# One year missing/late FBAR - Streamlined vs Amend?



## JAY453 (Apr 21, 2021)

Hi All,

As I'm preparing my 2020 returns I'm realizing I've made a number of mistakes in the past, I want to correct them and am fine paying the taxes which shouldn't be more than a few thousand dollars but I'm terrified by other potential consequences and significant penalties. I've probably spent too long online reading lawyer and accountant websites and have scared myself in the process.

Members on this forum seem to be the only place where a level head prevails.

Here is my situation:

In 2019 I filed taxes as a resident of the US when I should have filed as a non resident. (1040 instead of 1040NR)

In 2020 I realize now I was a resident and I should have filed an FBAR and 8938. The foreign taxes I probably owe for this year are less than $500. (I only filed a 1040)

I filed using everyone's favorite tax software T****t*x(/s) in both 2018 and 2019.

In 2020 I lost my job in the US due to covid and left the country but still qualify as a resident for tax purposes. I'm not a citizen or a green card holder and am not currently in the US. I have not filed taxes yet in 2021.

I'm going to start discussions with a CPA tomorrow but don't want to be scared down a potentially expensive path. I'm not sure if I should amend previous years and file this year correctly or just file correctly going forward. Most of the foreign taxes I owe will be in 2020. Alternatively I could go through the Streamlined program but I'm concerned of being found to be willful because the IRS feels like it. I don't have any plans of returning to the US currently and would only return at the earliest towards the end of 2022.

Most of my non US assets are inherited, complicated (PFICs etc) and not insignificant. I'm worried declaring them now will lead to severe penalties. The banks in my country don't have me listed as a US person on my accounts so theres that as well. 

This is turning into a nightmare and I'm losing sleep over it, I wish I had just hired a CPA to begin and any help would be appreciated. My family believes I'm making a bigger deal of this than I should. Any help would be greatly appreciated, thank you for reading so far.


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## Moulard (Feb 3, 2017)

First take a deep breath... and then slowly exhale...

The compliance industry thrives on instilling fear to drive business..

There are some on this forum that would simply suggest don't worry about it, if you have left the country, have no US assets, then there is very little the IRS could do about it even if they cared to do so. 
There is some merit to that argument.

If that is not what you want to do, regardless of the reason, then read on...

Its hard to de-tangle your circumstances directly, but I assume that you arrived in the US at some point in 2018 (you state you filed a 2018 tax return) and left at some point in 2020

If that is true then you probably would have been a tax resident of the US for the 2019 tax year and therefore filing a 1040 was correct even if you might have missed a form or two.

You could file a 1040-X for 2019 and attach the Form 8938 - that form on its own should not require you to enter streamlined if there is no foreign income associated with those assets.
Even if there was, I assume you could also then attach a Form 1116 to claim a foreign tax credit for foreign taxes paid on the income derived from those assets.
There are some on this forum that would simply suggest there is no obligation to amend a tax return, and technically they are right.

2018 and/or 2019 FBAR you can just file delinquent. Just add a reason why they they are late and that will be the end of it.

If you meant 2019 not 2018, then you actually have some choice in how you file in your first and last years of residency.

As to your 2020 tax return it is not due yet, and will not be due to June given you are outside the US so you have time to consider your position. If you need more time to consider you can apply to extend your deadline for filing to Oct quite simply - and as far as Dec if necessary.

First, take careful read of Chapter 1 of pub 519. It goes into a fair bit of details on the differences between a non-resident alien and a resident alien ; and the various options you have in your first and last year of residency. You can use that to help decide if you really need to do anything 



https://www.irs.gov/pub/irs-pdf/p519.pdf



If you have already filed a 2020 return, given it is not even due yet you can actually file what is referred to as a superseding return.. ie file a second return before the due date and it is treated as if the first one never existed.


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## JAY453 (Apr 21, 2021)

First off, thank you for the response! I have taken a deep breath and am feeling more relaxed already after reading your response 

The taxes I filed in 2019 for the 2018 tax return should have been filed as a Non Resident but I mistakenly went and filed 1040. I started working in 2018 (entered in 2014) on my student visa which was the first year I had any income in the US.

