Petros started…

    http://isaacbrocksociety.com/2012/02/01/comment-from-a-30-year-tax-lawyer/

    In the meantime, I would encourage you to read this thread..

    Has your life been stolen from you by the IRS?
    http://isaacbrocksociety.com/2012/01/21/has-your-life-been-stolen-from-you/

  20. Might 30 yr vet hazard an answer to the tax position of people who expatriated before 1994 but only informed the State Dept recently?

  21. Ja, Ja. Keep writing zese nootes – ve read zem und write down ze information to uze lader againzt you – SS Sturmfuehrer Shulman!

  22. @ 30 year irs vet
    Thank you for joining our blog. Like Blaze who wrote earlier today, I have a very difficult time understanding how any U.S. government department could possibly think of me as a U.S. citizen.

    I first left the U.S. for Canada on a student visa as an 18 year old in 1961, then landed in Canada married to my college sweetheart in 1964. Citizenship in 1972. At that time, the oath taken in Canada had both an oath of allegiance to the Queen but also you had to “hereby renounce all allegiance and fidelity to any foreign sovereign or state of whom or which I may at this time be a subjecct or citizen”. I took that oath voluntarily and with full intent to relinquish my U.S. citizenship.

    Since that time I have done nothing that would indicate I thought of myself as anything but a Canadian ie no U.S. passport, no application for U.S. Social Security, never called myself a dual citizen. I have always been completely integrated into Canadian society. Most years I never had to file income tax returns in Canada, as I was fortunate to be a “stay at home” mother until my youngest was in his last year of high school in 1989 – in other words 25 years after I “landed” in Canada. I vote in Canada: my children and grandchildren live in Canada: I have buried one daughter in Canada and buried my husband in Canada. I have no plans to leave this wonderful country.

    I have filed Canadian income taxes since 1989. My income is not from employment but from investments and CPP earned by my late husband and OAS. It is very modest income and consequently I usually have a very small tax liability or often no tax liability. Therefore, I would not have a “foreign tax credit” to use on a form 1040. Therefore, it is possible that a 1040 would show I owed money and therefore would be subject to the penalties. Yet why should someone like myself even have to file a 1040 when I left your country 48 years ago and have never asked anything of your country in all those years.

    This has become unbelieveably stressful to the point that I don’t sleep at night, my children and my doctor are all concerned. I have to be able to bank in my country but this ridiculous rule that your congress passed could prevent that. Does any of this make sense to you?

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