# Failing physical presence test for Streamlined



## Valencia2016

UNFORTUNATELY I fail the physical presence test and the $$ threshold in accounts to be able to do the Streamlined program of filing delinquent taxes, having never done so after 45 years abroad.

The repercussions of OVDP are overwhelming. Does anyone have any experience with a subject who was fortunate, opting out, and NOT being taxed the 27.5-50% of assets? 

One international tax attorney recently wants to have my enrolled agent stop working on my eight years of returns and is encouraging me to have him present a fight for residence based taxation since I am a bona fide resident for the past 45 years in spite of spending many years over 50 days in the US to visit ailing parents.. 

This seems so strange to me, since I can find nothing online about anyone having survived successfully THAT approach or even anything written about it being used by any law firms. 

I am hoping at least someone has had good results opting out of the OVDPonce into it or can share some professional advice.


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## Bevdeforges

If you don't meet the physical presence test, surely you do meet the bona fide resident test (i.e. you have legal residence in Spain). It's one or the other - not both. If you're a bona fide resident, it doesn't matter if you've spent more than 35 days in the US as long as you haven't changed your legal residence.

And I'm not sure what you mean by not meeting the $$ threshold in accounts. There are two parts to the streamlined program - filing current year plus three years in arrears of your income tax returns. And then there is the requirement to file current year plus six years' back of FBARs (now called FinCEN 114 or something like that). The threshold associated with that is a minimum of $10,000 combined total in your foreign bank accounts. And if the balance in your foreign accounts doesn't hit that threshold, you don't have to file FBARs at all.

There's no reason that you can't file those back returns claiming bona fide residence and just get on with. Unless you're seriously indebted to the IRS, chances are they'll just tick all the boxes saying that you've filed and you'll never hear from them again.
Cheers,
Bev


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## Valencia2016

thank you for your quick reply.. i meant i am over the threshhold of amounts in accounts to not file FBARs. I have been here for DECADES and never filed at all, just always paid our taxes here.

Unfortunately more than three firms have told me I cannot do what you are saying. They say it is the P. Presence test for US citizens and non-citizens have a different approach ( which must be the bona fide RT). Also, no where on all the IRS info does it say for streamlined you can use the BRT in lieu of the Physical presence. Every time I contest this I am again sent a copy of the wording. 


To complicate matters I have so many PFICs due to being married her, my husband of course always invested in funds. So there is NO way I can calculate those myself. 

It's just overwhelming. As the tax preparer progresses, I shall see if I owe or not.

Thanks again. This is a great forum.


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## JustLurking

Offshore streamlined requires you to be outside the US for at least 330 days in at least one of the past three years. If you haven't visited the US for too long already in 2016, you might perhaps decide to wait it out until next year when you can then use this year as your qualifying year.

Of course, that way you're gambling that the IRS won't change the rules yet again, but it's worth a thought at least. As is quiet disclosure. You should *definitely* avoid OVDP. This is designed for real tax cheats, and confiscation of 27.5% of one's life savings by a foreign government for a non-wilful paperwork foot-fault is not something _anyone_ should have to endure.

If the US cannot provide acceptable compliance options then i_n my opinion_ non-compliance is entirely justified. Assuming your entire life is now outside the US, up to a point that may well be an option if you decide to choose it. If you have it, dual citizenship makes that easier, the major fly in the ointment with this approach being where you were born or other FATCA 'indicia'.


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## Bevdeforges

I concur with JustLurking. The "physical presence" thing is only a one-year requirement - and to be honest, the IRS has used this thing about filing current year plus three back years for decades as a way to get you through your "failure to file" due to overseas residence. If they haven't caught up with you in the last 45 years, the odds are they aren't going to "suddenly" jump on you in the next year or so. Particularly if you don't owe much in back taxes for the period you do file for.

Paid tax preparers have to stick very closely to the letter of the law, but I'm willing to bet that if you were filing for yourself and just assumed that you were ok on the bona fide resident criteria, they wouldn't bother coming back on you. 
Cheers,
Bev


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## Valencia2016

to add to the injury, the first cpa had asked for an extension in 2015 for october. in the meantime much later she realizes she is unable to do my taxes as I have numerous pfics which she does not do. thus my quest for new preparer with pfic skills. "105 was important for me since my mother died in 2014 and i was awarded as beneficiary some monies, and had checked to withhold 10%, assuming would equal it all out with my return.

as i stand now.. have still not even begun to file.. and I guess, after also being advised NOT to do quiet disclosure.. seems it is very scrutinized now.. am caught in a bad place.

thanks for your suggestions. I am reading with interest and trying to get as much info as possible before doing one thing or another.


