# Another FBAR question!



## Mahoneyq

Hello Everyone,

I moved to USA from India in December of 2013 via Family Immigration. Started working in September 2014. I filed my first tax return last year.

A few days back I was told that i need to report my foreign income on my taxes and bank accounts to FBAR. This has put me under a lot of stress. 


Me and my wife have around ~$140k in India in CDs (a lot of them --> $3000-4000 each), and tax free retirement accounts that earns us somewhere around 8-10k in interest every year. This includes the tax free income as well as the taxed income. 

I was supposed to declare this income on my FIRST tax return last year which i wasn't aware of. 

This year i plan on doing everything legally and be fully tax compliant as well as FBAR compliant. 

How do i proceed for this? Go via the Streamlined Disclosure route? Or just amend last year's tax returns ? How do i proceed for this year's income?:noidea:

I really appreciate the help i will receive from here. 

Thank you!


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## Bevdeforges

I would just amend the prior year's return. You weren't subject to US taxation prior to 2014 so it seems a bit much to expect you to file 4 years back and 6 years of FBARs.

If all the CDs are with one (or just a couple of) bank(s), I'd just group them by bank for the FBARs and report a total figure rather than itemizing all the individual CDs. 

There may be a bit of tax to pay, plus the interest on the balance, but interest rates are pretty low (even on the IRS interest for "late filing"). Resolve it now as a "late filing" (or rather, a late amendment) and put it behind you.
Cheers,
Bev


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## Mahoneyq

Thank you so much for the response. 

So just to be clear this is what u are telling me. 

1) file FBAR for 2014 and 15

2)Amend back taxes 

3) file this year's tax return. 


I have a question ,Wouldn't this be a quiet disclosure and cause issues?


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## Bevdeforges

The whole issue of "quiet disclosure" is overly hyped - mostly by the tax preparation industry. It's generally intended for those who have lived quite a while overseas and haven't been filing at all, but now "suddenly" discover they should have been doing so. You filed the first year you were supposed to, but now you found out you need to amend that filing. Thousands of people do that all the time and while you may have to pay a bit of interest on any additional taxes that come due, it's just a simple mistake on your part that you're trying to correct. It shouldn't cause any problems at all. In fact, that's why they have a 1040X form (amended filing) in the first place.
Cheers,
Bev


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## Mahoneyq

Bevdeforges said:


> The whole issue of "quiet disclosure" is overly hyped - mostly by the tax preparation industry. It's generally intended for those who have lived quite a while overseas and haven't been filing at all, but now "suddenly" discover they should have been doing so. You filed the first year you were supposed to, but now you found out you need to amend that filing. Thousands of people do that all the time and while you may have to pay a bit of interest on any additional taxes that come due, it's just a simple mistake on your part that you're trying to correct. It shouldn't cause any problems at all. In fact, that's why they have a 1040X form (amended filing) in the first place.
> Cheers,
> Bev



Yeah that makes sense.I was just a bit worried about the very high penalty on the money I have as it will cause severe economic stress on me. I don't wanna get into a big hassle with IRS and get done with this asap.

So i will go ahead and file for 2014 and 2015 FBAR then i will go ahead and file this year's tax returns and once that's done i can amend last year's tax returns. Did i get that right?

Just one more thing, Income in India is reported in this way ---> April 1st to March 31st. So how do I prorate the taxes to report them to IRS?

I also have stocks so i guess that would need reporting as well.


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## Bevdeforges

Mahoneyq said:


> So i will go ahead and file for 2014 and 2015 FBAR then i will go ahead and file this year's tax returns and once that's done i can amend last year's tax returns. Did i get that right?


That works.



> Just one more thing, Income in India is reported in this way ---> April 1st to March 31st. So how do I prorate the taxes to report them to IRS?


You report income for the US from January to December. There are a number of ways to do that - one is to calculate the Jan. 1 to March 31st part for each year. Subtract the income from the period after the end of the calendar year, and add the bit at the beginning of the calendar year.

If you really don't have monthly figures to work with, divide your April 1st to March 31st income by 12. Subtract 3/12 of the current Indian tax year, and then add 3/12 of last year's "monthly" figure.



> I also have stocks so i guess that would need reporting as well.


