# FATCA / FBAR Advice



## jmbooth2000

I moved to the US from the UK about 5 years ago. At the time I moved most of my money over but left some in the UK (about $40,000). The money in the UK has been sitting in a savings account earning next to nothing in interest (I left it there to cover incidental expenses and a life insurance policy). I have not reported the accounts on my US tax returns as the income seemed negligible (like less than $10 total) but I'm now concerned having read a little about FATCA / FBAR.

I'm trying to work out where I stand and what the best route forward is.

Reading the FATCA it seems like that only requires reporting on accounts over $50,000 and none of my accounts are above $50,000 (nor the total if that maters).

FBAR is more concerning in that the limit is $10,000 and one of my accounts is about $10,000.

So the question is what do I do and what are the likely consequences? 

At this stage I guess my options are,
1) Report the accounts on this years tax form and hope everything is ok.
2) Remain silent and hope they never notice.
3) Close the accounts and move the money to the US.
4) Reduce the amount in the accounts by moving some of the money to the US.

Any suggestions / pointers. I guessing that lost of people must be in a similar position. Thanks in advance.

Jonathan


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## Baird68

jmbooth2000 said:


> I moved to the US from the UK about 5 years ago. At the time I moved most of my money over but left some in the UK (about $40,000). The money in the UK has been sitting in a savings account earning next to nothing in interest (I left it there to cover incidental expenses and a life insurance policy). I have not reported the accounts on my US tax returns as the income seemed negligible (like less than $10 total) but I'm now concerned having read a little about FATCA / FBAR.
> 
> I'm trying to work out where I stand and what the best route forward is.
> 
> Reading the FATCA it seems like that only requires reporting on accounts over $50,000 and none of my accounts are above $50,000 (nor the total if that maters).
> 
> FBAR is more concerning in that the limit is $10,000 and one of my accounts is about $10,000.
> 
> So the question is what do I do and what are the likely consequences?
> 
> At this stage I guess my options are,
> 1) Report the accounts on this years tax form and hope everything is ok.
> 2) Remain silent and hope they never notice.
> 3) Close the accounts and move the money to the US.
> 4) Reduce the amount in the accounts by moving some of the money to the US.
> 
> Any suggestions / pointers. I guessing that lost of people must be in a similar position. Thanks in advance.
> 
> Jonathan


I'm not an expert by any means. However, I do know the $10,000 amount is an aggregate amount of the highest total per month. So, if you have $170.00 in one account and $2000.00 in another and $7,900.00 in another, they all add up to $10,000 or more and therefore, all must be reported. They will notice eventually if you try to hide because all banks and foreign financial institutions will be FATCA compliant within two years. Your U.S. accounts will be automatically reported, so you don't have to worry about them. But dividing up your large UK account won't help unless it is put in a non U.S. person's name.


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## jmbooth2000

Thanks. I did a little more reading and found this on the IRS website

"Q. What happens if an account holder is required to file an FBAR and fails to do so?

A. Failure to file an FBAR when required to do so may potentially result in civil penalties, criminal penalties or both. If you learn you were required to file FBARs for earlier years, you should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be asserted if the IRS determines that the late filings were due to reasonable cause. Keep copies of what you send for your records." from the IRS website.

This makes it seem like at least as far as FBAR is concerned I may simply be able to file the forms for the missing years along with an explaination. Not sure what this means to FATCA though.


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## Peg

My understanding is that the FBARs are to find people not reporting investment income although everyone with monies outside the US totalling $10k are to file FBARs anyway.

Although you have some money in the UK you have not been hiding income. I was told that $100 is "de minimus" which I think means trivial and they wouldn't care about it.

Regardless, the $40k in the UK would require a FBAR. Your call if you choose to file it.


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## jmbooth2000

Can anyone clarify if pensions are, or are not included. I have two pensions in the UK (neither of which will be paying out until I'm 60 - many years from now). One is a final benefit scheme which it seems like I may not have to report. The other is a ISA but is under the $50K limit. Do I have to report the ISA? What about the fact that the ISA plus my bank accounts would be over $50K?

Thanks
Jonathan


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## Guest

jmbooth2000 said:


> Can anyone clarify if pensions are, or are not included. I have two pensions in the UK (neither of which will be paying out until I'm 60 - many years from now). One is a final benefit scheme which it seems like I may not have to report. The other is a ISA but is under the $50K limit. Do I have to report the ISA? What about the fact that the ISA plus my bank accounts would be over $50K?
> 
> Thanks
> Jonathan


I cannot answer this for sure but there is a member on this forum who lives in England, Mona Lisa and I believe she has written about the ISA and how she did not expect that it would have to be included. Hopefully, she'll see this and respond.

Many people here take the approach of reporting any financial account with a positive balance, so as not to miss anything. It's just too costly to make a mistake.


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## Bevdeforges

There are two separate and distinct things going on here: FBAR and FATCA.

FBAR has been around for a LONG time. It's the form you file with the Treasury Dept. (don't send it in with your income tax forms) and it's a simple declaration of your overseas financial accounts, with the high balance during the year.