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## Nononymous

Ask yourself this: what is the potential cost, or risk, of doing absolutely nothing from this point on?

You may find that it's the wisest course of action.


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## Valencia2016

I would have no idea but would not even think of doing that.. I assume after requesting an extension my name is in there.. I also have more obligations now that my mother has died and i have inherited and do not want to NOT pay what I OWE. That has never been my position. Once aware I needed to file I got right on it. It's just that all my acquaintances were able to do the Streamlined and the fact I cannot has been shocking... This is just taking so long..


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## Bevdeforges

You mention that you inherited from your mother - but any inheritance tax due would have been paid by the estate before being distributed. The only effect on your income taxes is from any interest or other income from however you invested the proceeds. (And if you've invested in PFICs, chances are that you have paid or are paying local income taxes on those earnings, which may offset any obligation to the IRS.)

If you owe nothing, then the penalty for late filing is $0 (because it's a percentage of the tax owed).They haven't bothered to come after you these past 45 years. If you don't file for 2015 by October, it's really no different than the return you didn't file for 2010 or 2013 or any other year. Just the fact that they "have your name" doesn't mean they're expecting to collect enough taxes from you to make it worth their while to hunt you down.

If 2016 will be the first year you meet the 330 days outside the country requirement, wait until next year to file that "current year" return and then do the 3 prior year returns under the Streamlined process. 

Don't let paid tax preparers push you into doing anything rash. If most of your income is from your country of residence, chances are you owe the IRS nothing or very little and the whole Streamlined process is primarily "informative" in nature. You can put it off another year (or two) without any worries - unless you're planning on returning to the US soon and need to be able to sponsor a visa for your spouse or other family member. (Then, you do need to have your tax history up to date.)
Cheers,
Bev


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## Valencia2016

thanks.. i cannot meet the 330 days in 2016 either.. did not have it in my plans as I was unaware of all this.. you have given me food for thought. I wish I had found this forum earlier.. It would have saved me the thousands I am already out on possible unnecessary years of returns being prepared as I type..

the fact that on the annuities I inherited and requested that 10% be withheld and received 1099s for them is my main worry of not being up to date on those items on the US end. 

I highly doubt I owe anything or much on Spanish earnings to US except perhaps through the unrealized gains on funds . 

Thank you for your suggestions


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## Nononymous

Valencia2016 said:


> I would have no idea but would not even think of doing that.. I assume after requesting an extension my name is in there.. I also have more obligations now that my mother has died and i have inherited and do not want to NOT pay what I OWE. That has never been my position. Once aware I needed to file I got right on it. It's just that all my acquaintances were able to do the Streamlined and the fact I cannot has been shocking... This is just taking so long..


I wouldn't assume that requesting an extension would necessarily subject you to much scrutiny. It would be better if you hadn't, of course, but not the end of the world that you did.

The way I see it, if you left 45 years ago, you owe the US nothing, even if somebody comes up with numbers suggesting otherwise. So do what you can to ensure that they receive nothing.

If you keep your inheritance invested in the US, there will be tax implications. Or move the money out of the country and drop back off the radar.


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## celticweb

I am not an expert but the accountant I used when I did the streamlined said that the physical presence test was only one of the tests to meet, the other was whether I have a U.S. abode. I actually met both requirements. Just because you were visiting in the USA. that doesn't means that you actually had an abode in the USA. 

The streamlined is for non non-willful conduct and your adobe is overseas so should qualify. The other offshore program is for willful which you are not and anyone telling you to fill under OVDP is not giving the correct advise. If you must file, I would file quietly if you definitely don't meet the streamlined requirements.


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## JustLurking

celticweb said:


> ... the physical presence test was only one of the tests to meet, the other was whether I have a U.S. abode. I actually met both requirements. Just because you were visiting in the USA. that doesn't means that you actually had an abode in the USA.


Unfortunately for the OP, the conjunctive for these two tests is *and*, not *or*. From horse's orifice (emphasis mine):


> ...if, in any one or more of the most recent three years for which the U.S. tax return due date ... has passed, the individual did not have a U.S. abode *and* the individual was physically outside the United States for at least 330 full days.


