# exchange rates for FBAR and tax return after renunciation



## cdymek (7 mo ago)

I've been having trouble getting a definitive answer to this question. I renounced in September and know that I need to use the exchange rate that day for Form 8854. What about my final tax return? Presumably the annual average rate isn't used, as I won't have been a citizen for the full year. And what exhange rate do I use for the final FBAR? My tax preparer said it's always the rate on December 31st, but that doesn't seem right, as I stopped being a citizen in September.

Does anyone know for sure what rates should be used? Thanks for your help and advice.


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## Bevdeforges (Nov 16, 2007)

Normally, the IRS publishes a listing of the average exchange rates for each year - and that rate can be used for tax filings for the relevant year. However, there is something of a "loophole" where you can use any publicly available standard rate as long as it is "reasonable." Several of the large FX firms have daily exchange rates on their websites (Oanda, XE and similar) while there is also the US Treasury Department rates (not sure if they maintain historic rates by day - but if they do, it's somewhere on their website). 

There is really no problem using the IRS annual average rates Yearly Average Currency Exchange Rates | Internal Revenue Service or if you prefer you can use the Federal Reserve rates. Just make a note (to yourself) of what rate you used so that you can respond if there is any question later (which there most likely will NOT be). You can actually use the European Central Bank rates or the OECD rates if you like. Just something that is generally available and vaguely "authoritative."


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## cdymek (7 mo ago)

Many thanks for your helpful reply. Do you have any advice about the rate for the FBAR?


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## Bevdeforges (Nov 16, 2007)

cdymek said:


> Many thanks for your helpful reply. Do you have any advice about the rate for the FBAR?


Basically the same thing applies. Under strict accounting rules, you "should" use the exchange rate for the date of your highest balance - but practically speaking there's no real problem using the same rate you use on the tax forms, or any other authoritative published rate. Take your pick.


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## Harry Moles (11 mo ago)

As long as you aren't at risk of paying any form of US tax bill, just use whatever exchange rate seems reasonable, the exact numbers aren't important when you owe zero.

If you are at risk of paying a US tax bill, don't file any more US tax returns - you've already renounced, what's the point? (Unless of course you still have US assets, income sources, property, business interests, expected inheritance or other complications that still tie you to the US.)


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## cdymek (7 mo ago)

Bevdeforges said:


> Basically the same thing applies. Under strict accounting rules, you "should" use the exchange rate for the date of your highest balance - but practically speaking there's no real problem using the same rate you use on the tax forms, or any other authoritative published rate. Take your pick.


My understanding is that you give the maximum balance but use the 31 DEcember exchange rate.


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## Bevdeforges (Nov 16, 2007)

cdymek said:


> My understanding is that you give the maximum balance but use the 31 DEcember exchange rate.


Nope. And especially if you are/have renounced. Give it a "good faith" effort if you feel better filing that one last time. But most people who renounce don't bother even filing their "final" tax return. They don't come after you unless there is reason to believe that you owe hundreds of thousands in back taxes.


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## Moulard (Feb 3, 2017)

cdymek said:


> Many thanks for your helpful reply. Do you have any advice about the rate for the FBAR?





cdymek said:


> My understanding is that you give the maximum balance but use the 31 DEcember exchange rate.


Correct.

FBAR requires use of the rate published by US Treasury for 31 Dec. 
If no Treasury rate is available, you can use another verifiable exchange rate so long as you provide the source of that rate


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## cdymek (7 mo ago)

Bevdeforges said:


> Nope. And especially if you are/have renounced. Give it a "good faith" effort if you feel better filing that one last time. But most people who renounce don't bother even filing their "final" tax return. They don't come after you unless there is reason to believe that you owe hundreds of thousands in back taxes.


This is dangerous advice for those who have been filing and so are already in the system: failure to file can lead to huge financial penalties.


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## Bevdeforges (Nov 16, 2007)

As I have often said, you do what you need to be able to sleep at night. But if you are only filing to "prove" that you aren't a "covered expat" or whatever the term is where you have to continue to file for a few years, it's pretty low risk. Maybe if Congress ever does get serious about funding the IRS adequately. But at present, unless you have significant assets remaining in the US or mega income, they're probably just as happy to have one less "taxpayer" they have to worry about.


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## cdymek (7 mo ago)

Bevdeforges said:


> As I have often said, you do what you need to be able to sleep at night. But if you are only filing to "prove" that you aren't a "covered expat" or whatever the term is where you have to continue to file for a few years, it's pretty low risk. Maybe if Congress ever does get serious about funding the IRS adequately. But at present, unless you have significant assets remaining in the US or mega income, they're probably just as happy to have one less "taxpayer" they have to worry about.


I'm afraid you are rather out-of-date. I file various forms each year, and the IRS mislaid one of them for tax year 2020, hitting me with a massive $88,000 penalty 15 months after I'd filed the fiorm. It took 11 months to sort out.


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## Harry Moles (11 mo ago)

Generally speaking, for anyone without US assets or income sources, the only way they can get into trouble with the IRS is by filing tax returns.

According to a recent Treasury audit, 40 percent of those who renounce fail to file Form 8854, and the IRS makes no effort to contact any of them. (I can find the link if you're interested.)

If you've been filing all along and you renounce, it probably makes sense to do the tax exit procedure as long as you don't owe any money. Use any reasonable exchange rates, there's no reason for it to be exact if the amount owed is going to be zero. If you haven't been filing, or you would owe money on exit, just renounce and walk away (unless you have some ongoing family/business/financial tie to the US, in which case you need to be more careful).


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## JustLurking (Mar 25, 2015)

Of course, at no point in the half century since the US ginned up the entirely pointless FBAR form has either the IRS or FinCEN come up with _how_ -- or even _whether_ -- to file a "part year" FBAR form. As usual then, affected individuals are left on their own to try to figure this stuff out as best they can (while all the time under threat of vicious penalties for getting something wrong).

Given the persistent unsatisfactory situation in this area, you could do worse than following the ever-reliable Phil Hodgen's take on this nonsense:

FBAR Filing In the Year of Expatriation - Hodgen.com

The article is a few years old, but nothing has changed since, so it should still be entirely valid. TL;DR: nobody knows for sure, but since there are penalties for under-filing but none for over-filing, the safer route is the latter. And in Phil's words, "just layer one more epithet on those previously hurled at the IRS."


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