# US taxes: Declaring Foreign Financial Assets



## Bevdeforges

Any US taxpayer who has $10,000 or more in *foreign (i.e. Non-US) financial accounts* must declare these accounts and their maximum balances during the year on a form TD F 90-22.1. This form is a Treasury form, not an IRS form, and it should be filed by June 30th of each year. You cannot send this in with your tax returns. It goes to a separate address in the US. Reporting of Foreign Bank Accounts (FBAR) can now be done Electronically at BSA E-Filing System - Enroll Now 

Many US residents aren’t aware of this requirement, and most US taxpayers don’t run into it until they relocate overseas and open up the usual round of bank, savings and investment accounts. Even if you don’t receive enough interest to have to file a *Schedule B* with your 1040, you may need to do so in order to answer the questions at the bottom of the Schedule. (They also mention another form, Form 3520, if you have any sort of foreign trust.) As long as you have to download the form, you might as well fill in your interest and dividend income asked for on the Schedule B - if only to “prove” to the IRS that you’re reporting all the interest from all your foreign accounts.

The Treasury form (as it was long known - now often referred to as the *FBAR *form) is simply a listing of your foreign accounts. Over time, they have started requiring more and more information, like the account number and the high balance for the year (at one time, they just had you indicate by range the maximum balance). There is a separate section of the form for listing accounts you hold in joint ownership with someone else and another section for accounts you have signature authority over (but no “financial interest”). Read the instructions for this form carefully to see how your various accounts fit into the several categories. 

If you sign checks for your employer or for a charity or other volunteer association, then yes, you are expected to declare those accounts on this form unless your employer gives you a letter stating that they have submitted the necessary information to the IRS for you. (Usually the case with US owned employers or some other organizations with US ties.) If your spouse, or other person with whom you share an account doesn’t have a US ITIN, just fill in “NRA” (non-resident alien) in the space that asks for the ITIN. In the case of a foreign company or association that doesn’t have a US business presence, fill in “N/A” or note that this is “not a US entity” in the ITIN space.

There are further filing requirements for US taxpayers who have certain types of *foreign financial investment assets.* The new requirements are intended to find instances of abusive tax shelters and US taxpayers hiding money in offshore accounts and dodgy investment deals. Unfortunately, the new regs do affect some of us “simple expats” with perfectly legitimate foreign assets. These assets have to be summarized on a new* form, 8938*. Take a look here to see if you have to file it (and possibly some other forms related to the specific assets): Do I need to file Form 8938, ?Statement of Specified Foreign Financial Assets?? 

Do read the instructions for Form 8938 very carefully, as *the thresholds for filing are considerably more “generous” for those of us living overseas* than for those living in the US. The final version of the form also includes a more detailed definition of what they are looking for in terms of *“specified foreign financial assets”* which need to be reported. These last-minute definitions may alleviate the filing quite a bit for those of us who are part-owners in a small company which is also our employer or who simply have an ownership interest in the family mansion. They are not asking you to declare ALL foreign assets, only “specified foreign financial assets.” The instructions for form 8938 explain what they are looking for in more detail. See particularly pages 4 and 6 of the instructions. If the assets you report generate income, make sure your share of the income has been appropriately reported on your 1040 and supporting schedules.

We’ve already had multiple “discussions” of the moral and ethical aspect of all this “new” reporting. But it’s the law now, and we’re just here to help you determine what, if any, obligation you have to comply with this. Any information given out or shared on this site is merely advisory - plus, it’s not yet clear to what extent the IRS is going to be able (or willing) to investigate discrepancies. If you have specific concerns about your particular situation, you may want to consult a tax adviser, accountant or legal adviser but be wary of those looking to whip up panic over the new (and untested) rules and just generate bigger fees for themselves.


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## Kaia

*Back taxes:FBAR*

One of my New Year's resolutions was to get my tax situation in order. I've lived overseas for over 20 years and have never filed a return. Yes, I knew I was supposed to, but since my income has never come close to the limit, I didn't take the situation seriously enough. I have some assets in the US (IRA and CDs), but most of my assets are overseas. I had no idea about the FBAR forms.
I had planned to file returns for previous years (3 or 6) but the information I've found on this site and other places has me thinking that's not a good idea. (Would have amounted to "quiet disclosure", which apparently is frowned upon.)