With $40,000 in a UK account, yes, you should be filing an FBAR each year. Personally, I wouldn't bother with the back filing. With the interest from those accounts not amounting to more that $100 or so each year, you're hardly evading taxes. File your FBAR this year, and be done with it. Just be sure to declare the interest on your tax return, even if it's only $10 or so. If they really want back years, they'll let you know - but chances are they won't.

As far as the pensions are concerned, the "final benefit" one is free and clear. You don't actually have any rights to it until you've qualified and hit retirement age, so it's out of the questions.

The ISA probably should be declared on the FATCA forms somewhere. (I confess I haven't really "engaged with" the FATCA forms because I'm not really affected by them.) Because the UK's ISAs are similar in nature to the US IRA accounts, I suspect the IRS is going to have to deal with these somehow under the US-UK social security treaty provisions. Follow the instructions on this year's forms for your ISA as far as reporting or not reporting the income.

Given the low balance in your ISA, I really doubt they're going to come back at your asking for prior years filings or amendments to your income tax returns. They really do have much bigger fish to fry. This way, you've shown that you are now aware of the rules and you're complying with them. If you had $500,000 or $1million in that ISA, you might have reason to worry - but given the minimal effect on your income taxes, I'd just file the current year and wait for any questions that might arise.
Cheers,
Bev


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## Mona Lisa76

Every account abroad has to be reported, even dormant ones with a zero balance. I've even reported my travel card, paypal, alertpay, credit cards and cell phone prepaid sims since cash can be transfered to them. I will be filing 29 separate 8938s and 47 8621s for my UK mutual funds I held till last year. 

ISAs all have to be reported; they are not recognized as tax free by the IRS. Their punitive taxation of pfics is why I wound up having to pay over $4500 in US taxes both for 2009 and 2010; I will probably owe a similar amount again for 2011 but hopefully be paying minimal taxes after that.

It's been a swine because if I had been in ordinary company stocks rather than mutual funds, I probably wouldn't have even owed the US any taxes. It's been traumatic shock but simply hadn't known that non-US pooled funds would get such onerous tax treatment, especially as I'd naively assumed that the us/uk tax treaty would protect me both from double taxation and discriminationary treatment....but, alas, they have savings clauses which mean that US citizens still face worldwide taxation even when permanently living abroad.


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## Peg

Bevdeforges said:


> There are two separate and distinct things going on here: FBAR and FATCA.
> 
> FBAR has been around for a LONG time. It's the form you file with the Treasury Dept. (don't send it in with your income tax forms) and it's a simple declaration of your overseas financial accounts, with the high balance during the year.


It is not a simple declaration to me. 

It infuriates me that the US gov thinks they have a right to know the details of my children's education savings which is already registered with the Canadian government and would be taxed if I ever accessed the money personally. As an Executive on a Parent Teacher Association which clearly I would never have financial interest it is absurd that the US gov feels they should know about it - as a registered charity, the Canadian government already knows all about it. Add in the Girl Guides and Football team accounts and it is ridiculous!

It still takes me time to go through the statements for each year to figure out the highest balance. For some of those accounts we don't even get statements which means further work to find the highest one. Maybe not a lot of time but it should be none!


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## Bevdeforges

I agree with you that these things are getting ridiculous. A tax preparer friend of mine is sending me copies of the information from her annual tax seminar on FBAR and FATCA - and even she admits that the changes and the complexity (of all the tax regs, not just FUBAR and FATCAT) are really getting to her.

I do think, however, that once they are deluged with all the information they are asking for, they may see the light and cut things back to a somewhat more practical level. (Or so we can hope.) They just need to find a way to do so that doesn't look like they are backing down....
Cheers,
Bev


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## Mona Lisa76

I agree. I tgink when they see our bare financial souls thst they'll more information than they know what to with...j


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## somerfugl

Peg said:


> It is not a simple declaration to me.
> 
> It infuriates me that the US gov thinks they have a right to know the details of my children's education savings which is already registered with the Canadian government and would be taxed if I ever accessed the money personally. As an Executive on a Parent Teacher Association which clearly I would never have financial interest it is absurd that the US gov feels they should know about it - as a registered charity, the Canadian government already knows all about it. Add in the Girl Guides and Football team accounts and it is ridiculous!
> 
> It still takes me time to go through the statements for each year to figure out the highest balance. For some of those accounts we don't even get statements which means further work to find the highest one. Maybe not a lot of time but it should be none!


I am also infuriated that the IRS considers RRSP's and RESP's as "offshore, foreign accounts" that we have to report. This is money that we've earned, paid taxes on, and saved in the country in which we live. We are not criminals because we dare to save money for our retirement or our kids' education. It is appalling that the IRS can threaten us with massive fines because we didn't let them know we have perfectly legal accounts in our country of residence and citizenship. I am disgusted by this whole expensive, ridiculous mess.


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## greyowl

I find it ridiculous that the US can justify taxing people who derive no benefit from the taxes paid. We do not benefit by the US schools, hospitals, roads, defense, etc.


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