# FBAR and FACTA for EXPATS



## abdito

Hi!
I'm an american citizen studying in belgium for 3 years now thanks to an assistantship from the belgian government. Previously I have lived in south america with my family almost all my life. I have been doing small things to pay my studies and never made more than 20K a year and now with my assistantship is more or less the same.
Some days ago because of FACTA I receive a letter from my bank saying that if I don't file a W-9 form, they will have to block my bank account. 
So when I tried to fill it I realize is quite tax related, as I have never lived nor work in the States I did not know I had to declare taxes there, in fact now I'm really scared because I read I have to declare something called FBAR, if my bank account exceeds 10K. I've always save money because the financial situation of my family is not good, so I realize that I surpass that threshold 3 years ago. 
I read the penalties go up to 100K and I'm just a student and I'm extremely scared. I do not have that kind of money nor people or contacts in the States to give me a hand. And as I'm suppose to fill in this W-9 I do not know what to do. If I should file my FBAR and taxes and moreover how many years and on which procedures.
I would really appreciate a hand or any piece of advice you could give me.


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## Bevdeforges

Don't worry. You're one of zillions of overseas US citizens who is just discovering that they were supposed to be filing taxes and now these new FATCA forms.

Safest thing would be to file the current year's (2012) income tax return (claiming the FEIE, in which case you probably won't owe any taxes) - they'll be late, but since you most likely owe nothing, the penalty is a percentage of the tax due, and thus $0. Then file 3 years back (2011, 2010 and 2009). If those all show $0 tax due, that should be the end of it. (Well, other than filing like you should, going forward.)

With the FBAR forms, you should try to get this year's (i.e. for 2012) in on time if you can. (They're due at the end of June - it's tight, but the forms are fairly simple to do and you can at least look like you've attempted to get them in on time.) For those, you should back file for the 3 years that your combined account balance exceeded the $10,000 threshold. (If your total for foreign accounts was not $10,000 in a prior year, then you don't have to file a form for that year. Normally the statute of limitations on the FBAR is 6 years.)

FBAR is primarily a disclosure document - they're more interested in knowing what accounts you have than in the specific "high balance" you give them. (But do make an honest attempt to estimate the high balance in the account, and if in doubt, add a few thousand $ just for good measure. Nobody ever got in trouble for over-reporting or over-estimating their balances on the FBAR.)

On the W-9, just fill it in and send it back to your bank. All that form is for is to get your US social security number. If you don't have a social security number, you'll have to get one before you can do anything, whether for the W-9 or for the FBARs and/or tax returns. Check with the US consulate in Belgium for how to apply for a social security number if you don't already have one: Federal Benefits/Social Security | Embassy of the United States Brussels, Belgium
Cheers,
Bev


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## abdito

Thank you so very much.. I was extremely worried about this stuff when i discover it just a couple of simple questions:
Do I only file the tax returns? Should I write an explanatory letter as well? Or do you think is too much? The same with FBAR? Should I file these 3 years altogether tax returns and FBAR? and
And finally I was wondering what about the penalties for the FBAR filing. I read there were quite big.. 

Once Again... I cannot tell how much this info ease my worries.


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## abdito

I was wondering as well if I have to use forms from previous years for the returns and the FBAR


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## Bevdeforges

abdito said:


> I was wondering as well if I have to use forms from previous years for the returns and the FBAR


For the tax returns, yes, definitely. You need to use the proper year's form (but those are all available on the IRS website). For the FBAR's you can use the current form, as you need to fill in the year you're filing for on the form itself.
Cheers,
Bev


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## abdito

And what about the penalties? Do you think they are going to be as high as I read? If I include the explanatory letter what are the chances to get a high penaltie?


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## Nononymous

abdito said:


> And what about the penalties? Do you think they are going to be as high as I read? If I include the explanatory letter what are the chances to get a high penaltie?


First, by all accounts, penalties are not being assessed unless you owe very large amounts of money. So don't lose sleep over that.

Second, if you have no US assets and live overseas, it's difficult for the US government to collect those penalties anyway.

Third, if you have another citizenship besides US, you could avoid the FATCA nonsense by using that passport to open another bank account. 

The extent to which you wish to comply really depends on what sort of relationship you want to have with the US in future. If you have a US birthplace, have only US citizenship, or wish one day to live in the US, it probably makes sense to become compliant now; the risk of penalties is basically nil. If you want to remain independent of the US (or are quite stubborn) you can also choose not to cooperate, and save yourself some paperwork.


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## KeithCAN1

One thing that I think people underestimate is what your have to report on an FBAR form. The 10K threshold is ridiculously low when you consider that things like life insurance (the payout value) is included. My company gives me basic default life insurance as part of the standard benefits and that easily exceeds 10K.

With the ridiculous requirements of what you need to report, I'd imagine that a much greater percentage of people need to file an FBAR than expected. How many people think of their life insurance needing to be reported to the US treasury? Really??