Harsh? Yes. Unfair? Certainly, under the circumstance. Par for the course? Sadly, yes.



celticweb said:


> If you must file, I would file quietly if you definitely don't meet the streamlined requirements.


Absolutely.


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## Valencia2016

I guess my problem is this EA says HE cannot do that.( quiet disclosure) . and.. can he "turn me in"? and send a red flag to irs? I am unable to do these complicated returns myself. I guess I am in a bad place as i have been told from the beginning.


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## Bevdeforges

To be perfectly honest about it, if you either filed Streamlined without meeting the physical presence test, or simply filed the 2015 form late (worry about the back filings later), I seriously doubt anything would come of it. If the EA you're working with won't prepare and file the 2015 forms that way for you, I'd find someone else to do it. There's nothing "illegal" about filing late - particularly if you don't owe any (or much) in the way of taxes.

It's highly unlikely the EA could or would "turn you in." Again, especially if you don't owe much in tax because any "rat bonus" is a percentage of the delinquent tax collected.
Cheers,
Bev


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## celticweb

Definitely I would find another accountant. Your accountant seems to be one of the scaremonger types that I have also come across during my initial research period after finding out and I decided early on to stay clear from these types once I took a deep breath and became a bit more educated. 

You seem to not meet either disclosure program. the streamlined due to some 330 day rule thing and the OVDP because your failure to file was non-willful. So normal back filing would be the way to go, just pay all tax and penalties. that's all they really care about at the end of the day. to get their tax back. you are not a tax evader, just a normal person caught up in a system that does not educate people properly and lacks common sense. 

I just filed 2011 as a quiet disclosure. I did 2012 - 2014 as streamlined and 2015 normally, decided to renounce so needed another year and back filed 2011 outside any program. OK i didn't owe any tax but still, it was done. 

Also one of the accountants I spoke to (which i didn't use but I would have used had my situation been like yours) said that had i been caught up in the PFIC regime, they would have just filed mine as quiet disclosure and the fbars as late, reason did not know. they sometimes added a "waiver of penalty" letter with the filings depending on the circumstances. so it can be done and should be done in these circumstances.


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## celticweb

also when i say pay all tax and penalties, i don't mean the 27% to 50% penalties. i mean the interest on the tax due. just pay the tax and any interest penalties and be done with it. and late filing penalties if they ask for that too.

and for me, i was eligible for streamlined but the other accountant said had i not been eligible and had PFIC issues, they would have done quiet disclosure as i described in my previous post. this was during the initial phone call i had with them before they knew my facts.


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## dstauffe

*physical presence test*

I am also considering filing under the streamlined offshore compliance procudures. I have been living in Canada the past six years. My wife and I make occasional trips to visit relatives in the U.S., but not for more than a week at a time, and that only once or twice a year. We also make occasional day trips to the U.S. So I am not entirely certain I meet the physical presence test, although it is aweful close for all three previous years considered, and I am pretty sure I meet it for at least one of those years. 

My question is how to answer the question in form 14653 for each year, and if the IRS will check up on this closely. I may meet the test for all three years, I am just not 100% certain.


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## Bevdeforges

Before you worry too much about it, why not just tally up the time you've spent in the US in the last three years. The physical presence test is something like 330 days in a given calendar year spent outside the US. That leaves you 35 days a year in the US. 

Frankly, the IRS is limited in its means to check up on this too stringently.
Cheers,
Bev


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## dstauffe

*physical presence test*

Thanks for the reply. The problem is I did not keep record of every single trip to the U.S., and I don't remember every trip off the top of my head. Like I said, I think I meet the physical presence requirement. I am just concerned if there will be major consequences if I am wrong by a few days. Frankly, I didn't expect to have to keep such detailed records.


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## Bevdeforges

If you're wrong by a few days, it probably won't really matter. As I mentioned, the means the IRS has to "check" this stuff are limited - and chances are they won't really bother to check unless they have some reason to. (I.e. they don't routinely check every return they process.) Unless procedures have changed in the last couple of years, if you have a US passport, they don't record anything about your departure from the US anyhow. So your word is all they have for when you left - even if they do "swipe" your passport to record your entry into the country.

Give it the old "good faith" estimate and let it go with that. As long as you don't owe much (or anything), they'll probably just process the paperwork and get on with other, more important, stuff they have to do.
Cheers,
Bev


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