What I've managed to piece together so far:
- I need to file FBAR forms back to 2003 and for 2011 the new form replacing FBAR
- I need to file tax returns - but how far back?
- The Voluntary Disclosure program has been extended indefinitely but will only give me amnesty from criminal proceedings, not from the potential fines.
- It's possible to "opt out" of Voluntary Disclosure - under what circumstances should one do that? How is it done?

I've read quite a bit in the threads and some of the links and have gathered that most people are not getting socked with penalties for filing late or for turning in late FBARs. The costs people are incurring tend to be legal fees or accountants' fees. Some have been hit with taxes on passive income (mutual funds).
What I'm not reading is closure. Most of those who filed seem to have not received answers from the IRS or the Treasury Department. Is the threat of losing 27% of my savings going to be hanging over my head for years to come?

I guess what I'm looking for is correction if my understanding of this process is flawed and reassurance that if I just get it done I'll probably be ok.
Any other tips would be welcome as well. I had planned to take my papers to the IRS office in the consulate in Frankfurt and ask for help. After what I've read here, I'm not sure that's a good idea either.
Should I file under Voluntary Disclosure or should I file returns with a cover letter stating what I'm doing? (Is that "noisy disclosure"?)
Am I likely to get hit with penalties for not filing FBARs?

Any help or reassurance is greatly appreciated.
Kaia


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## Bevdeforges

The whole FBAR thing has received a tremendous amount of publicity in some parts of the world. In other parts of the world it's virtually unknown.

The key seems to be just how much you have in "overseas" holdings and whether or not you've actually been "avoiding" applicable US taxes by not reporting them and your regular US income taxes.

If you have been reporting your income from any and all financial accounts and investment assets in Germany, then you may not owe any taxes to the US at all - only the reporting. (The taxes you pay in Germany can be used to offset any US taxes that would otherwise be due on the income from those assets.)

The official statute of limitations on US taxes is still, I believe, only 4 years, so the first thing to do is to file the current year (2011 - due June 15th 2012) and the three prior years returns. In the course of preparing those, you'll see if you have any investment income that you haven't already paid taxes on in amounts adequate to cancel out what you would have owed the US. If everything is accounted for, then I'd just file the FBARs for those years and see what the IRS comes back with (if anything).

The whole purpose of FBAR and FATCA (which requires reporting of certain financial investment assets) is to find tax evaders who have been hiding income they should have been reporting. If you've been reporting your investment and interest income and paying your taxes on it where you live, you're not really within the IRS scope of interest. You could probably even safely contact the IRS office in Frankfurt for guidance.
Cheers,
Bev


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## Ladyhawk

Do not go into the Voluntary Disclosure program. It is only for people who have been willfully hiding money to avoid taxes. And "Quiet Disclosure" means people who who lied on previous returns by reporting lower income than they had, and who then file an amended return showing the higher income they actually had. QD does not apply to people who have just found out they have to file or who haven't bothered filing in the past because they don't make enough money to owe anything to the IRS, and are just trying to become compliant. If you simply file your past returns, you will be fine, especially if you owe no substantial back taxes.


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## QueensU

Are any of you filing explanation letters with your late FBAR's? I'm reading about these explanation letters being attached to FBAR forms.

I don't see an explanation letter being required with late 1040's when there is no tax due.


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## Peg

QueensU said:


> Are any of you filing explanation letters with your late FBAR's? I'm reading about these explanation letters being attached to FBAR forms.
> 
> I don't see an explanation letter being required with late 1040's when there is no tax due.


I did attach an explanation letter to my FBARs and also my 1040s. I used the identical letter for all of the FBARs but changed it to reflect that year to which it was attached. It may not have been required but I simply wanted to put it on record with the US Gov.


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## Guest

QueensU said:


> Are any of you filing explanation letters with your late FBAR's? I'm reading about these explanation letters being attached to FBAR forms.
> 
> I don't see an explanation letter being required with late 1040's when there is no tax due.


I filed a cover letter with each FBAR and with each 1040. I don't know how important it is for the 1040's, especially if no tax is owed, but I think it is important for the FBAR's. Probably caution should be used in the FBAR letter with no reference to "voluntary" or "disclosure". I just told the truth - I had never heard of the FBAR and had no reason to know about it because I didn't owe taxes and, for most years, didn't even have any income, so I didn't fill out Schedule "B" where it turned out it was noted. Hope this helps!


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## Kaia

Thanks to all who responded to my cry for help. I'll get cracking and let you know how everything turns out.
Kaia


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## smccarth

*ovdi*



Ladyhawk said:


> Do not go into the Voluntary Disclosure program. It is only for people who have been willfully hiding money to avoid taxes.