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## BBCWatcher

Nononymous said:


> Third, if you have another citizenship besides US, you could avoid the FATCA nonsense by using that passport to open another bank account.


Not legally. If you're a "U.S. person" you're a U.S. person.


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## BBCWatcher

KeithCAN1 said:


> The 10K threshold is ridiculously low when you consider that things like life insurance (the payout value) is included. My company gives me basic default life insurance as part of the standard benefits and that easily exceeds 10K.


That's overstating the requirement. Foreign life insurance and annuities are only reportable if they have a cash value. The usual life insurance tossed in with employee benefits (that you lose when you leave employment) isn't reportable.

As a separate matter, note that the employer-paid premium associated with the amount of death benefit exceeding $50,000 is considered taxable income. There are a couple solutions. One solution is to pay the tax. For example, if the life insurance would pay a $100,000 death benefit, and the employer is paying $600 per year per employee for that life insurance, the premium associated with the death benefit over $50,000 ($300) would be taxable income, and you'd report that and pay tax on that (if you owe tax). It's probably considered earned income, but I'm not 100% sure about that.

Another solution is to put a letter on file with your employer that stipulates that any death benefit in excess of $50,000 should be paid to a 501(c)3 charity, e.g. Save the Children, Doctors without Borders (U.S. office), etc.

Note that travel or accidental death insurance in any amount is not considered a taxable benefit.

Yes, a lot of people miss the IRS treatment of >$50,000 employer-provided life insurance. U.S. employers would report such a benefit on a W-2, but you've got some more work to do if you work for a foreign employer. And the foreign employer might wonder why you want to put a letter on file with them if you choose that option, but so it goes.


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## Nononymous

BBCWatcher said:


> Not legally. If you're a "U.S. person" you're a U.S. person.


Indeed. Legally, as a US person one must do certain things. But one may choose not to. 

That being said, a non-US passport will make it easier to get a bank account in some parts of the world.


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## KeithCAN1

BBCWatcher said:


> That's overstating the requirement. Foreign life insurance and annuities are only reportable if they have a cash value. The usual life insurance tossed in with employee benefits (that you lose when you leave employment) isn't reportable.


Hmm... looks like I didn't have to report my life insurance on my FBAR since I have your standard basic life insurance as an employer benefit. Is it even worth trying to correct this with the US Dept of Treasury? From what I read, they are less concerned with over reporting assets than under reporting assets.


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## BBCWatcher

No, there's no need to correct that.


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## Bevdeforges

Nononymous said:


> Indeed. Legally, as a US person one must do certain things. But one may choose not to.
> 
> That being said, a non-US passport will make it easier to get a bank account in some parts of the world.


It kind of depends on where exactly you are looking to open a bank account. In many countries, you are identified by a combination of your name, date of birth, place of birth, nationality and a few other factors. For those born in the US, it may not matter what passport you show on opening the account, the place of birth will give it away. But then again, that depends on how scrupulous the bank is about complying with the US regulations and/or how likely it is that IRS auditors will be checking the bank records, looking for "US persons" with accounts.

Just for fun, I asked my bank here in France to update my bank record when I got my French nationality to remove my US citizenship. They didn't bat an eyelash - "yeah, sure - ok." I hardly think the IRS is going to be auditing the records of the little, local bank I use, looking for tax evaders - but I do report the accounts every year. 
Cheers,
Bev


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## abdito

Hi guys I guess I have one final question related to the FBAR.. I've submitted my paperwork as you suggested.. But just realize the deadline is on sunday. As you can submit online.. It would be advisible to do it for this year taking into account that my explanatory letter plus the last 3 years including 2012 are already in the mail??


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## BBCWatcher

Yes, I think that's a good idea.


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## abdito

Finally I send these past 3 years FBAR by mail on tuesday.. with an explanatory note.. after i did it so.. some really nice IRS information guy in france told me i should do it online.. bc of the deadline on sunday.. My guess is the FBARS will arrive next tuesday.. Any how now that I'm filling the thing online and I cant remember whether I wrote 10500 or 11000 on my FBAR of this year.. So do you think its better to let the things of this size.. or to fill online 11000? I just dont wanna get fined.. I'm keeping that money to pay my last year.. so I cant loose it pleeeease an adviceee!!!!!


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## Nononymous

Chill. It's cool.


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## santafe

A word of caution for those filling fbars online. I have read on another forum that filling overdue fbars online maybe a bad idea as these are the ones that are being assessed for automatic penalties as you cannot include a reasonable cause letter. It maybe better to mail in the old ones as you have done.


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## abdito

Thx... But then..what about the one of this year.. Im gonna get in trouble if the values on the declaration are not the same? I overestimate a bit but don't remember how much


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## BBCWatcher

Do the best you can. That's all you can do.


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## Bevdeforges

Don't worry about a mismatch between the forms. AFAICT, once they have officially received the FBAR forms (by whatever means), they will automatically reject the second set to appear. They won't bother to try and match them up. Leastwise, that's what I've been told is the policy.
Cheers,
Bev


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