Cross posted from RenounceUSCitizenship.
There are many firsts in life. These include graduations, weddings, and more.
Anecdotal evidence suggests that few U.S. citizens living outside the U.S. had ever heard of Mr. FBAR (until the mainstream media began educating people). One can’t file, what one has never heard of. That was until recently. Since the fall of 2011, the mainstream media has been educating U.S. citizens about U.S. tax compliance.
Tax and FBAR compliance is a priority for most U.S. citizens living outside the United States. The IRS has still NOT released the “compliance guidelines” that were promised when OVDI was reactivated in January of 2012. This is a major problem. By not coming forward with the promised guidelines, the IRS has become an obstacle to tax compliance. We are well into tax season. In any case, …
One of your most important firsts will be your first FBAR. You spent lots of time preparing for your other “firsts”. This “first” should be no different. Part of your preparation should be how to file those FBARs.
Unfiled FBARs are a “problem to be solved”. It used to be that one could only mail or courier them to Detroit. (It is likely that the avalanche of FBARs is providing employment in this economically depressed city – putting America back to work. Is this a “make work” project? Does a filed FBAR have value to the government? We do know that an unfiled FBAR is of great value to the government.) The good news is that it is now possible to file FBARs online. This means that you have a choice of either mail or online. There have been recent anecdotal comments on both options. You might find these comments to be of interest.
FBAR Traditional – Mail or Courier
The above post discusses the implications of interacting with a person.
Bottom line: Nothing can be done with a human intervention
The above comment discusses the implications of interacting with a computer.
Bottom line: Things can be done automatically.
FBAR – Thinking About Your First Time
Here is a primer for first time FBAR filers.
Warning!! FBARs, 1040s and The Order of Filing: FBARs aside, there is also the issue of the 1040s. Consult with your tax adviser on the specific issue of whether your 1040s should have been filed (are in the system) before the FBARs are filed.
Here’s to building a scrapbook of wonderful memories!
If you want to comply with all this, then move back to the USA.
I suspect that the late filed fbars are gradually entered into a database. I am praying that I’ll be okay because my amended returns would have probably been entered into the system by the time they entered in the fbars.
I posted 2011’s well ahead of the deadline by courier but unfortunafely their tracking code was not valid so had no way of proving that fed ex had delivered it. I thus concluded that filing it online would provide definite proof of receipt. But I’m glad my earlier years were filed by hand. Obviously their online system will enable those fbars to be first in line to be inspected…and as I had to file the short version since I had almost forty five accounts, wouldn’t be at all sutprised if they’ll want to know why I had so many…
But these included sub accounts with the same account number as well as sub accounts of different numbers within the main account, so wasn’t sure how to report them. Also about eight tiny savings bonds accounts which had already matured but hadn’t been officially closed so had to be counted (even though with only a couple pence in them!!). Also had postive balances in paypal and alertpay, plus balances on phone sims and a travelcard, etc. Also credit cards that briefly had a positive balance due to having been overpaid.
All this information will be provided on my 8938s and 8621s so DOJ won’t need to harrass me with questions. The whole process has felt like a rape or at least strip search..even my own UK tax authority wouldn’t demand such minute information, nor threaten me with such draconian fines over mere reporting.
Google ‘lizzit online fbar’ and the information about how delinquent fbars are. being centrally processed comes up. Orwellisn stuff of nightmares…seems they really want to use these as a revenue generator via fines…but will be intriguing to see if they severely punish honestly ignorant expats or mainly US persons living inside America hiding accounts offshore.
@Mona
Thanks interesting stuff.
In the world of FBAR there are differing perspectives on whether Paypal (what if there is no balance), balances on prepaid phones with sim cards, credit cards with positive balances (as opposed to prepaid credit cards) etc. are to be included on FBARs.
Just curious how or where you learned that these things are to be included (assuming that they are).
Thanks,
My accountant says as it’s a grey area, safer to over-report than under-report with the fines being so draconian. Any type of account which could potentally hold a positive balance should be reported, even those with zero balance as I understand it…also had to report everything on the 8938s which will be directly attached to my 1040. I believe my tax return for 2011 will be around 250 pages long!!!
Also travel cards, store cards, accounts where you might hold a gift certificate balance, and pension schemes, of course!
Also if you had a brokerage account or mutual fund which changed share dealing administrators would to my mind mean new accounts having to be reported, especially if the account number changed (even though nothing was sold).
How much is the IRS reimbursing us for paying our tax preparers to file this crap?
Until they do so I say leave it out.
My accountant says as it’s a grey area, safer to over-report than under-report with the fines being so draconian. Any type of account which could potentally hold a positive balance should be reported, even those with zero balance as I understand it…also had to report everything on the 8938s which will be directly attached to my 1040. I believe my tax return for 2011 will be around 250 pages long!!!Also if you had a brokerage account or mutual fund which changed share dealing administrators would to my mind mean new accounts having to be reported, especially if the account number changed (even though nothing was sold).
You’re kidding right?
The one advantage for the rest of us is that you are consuming so many of their resources they won’t have time for us. Did you ever think perhaps that your accountant is just running up his/her bill?
From the IRS website definition of financial account for the purpose of FBAR Quote
“Q. What is a financial account?
A. A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts. The term includes any savings, demand, checking, deposit or any other account maintained with a financial institution or other person engaged in the business of a financial institution. Financial account also generally includes any accounts in which the assets are held in a commingled fund, and the account owner holds an equity interest in the fund (including mutual funds). Individual bonds, notes, or stock certificates held by the filer are not a financial account nor is an unsecured loan to a foreign trade or business that is not a financial institution.”
monalisa1776 said: “I believe my tax return for 2011 will be around 250 pages long!!!”
Unless you’re Mitt Romney and worth a quarter of a billion dollars, that many pages is just asking for trouble.
If your accountant doesn’t bankrupt you, the IRS and your lawyer will.
@OMG, honestly, I don’t think it’s such a big deal to over-report. I just think one can’t go wrong by giving a complete disclosure because it will affirm to them that I’ve come in good faith. I agree it seems ridiculous but the whole situation is ludicrous.
To my mind, their definition of a financial account could include anything that can hold a positive balance such as a travel card, phone card, over-paid credit card, paypal, etc. in addition to what would more obviously be deemed a financial account. She is not going to charge me any extra because I am filling out the 8938s myself, though she will check them over…perhaps she’ll decide that it’s not really desirable to include all these things after all…
This whole situation caught me off-guard early last year when I first learned of it and am simply trying to put it right.
Actually, the reason my tax returns will have so many pages is because of all the PFIC forms that have to be attached to the darn thing. 1116, 1116 amt, etc. I don’t think tax returns of, say, 70 or 80 pages are unusual for expats with any sorts of investments, for instance. Conversely, my UK tax return was only about ten pages!! It’s just obviously a much more complicated tax code in the US unless one has a very sumple sutuation.
Anyway, I’ve said enough about my situation…we’ll just have to wait and see what happens though it’s been almost nine months since I submitted the earlier years’ amended returns and so far, so good. I do realize though that they have up to three years to audit the returns and six years for the fbars.
I’d have thought I’d have had fbar fines assessed witin a year of having filed them if they were going to do so though. So far there don’t seem to have been any reported cases of expats being hit with harsh fbar fines except this one online delinquent fbar filing which had probably been a computer-generated penalty notice.
Should one wait to send in the tax return before mailing in the FBAR?