In 2019 I switched to a work visa and hence became a resident for tax purposes, I believe even if I didn't switch visa's this year I would have been a resident - based on my new understanding. I erroneously only filed a 1040 in 2020 for this year.

I do have some assets all liquid cash in the US which I was initially thinking of investing but am now thinking of removing from the US after realizing this situation. I can effectively remove them without any additional tax consequences. Will removing them raise any undue suspicion?

I guess I have the following Options:

*Option 1 - Do nothing file 2020 return and remove all assets from the US.

Option 2 - File 2020 tax return, file FBAR and remove all assets from the US.

Option 3 - Amend 2018 and 2019 tax returns and file 2020 return correctly and file previous FBAR for 2019 return. (I could face automatic penalties just for not filing certain forms it seems)

Option 4 - Only file delinquent FBARs and file 2020 return correctly

Option 5 - Go through a Streamlined Disclosure Program (I'm worried since I used T****T*x I'd be found to be willful)*

If I don't amend my taxes and only go ahead and file a delinquent FBAR(s) will this raise any undue suspicions? 

With Options 2, 3, 4 and 5 I have no issue paying the taxes but I'm worried this could horribly backfire with penalties now or in the future. I guess option 1 could also backfire in the future.


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## Nononymous (Jul 12, 2011)

Moulard said:


> There are some on this forum that would simply suggest don't worry about it, if you have left the country, have no US assets, then there is very little the IRS could do about it even if they cared to do so.


Good morning. Here I am so suggest exactly that.



JAY453 said:


> Option 1 - Do nothing file 2020 return and remove all assets from the US.


This is your best option. Presumably (1) you have no plans of making a permanent move back to the US, and (2) all financial institutions outside the US were not aware of your US residence (i.e. US person status) so never subjected your "foreign" assets to FATCA reporting?

If so, then forget about this. Let sleeping dogs lie. No good will come of your trying to fix this, and there is no risk to your ignoring this.


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## JAY453 (Apr 21, 2021)

Thanks Nononymous, in regards to (1) not permanently but may go to study or visit friends/family. After this debacle it's unlikely I want to work in the US or be subjected to US Taxation again. And (2) is correct.


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## Nononymous (Jul 12, 2011)

If indeed your non-US assets are "complicated (PFICs etc) and not insignificant" then I don't think you want to even consider retroactively declaring them now that you've left the country. Leave it alone. Don't go anywhere near the domestic streamlined program since it may include mandatory penalties. It likely would not have mattered, but be thankful that your banks did not have you signed up for FATCA - an extra reason not to lose any sleep over this.

If you file for 2020 you will probably receive the stimulus benefit (up to $3200) if you haven't already based on your 2019 filing as a resident. This would be moderately amusing. Might as well keep your US account open long enough to collect that money.

After that, move your money out - nothing suspicious, it won't trigger some sort of IRS investigation unless maybe its in the billions, in which case you would not be asking questions here - and you have no further obligation to file US tax returns. Nothing would prevent you from returning to the US as a tourist or student. If you wanted to settle more permanently you'd need to deal with the offshore assets, one way or another.

PS on edit: If it's any consolation, there were some amusing stories last year about recent foreign exchange students no longer in the US who'd mistakenly filed regular 1040 forms instead of 1040NR forms for 2019, and who were consequently receiving the stimulus benefit, either deposited to US accounts they'd left open, or having actual cheques sent to their homes in wherever. By the thousands. Some sent the money back, some didn't. The point is, people screw this up all the time and the IRS typically doesn't care.


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## JAY453 (Apr 21, 2021)

Spoke to the CPA and he recommends I amend but it'll probably cost be a small packet just to file outside of any other potential penalties. He mentioned something about a mercy plea if the IRS chooses to audit my returns. Otherwise unsurprisingly little new information was provided. I'll probably end up paying more to have my taxes filed and amended than I will have to pay in taxes.

The way I see it I'm exposing myself to effectively the same/similar penalty risk either way currently, but I may be reading the situation wrong. Haven't reached a decision yet but streamlined is definitely off the table.


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## Nononymous (Jul 12, 2011)

Not sure what risk there is in doing nothing and not amending the returns, given that your non-US accounts were never subject to FATCA reporting.


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