# Streamlining, large bank account



## aeolion (May 6, 2014)

I discovered streamlining yesterday. I have been reading your site on the subject, and it is becoming clearer. The IRS should fire its writers and hire a few of you to do their manuals.

I left the US in 1990, got permanent Korean residence, paid Korean taxes, didn't file in the States until tax year 2007, six years worth, because I wanted to return to the States. 

Very nicely-paid tenured job, no backpacker private lessons, successful Korean wife, but always zero US tax. No kids, I squirreled away some 40k US each year, yet lived well, traveled a lot. The interest for the accounts was awfully nice, and all in cash, I sailed right through the 2008 financial collapse unscathed. 

Korean banks automatically withhold 14.5% from the first penny of interest, so there was no tax due on that in the States. I am smart in a bookish way, but incredibly dumb in other ways. Hey, no tax obligation? Then obviously no FBAR! As for hiding money, WHY? I registered for Vanguard Funds and was prepared to wire $800,000 US to them. Hey, no tax due, no problem.

Retired in 2008, the marriage crumbled, didn't go to the States, didn't send the money to Vanguard, so I didn't bother to file anymore. 

Present situation: About $800k US in Korean banks, maybe $15k in Thai bank. No tax due ever, so I have not filed anything since tax year 2007. Since 2008 I had zero earned income, and I live off the interest and $7k a year social security. I am based in Thailand with my Vietnamese wife. I return to Korea once a year to renew CDs and keep my permanent residence. 

If my bank accounts were smaller, I think I would fly through Streamlining. But... (By the way, with only nominal Social Security and nothing else, $800k is not all that much if I make it to 90.) Especially with likely inflation. I'm also thinking about my wife going to college in the States, no small financial drain.

How do you think streamlining will go? And any tips?

Aeolion


----------



## Bevdeforges (Nov 16, 2007)

The main thing with the streamlined compliance deal is that you're ok as long as you don't owe any/much in back taxes for the period for which you're required to file. Believe me, they are well aware of the matter of living off your savings - even with a large account balance like you have, chances are you won't owe any US taxes (at least not for the 4 year period for which you'll be filing).

But you won't know until you file and see what (if anything) they say.
Cheers,
Bev


----------



## aeolion (May 6, 2014)

It seems I will need to file 7 FBARs, for tax years 2007-2013, but I will file taxes for only four. Do they usually get heavily into the older FBARs and then get into the taxes for those years? I have all my old bank books for 2009-2013. For 2007-2008, no bank records, just a guess off the top of my head.


----------



## Bevdeforges (Nov 16, 2007)

At the moment, I don't get the feeling that they look terribly closely at either the returns or the FBARs - unless something "jumps out at them" that puts you in the "high risk" category.
Cheers,
Bev


----------



## BBCWatcher (Dec 28, 2012)

You don't have a lot of money in this business, and South Korea is not known as an attractive tax haven. North Korea, maybe.


----------



## aeolion (May 6, 2014)

BBC, I assume that means the amount in my account should not cause problems while streamlining, and with S. Korea cooperating with the US IRS, I should streamline with haste?


----------



## BBCWatcher (Dec 28, 2012)

Did you accumulate your nice but not-vast wealth through illegal drug dealing, money laundering, as the recipient or transit point for terrorist financing, or as payment for illegal arms sales? As compensation for your role facilitating illegal trade with North Korea? In the course of bribery? As payment for child trafficking, illegal human organ sales, or illegal trade in endangered species? Kidnapping (i.e. ransom payments)? Massive violations in the "one coupon per household" rule at McDonald's? 

Doing any of those things, which are illegal practically everywhere? (OK, maybe not the last one.) If so, yes, worry. Otherwise, I don't know why you're worried about a truthful report.


----------



## aeolion (May 6, 2014)

BBC,

I guess I am worried because of horror stories about the IRS deciding, for whatever reasons, to hit you with massive penalties. After all, i did not file for years. 

But your wit, backed by expertise, is reassuring. I will go ahead with the streamlining to beat the June 30 deadline.