Income from said stocks, yes. Depending on the balance of your foreign financial assets, there may be a few additional forms related to the stocks.
Cheers,
Bev


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## Mahoneyq

Thank you so much!! 

I am sorry for too many questions but you know how stressful it is to know that you might get hit by huge penalties.

Stocks dont make me any money till i sell them apart from the dividends of course. I read that they are not covered under FBAR but i doubt that.


I just saw that i am eligible for Streamlined Foreign Offshore Procedures if i do it before this year's due date .

" Individual U.S. citizens or lawful permanent residents, or estates of U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended 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"

So because the due date for 2015 has not yet passed, 2012,2013 and 2014 are to be taken under consideration. I wasn't in America for 2012. I was present for 39 days in 2014 and the entire year in 2015 (due date hasn't passed for 2014) . So do i meet the non-residency requirement?


In 2013, I came to USA on 23rd of November.



I am extremely pessimistic ( i know it's bad) but i wanna minimize the risk as much as i can. Also do i need to mail the tax forms in and mentioned streamlined foreign thingy on top in red or i can do it online ? I used turbo tax last year.

Again, I apologize for tooooo many questions.


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## BBCWatcher

If you're eligible for the offshore Streamlined Program that's a good deal since the IRS can waive some penalties if it wishes. Either way you're OK.

FinCEN Form 114 requires reporting financial accounts. That has to include stocks, I would imagine. Unless you're holding very old fashioned paper stock certificates with no broker account, and then I'd have to study the instructions more carefully.


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## Mahoneyq

BBCWatcher said:


> If you're eligible for the offshore Streamlined Program that's a good deal since the IRS can waive some penalties if it wishes. Either way you're OK.
> 
> FinCEN Form 114 requires reporting financial accounts. That has to include stocks, I would imagine. Unless you're holding very old fashioned paper stock certificates with no broker account, and then I'd have to study the instructions more carefully.



Hey BBCwatcher. Thank you for the response. 

I just wanted to confirm if i m eligible for the Streamlined Foreign Offshore disclosure.


The IRS site says this


> Individual U.S. citizens or lawful permanent residents, or estates of U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended 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.


So according to this, 2012,2013,2014 are to be taken into consideration B'coz the due date for those years have passed and because 2015's due date is April 18th ( or October 18th if i apply for an extension) we can ignore 2015 in this case.

So as i mentioned in the previous post, 2012 I wasn't present in USA for a single day. 2013 around 38-39 days and 2014 the entire year. So this means that I do meet the non residency requirement as long as i file it BEFORE April 18th of this year (or 18th october if i go for an extension) 

AM i right?



One more thing,

I started working late in 2014 and had no income for 2013 ( i came here in last week of november 2013) so didn't file for taxes in 2013 however i did have interest and dividends, does that mean i will have to file for 2013 taxes as well?


And do i have to mention ""Streamlined Foreign Offshore" in red on my 2015 tax return and send it in mail or i can do that online and send rest of the older ones with that headline in mail?


Again thank you . Both of you have been very helpful and i just want to make sure i m doing everything properly.


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## Mahoneyq

Cant seem to be able to edit my post.

SO i m doing the 2015 returns via turbo tax and it asks me for 8938 and Schedule B. Do they both need to be filled up as well? 8938 looks kind of like FBAR. Also will i need to mention each and every account? That's like 25-30 CDs .


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## BBCWatcher

You are likely to need to file 8938, yes. It's similar to FinCEN Form 114 but an entirely separate requirement.

Yes, file Streamlined tax returns before April 18th -- has to be that date -- and you should qualify for the offshore version. I agree with your logic except the part about an October 15th extension for that purpose.


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## Bevdeforges

Why on earth do you want to file Streamlined when basically all you need to do is to file your FBARs for 2014 and 2015 and then simply amend your 2014 return? Oh well - it's your choice.

However, I would advise you to take a look at the actual FBAR (FinCEN) form. There is a box to check if you have more than 25 accounts to report. If you check that box it specifically tells you NOT to fill out the next couple of sections of the form, but to retain the information for your records. If they want the detail, they'll be in touch. (But don't hold your breath.)
Cheers,
Bev


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## BBCWatcher

Bevdeforges said:


> Why on earth do you want to file Streamlined when basically all you need to do is to file your FBARs for 2014 and 2015 and then simply amend your 2014 return?