I participated in the Voluntary Disclosure Program on the advice of a U.S. tax lawyer. It's purpose is to have open disclosure of foreign accounts to the Dept of Treasury so that individuals can comply with the law. I would argue that most accounts submitted through OVDI were legitimate. 

Thus Voluntary disclosure may have exposed a few "bad actors", but most are "benign actors" with legitimate accounts in the country of residence. This should be obvious to the IRS as they look through the submissions. 

Finally, the IRS has extended this program indefinitely because this is how they wish people to come into compliance.


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## Bevdeforges

smccarth said:


> Ladyhawk said:
> 
> 
> 
> Do not go into the Voluntary Disclosure program. It is only for people who have been willfully hiding money to avoid taxes.
> 
> I participated in the Voluntary Disclosure Program on the advice of a U.S. tax lawyer. It's purpose is to have open disclosure of foreign accounts to the Dept of Treasury so that individuals can comply with the law. I would argue that most accounts submitted through OVDI were legitimate.
> 
> Thus Voluntary disclosure may have exposed a few "bad actors", but most are "benign actors" with legitimate accounts in the country of residence. This should be obvious to the IRS as they look through the submissions.
> 
> Finally, the IRS has extended this program indefinitely because this is how they wish people to come into compliance.
> 
> 
> 
> The Voluntary Disclosure program is for those who have something to disclose - i.e. an offshore account that they had been "hiding" or failing to disclose.
> 
> For those who have been living abroad for years and who are filing their first returns to clear their record, the voluntary disclosure program is not appropriate unless you have large financial investment assets of the type subject to disclosure requirements.
> Cheers,
> Bev
Click to expand...


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## colddigits

Hello!
I just learned about FBAR on Tuesday when meeting with a tax accountant' I have been a permanent resident of Canada since 1976 and stopped filing US taxes somewhere around that year. In 1989, we (husband is Canadian with permanent resident status in the US) moved to southern Nevada and stayed for 18 years. Left there in December, 2006. We filed joint US returns for all of those years ans subsequent years from Canada.

As it turns out, I haven't had any income to report over $10,000.00 until last year. I believe with the inclusion of a spousal RRSP and a TFSA, both in my name, I may have had over $10K for a couple of months last year.

My question is, am I understanding the laws correctly when I feel I should only have to file an FBAR for 2011 by the June 30th deadline in 2012?

Thanks so much for any help!!


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## Bevdeforges

colddigits said:


> As it turns out, I haven't had any income to report over $10,000.00 until last year. I believe with the inclusion of a spousal RRSP and a TFSA, both in my name, I may have had over $10K for a couple of months last year.
> 
> My question is, am I understanding the laws correctly when I feel I should only have to file an FBAR for 2011 by the June 30th deadline in 2012?


The $10,000 filing threshold for FBAR does NOT apply to income - it applies to the balance in the reportable financial accounts. And, I believe I've seen somewhere in the instructions that if you don't need to file an income tax return (due to not meeting the threshold amounts) then you don't need to file FBARs.

Just do the one for 2011, along with your regular return, and if the IRS wants to see more they'll be in touch. Just be aware that the filing thresholds are much lower for married filing separately (which you would do if your husband no longer has his permanent resident status).
Cheers,
Bev


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## theOAP

Bevdeforges said:


> And, I believe I've seen somewhere in the instructions that if you don't need to file an income tax return (due to not meeting the threshold amounts) then you don't need to file FBARs.


You can file this under useless information if you wish. I'm not agreeing or disagreeing with anyone.

The question of whether to file a 1040 return if you are below the filing threshold for 1040, but do have aggregate accounts over $10,000, came up on another forum. The OP decided to Email the IRS Email Tax Law Assistance help site. The official response they received was as follows:

_"If you do not meet the income requirement to file a federal tax return , but must complete a Schedule B, Interest and Ordinary dividends for purposes of Reporting Foreign Bank and Financial Account (FBAR) information.

You should place your name and social security number in the space provided on the Schedule B, then complete part three as required, attach a statement explaining that you were not required to file an income tax return, but must submit the Schedule B for FBAR compliance requirements only.

File the Schedule B as a stand alone document to the address where you would normally submit your federal income tax return if you were required to file._

This was for 2010 tax year.

The instructions for Form 8938 clearly states that if you are not required to file a 1040, then you are not required to file Form 8938.