Thanks,

aeolion


----------



## BBCWatcher (Dec 28, 2012)

I've only seen a single confirmed report of a "naked" FBAR prosecution -- prosecution of a failure to file a FBAR without any accompanying/underlying crime -- and that occurred when the defendant didn't file at all. At least the Treasury Department thinks it's the first and only one, because that's what they said. There's currently no penalty for late filing a truthful report with a reasonable, truthful justification, e.g. "I didn't know I had to file until now." But yes, the first individual was successfully prosecuted for willful non-filing, and obviously he didn't file before the government came knocking.

According to what I've read about the case, his accountant asked him whether he had any foreign financial accounts, and he answered "no." The government subpoenaed the tax questionnaire his accountant sent him with his untruthful reply, and that was "game over." The government thus was able to confiscate much of the wealth he kept offshore.

However, even in that case the defendant had what you'd call a "colorful past" -- and present -- with the IRS. That is, the IRS was after him for tax violations already. Which is one reason why "don't be a jerk" is a good rule to live by. Even in that case it could be argued that FBAR/FATCA non-filing (or untruthful filing) is an added sin that required original sin. Nonetheless, the Justice Department achieved a first which was a legally standalone FBAR prosecution and victory.

In my view that "added sin/original sin" interpretation is consistent with the long history of financial disclosure laws, how the government views them, and how the government pursues prosecutions. Al Capone is a great example from history. Al Capone was convicted of tax evasion in 1931, not of his underlying crimes. The whole reason FBAR and FATCA exist is to establish clear legal jeopardy for people committing other, potentially more difficult to prosecute crimes -- and to "backdoor" increase the potential penalties associated with crimes.

To pick another example, the State of Alabama has a marijuana stamp tax. Marijuana use is illegal in Alabama. If you're caught using marijuana in Alabama, there's a (usually) modest penalty. But if you have not purchased a marijuana tax stamp -- filed your "marijuana report," basically -- _your failure to purchase the tax stamp_ is separately punishable by a whopping 1 to 10 years in prison or a $5,000 fine. The tax stamp costs $3.50 per gram, though there's no tax for up to 42.5 grams, so $5,000 is a lot of tax stamps!

Alabama has actually sold a few marijuana tax stamps as novelties. If you're committing an illegal act, in this case possessing marijuana, you have to think twice about purchasing a tax stamp. You're damned if you do, damned if you don't. And that's the whole point.

FBARs and FATCAs are much the same thing. Failure to file, or filing untruthfully, _compounds_ many underlying crimes if they exist. The government can then choose how it wants to prosecute if they've found someone committing an illegal act such as tax evasion, money laundering, etc. In the plea bargaining phase, for example, it makes a big difference if the government has a "bright line" FBAR/FATCA violation to add to their list of charges. Your attorney might advise you that she can beat the money laundering rap, but you're otherwise screwed because of FBAR, for example. Usually the government does have that reporting violation in their arsenal because criminals typically don't file their FBARs and FATCAs. If they do, they usually aren't truthful. There are many, many reports of the government doing exactly that when confronting, well, jerks.

That also means that a non-criminal -- most of us! -- who files truthful financial disclosures is completely boring. So are non-marijuana users buying Alabama's marijuana tax stamps as collectible novelties. Such individuals are very boring to the government, rightly so. This analogy isn't quite perfect because you're not required to buy an Alabama marijuana tax stamp unless you possess sufficient quantities of marijuana. But hopefully you get the idea.

So...have you done any seriously bad things? If so, no surprise, you're probably in jeopardy of multiple criminal charges, and FBAR/FATCA are just added to the pile of charges. (And if you file a truthful report, that just might tip off the government that you've done something seriously bad. Or at least you might be concerned enough that it might tip off the government, in which case you'd be seriously inclined not to file a truthful report. Damned if you do, damned if you don't.)

If you haven't done anything seriously bad, that's great. Now just be boring, as you are. File truthful reports.


----------



## aeolion (May 6, 2014)

BBC, thanks. Really, thanks.

aeolion


----------