There's a simple answer: because the IRS's offshore Streamlined Program can be financially more attractive but is at least no less attractive than ordinary late amended filing.


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## Mahoneyq

Bevdeforges said:


> Why on earth do you want to file Streamlined when basically all you need to do is to file your FBARs for 2014 and 2015 and then simply amend your 2014 return? Oh well - it's your choice.
> 
> However, I would advise you to take a look at the actual FBAR (FinCEN) form. There is a box to check if you have more than 25 accounts to report. If you check that box it specifically tells you NOT to fill out the next couple of sections of the form, but to retain the information for your records. If they want the detail, they'll be in touch. (But don't hold your breath.)
> Cheers,
> Bev



Coz i qualify for it and there is no penalty under that program so i figured why not just go for that and avoid any risk whatsoever 



Yes the FBAR form stats not to finish part 2 and 3 if i have more than 25 accounts. But 8938 has no such option.So i will just have to file a consolidated report under part 5 about my total $$ ?


So here is a query, Some of my CDs have a common "reference number" with different account numbers depending on what bank they are in. So can i just add up the CDs under the same reference number and write it up in 8938 and/or FBAR ( i guess it be redundant because of the more than 25 accounts option). 


Thank you. You guys have cleared up almost every doubt of mine.


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## Mahoneyq

Okay , Unable to edit again.

So i looked up what you said i found this,

"31 CFR 1010.350(g) provides that a United States person that has a financial interest in 25 or more foreign financial accounts only needs to provide the number of financial accounts and certain other basic information on the report, but will be required to provide detailed information concerning each account if the IRS or FinCEN requests it."

So that makes things a bit easier for me now!! 



I have one more question ( i m sorry :| ), 

Turns out I have 44 accounts in total including savings, CDs,checking accounts and retirement accounts. That's a bit more than i honestly expected. Many CDs have been on auto-renew since years now and the total $$ would be more than the 140k i think i had. 

Now out of those 44, 42 are joint accounts between me and my wife. Our retirement accounts are obviously not joint accounts. So how do I handle that in my FBAR filing? 

Would it be like this,

1) File a FBAR declaring 42( joint accounts) + 1 ( my retirement account) 

2)File another FBAR declaring just my wife's retirement account.


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## BBCWatcher

If your wife is not a U.S. person then she has no filing obligation.

I do not agree with the "reference number" idea. Both the IRS and Treasury are interested in the financial institutions where you hold or have signature authority over funds. Unless the instructions say otherwise, you cannot consolidate across financial institutions for reporting purposes. In some cases you can consolidate within the same financial institution. For example, if you hold a savings account that then has subaccounts or "connected" accounts with fixed deposits/CDs, then the instructions say you are allowed to report the "base" account number (for the savings account in this example) and also report the total highest balance for the year across those accounts. But that's only within the same financial institution.


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## Mahoneyq

BBCWatcher said:


> If your wife is not a U.S. person then she has no filing obligation.
> 
> I do not agree with the "reference number" idea. Both the IRS and Treasury are interested in the financial institutions where you hold or have signature authority over funds. Unless the instructions say otherwise, you cannot consolidate across financial institutions for reporting purposes. In some cases you can consolidate within the same financial institution. For example, if you hold a savings account that then has subaccounts or "connected" accounts with fixed deposits/CDs, then the instructions say you are allowed to report the "base" account number (for the savings account in this example) and also report the total highest balance for the year across those accounts. But that's only within the same financial institution.


She works in America and is a LPR as well.  . We file a joint tax return.


Oh i think i used the wrong word so you got that wrong. What i meant is, For example I have savings account, checking as well as CDs in Central Bank of India. Now central bank of india gives me a customer reference number under which all of my accounts fall. So each account will still have its own account number but all of them will have a common customer reference number which is unique to me for THAT financial institution. 

The reference number is different for each bank and some of them dont give a reference number. I wasn't talking about consolidating across the financial institutions. Just a poor use of words from my part. Sorry about that 

All of my CDs are linked to the savings account/checking accounts in their respective banks. So as you said i will just give my Savings/checking account number and then mention the total amount which will include the $$$ in CDs+Savings/checking account . Can I do the same for Form 8938 as well? I guess I will have to file for Schedule B as well, m i right?