Inconsistent? Confusing, since you would file the FBAR for being over $10,000, but not file a 8938 for being over $200,000 (MFS, depending on circumstances)? At times, as much as all this is maddening, the obtuse instructions can also be amusing (well, sort of...).


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## Bevdeforges

And to make things even worse, the IRS doesn't even stand behind its own information. Any advice they give you is subject to change if they decide for some reason to take an interest in your case.

One good strategy is to disclose everything necessary to show them you don't owe any taxes. (Assuming you don't owe anything.)

After a few years of filing tax returns even though he was under the various limits, my Dad even got a letter from the IRS telling him he didn't need to file anymore. (The caveat was, of course, "unless your circumstances change.")
Cheers,
Bev


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## colddigits

Argh-h-h-h-h-h-h!! I suppose I will get through this stuff somehow.

Thanks so much to you both for the help. These forums are so much more helpful than trying to decipher the IRS site!! ;-}


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## Bevdeforges

There are two sections on the IRS website that may be of use to you when trying to figure out this FBAR and FATCA stuff:

For FBAR

There is also an FBAR telephone line you can use for questions.

For FATCA

Cheers,
Bev


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## SteveOdem

Bevdeforges said:


> The whole FBAR thing has received a tremendous amount of publicity in some parts of the world. In other parts of the world it's virtually unknown.
> 
> The key seems to be just how much you have in "overseas" holdings and whether or not you've actually been "avoiding" applicable US taxes by not reporting them and your regular US income taxes.
> 
> If you have been reporting your income from any and all financial accounts and investment assets in Germany, then you may not owe any taxes to the US at all - only the reporting. (The taxes you pay in Germany can be used to offset any US taxes that would otherwise be due on the income from those assets.)
> 
> The official statute of limitations on US taxes is still, I believe, only 4 years, so the first thing to do is to file the current year (2011 - due June 15th 2012) and the three prior years returns. In the course of preparing those, you'll see if you have any investment income that you haven't already paid taxes on in amounts adequate to cancel out what you would have owed the US. If everything is accounted for, then I'd just file the FBARs for those years and see what the IRS comes back with (if anything).
> 
> The whole purpose of FBAR and FATCA (which requires reporting of certain financial investment assets) is to find tax evaders who have been hiding income they should have been reporting. If you've been reporting your investment and interest income and paying your taxes on it where you live, you're not really within the IRS scope of interest. You could probably even safely contact the IRS office in Frankfurt for guidance.
> Cheers,
> Bev


Bev, I partly agree with you. 

First, the Internal Revenue Code applies to global income, subject to credits, deductions and exemptions.

There are multiple elements to the statute of limitations. First and foremost, it doesn't start running until the return is filed. The general rule is 3 years from the later of the due date or the filing date. Special rules apply to fraud or a substantial understatement of taxable income (6 years) and certain foreign matters (10 years). 

A key is reporting income from all sources on the 1040 - interest and dividends on Schedule B, and other investment and business income that ties into the FBAR and FATCA. FBAR is due June 30 in Detroit following, no extensions. Penalties are obscene and can run to 100% of the maximum amount that was in each account each year, plus interest.


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## Bevdeforges

SteveOdem said:


> A key is reporting income from all sources on the 1040 - interest and dividends on Schedule B, and other investment and business income that ties into the FBAR and FATCA. FBAR is due June 30 in Detroit following, no extensions. Penalties are obscene and can run to 100% of the maximum amount that was in each account each year, plus interest.


While I don't disagree with you, I note that the IRS seems to have been engaged in one of their all-too-frequent "shock and awe" campaigns this year - particularly in Canada. Yes, there are obscene penalties for failure to file and for late filing of FBAR and FATCA, but as with so many IRS things, if you can show through your filing that you have been filing all along and/or not concealing any "ill gotten gains" or other forms of income or investment they are looking for, it's unlikely the IRS will invoke full penalties (or any penalties at all).

Also, check the instructions carefully. There are often "outs" or "loopholes" in the fine print. (The current $200K and $400K thresholds for overseas residents on certain forms only just came out at the end of 2011 - so the situation is still evolving.) I'll also stand by my comments that the staff in the foreign IRS offices are generally pretty helpful when asked a sincere question without any "attitude." (I admit I avoided dealing directly with the IRS when I was in the US.)
Cheers,
Bev


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## colddigits

Thank you, Bev -- I'm not sure I understand exactly what Steve said. 
I put a "like" on it so that I can get more access to the site, my bad.