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## ForeignBody

Mahoneyq said:


> Cant seem to be able to edit my post.
> 
> SO i m doing the 2015 returns via turbo tax and it asks me for 8938 and Schedule B. Do they both need to be filled up as well? 8938 looks kind of like FBAR. Also will i need to mention each and every account? That's like 25-30 CDs .


Yes, if you meet the requirements, you must file 8938 (with your 1040) and the FBAR which is a quite separate on-line return. The following will help you understand the similarities and differences between the two returns:

https://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements


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## BBCWatcher

To close out the answer to your remaining question about FinCEN Form 114, you wife will have her own separate filing obligation unless you meet a few exception conditions to file just one report (yours). However, she doesn't quite meets the exception requirements since she has at least one of her own reportable accounts. For details, see the instructions, specifically page 6 ("Certain Accounts Jointly Owned by Spouses").

If you file a joint tax return then that's that: one joint return. But FinCEN Form 114 is a completely separate report (or pair of reports in your household) with its own separate requirements. It's not even an IRS report.


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## Mahoneyq

Understood.

You guys have been really helpful.Thank you so much!


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## Mahoneyq

Unable to edit again.



So this will be my last query : (

I own around $26000 worth of stock in 16 companies. The face value of these stocks in considerably lower . The $26k is the current market value. Am i suppsoed to report the face value or the market value? 

Also all of these stocks are held under a demat account with a single client ID. Should i just consolidate them as one single entity or have a separate disclosure for each company.

Are these stocks considered held in a financial account at a foreign financial institute ( they are under a single demat account) or not?

Coz this is what IRS FAQs say

"The account itself is subject to reporting, but the contents of the account do not have to be separately reported"


And would i need to file for schedule B? 

You guys have been really helpful.Thank you so much! Hopefully i wouldn't have any more questions.


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## ForeignBody

Mahoneyq said:


> Unable to edit again.
> 
> 
> 
> So this will be my last query : (
> 
> I own around $26000 worth of stock in 16 companies. The face value of these stocks in considerably lower . The $26k is the current market value. Am i suppsoed to report the face value or the market value?
> 
> Also all of these stocks are held under a demat account with a single client ID. Should i just consolidate them as one single entity or have a separate disclosure for each company.
> 
> Are these stocks considered held in a financial account at a foreign financial institute ( they are under a single demat account) or not?
> 
> Coz this is what IRS FAQs say
> 
> "The account itself is subject to reporting, but the contents of the account do not have to be separately reported"
> 
> 
> And would i need to file for schedule B?
> 
> You guys have been really helpful.Thank you so much! Hopefully i wouldn't have any more questions.


As per the FAQs, you report the one demat account. You take the maximum market value in the year and convert it to US$ using the Treasury Rate of Exchange at December 31.


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## BBCWatcher

....and also check to make sure they aren't PFICs.


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## Mahoneyq

Okay understood!!

So i just filed my 2015 returns using turbo tax. Reporting my foreign interest and dividends on this one , so i owe $750 or so to IRS and $370 to state. Was getting a huge refund before that.


For 2014, our income was very low at 21000 because our professional license took very very long to process and we earned a Earned Income credit of $3305 which I will have to surrender because of the interest i reported. I owe IL ~$1000 and Federal $3305 ( the EIC which i will have to give back). 


I am planning to send the 2014 amended return to IRS by this weekend or early next week.I didn't have exact figures for interest on one of my largest CDs so I over-reported it by $300.

I hope to never hear from IRS about any of my foreign accounts or FBAR. I hope i get to take advantage of the Streamlined Foreign Offshore Procedures we are elgibile for till this due date passes.


Regarding FBAR i will be doing it tomorrow for both 2014 and 2015!


It's almost a $6500 hole for me at the end of the tax year (including the refund i would have got) but it will make me IRS and FBAR compliant so its okay, i guess. 



I am still a bit tensed about all this and the general fear about IRS coming after me and my $$$$ 



Thank you BBCWatcher and Bevdeforges for helping me out on this. I know where to look for in case of any confusion now


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