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## jeffandgop

Re the comment "The official statute of limitations on US taxes is still, I believe, only 4 years." The limitation applies to returns already files that may have errors or omissions...there is no statute of limitation for non-filing when filing is required.


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## SteveOdem

colddigits said:


> Hello!
> I just learned about FBAR on Tuesday when meeting with a tax accountant' I have been a permanent resident of Canada since 1976 and stopped filing US taxes somewhere around that year. In 1989, we (husband is Canadian with permanent resident status in the US) moved to southern Nevada and stayed for 18 years. Left there in December, 2006. We filed joint US returns for all of those years ans subsequent years from Canada.
> 
> As it turns out, I haven't had any income to report over $10,000.00 until last year. I believe with the inclusion of a spousal RRSP and a TFSA, both in my name, I may have had over $10K for a couple of months last year.
> 
> My question is, am I understanding the laws correctly when I feel I should only have to file an FBAR for 2011 by the June 30th deadline in 2012?
> 
> Thanks so much for any help!!


The fundamental issue with FBAR is NOT income but, rather ALL foreign financial accounts including bank, investment, retirement, in some cases precious metals. If the aggregate of the maximum values of all the accounts at any time during any year is $10,000 or more, FBAR filing is required.

Associated with this, in spite of income, is Form 1040 Sch B, which has questions (NOT income itself) to the effect "Did you have a foreign financial account?" yes or no, and "Did you have a foreign trust?" yes or no. 

So at a minimum you must file the 1040 with Sch B, even if you don't owe any US taxes on your world-wide income.

And yes, I know that getting the value of a retirement account is not necessarily easy.


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## SteveOdem

theOAP said:


> You can file this under useless information if you wish. I'm not agreeing or disagreeing with anyone.
> 
> The question of whether to file a 1040 return if you are below the filing threshold for 1040, but do have aggregate accounts over $10,000, came up on another forum. The OP decided to Email the IRS Email Tax Law Assistance help site. The official response they received was as follows:
> 
> _"If you do not meet the income requirement to file a federal tax return , but must complete a Schedule B, Interest and Ordinary dividends for purposes of Reporting Foreign Bank and Financial Account (FBAR) information.
> 
> You should place your name and social security number in the space provided on the Schedule B, then complete part three as required, attach a statement explaining that you were not required to file an income tax return, but must submit the Schedule B for FBAR compliance requirements only.
> 
> File the Schedule B as a stand alone document to the address where you would normally submit your federal income tax return if you were required to file._
> 
> This was for 2010 tax year.
> 
> The instructions for Form 8938 clearly states that if you are not required to file a 1040, then you are not required to file Form 8938.
> 
> Inconsistent? Confusing, since you would file the FBAR for being over $10,000, but not file a 8938 for being over $200,000 (MFS, depending on circumstances)? At times, as much as all this is maddening, the obtuse instructions can also be amusing (well, sort of...).


Bev, I'm like you, and don't agree or disagree, but I would seriously question the basis in law for the statement that the Sch B is a stand-alone document. Buyer beware.


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## Bevdeforges

SteveOdem said:


> Bev, I'm like you, and don't agree or disagree, but I would seriously question the basis in law for the statement that the Sch B is a stand-alone document. Buyer beware.


The IRS has been known to give out some "wrong" advice - and of course won' t take the excuse that "you guys were the ones who told me to do this!" There' s also the very real issue of the domestic IRS offices not being real familiar with the filing requirements and procedures for overseas taxpayers.

I don' t see the point of filing a Schedule B unless you file a 1040 to go with it - but then again, I' m all for "defensive filing" - file the information to show them you're not hiding anything. And maybe someday they' ll send you one of those letters saying you don' t have to file anymore like they did for my Dad. :clap2::clap2:
Cheers,
Bev


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## manny.j

In regards to filing FBAR for foreign bank accounts, I did that for the first time last year where I mailed the filled form by post last year.

We are in the middle of filing our tax-returns for 2011 via turbo-tax, I noticed that turbo-tax also has form for FBAR submission. Does this imply we can submit this form online or it can only be done by post?


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## SteveOdem

IRS prefers on line.


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## manny.j

SteveOdem said:


> IRS prefers on line.


Not sure whether you read my question but I asked if we can submit FBAR form online or not? I know we can submit this by post, as I did that last year, and tax-returns online but I am unsure whether the option of submitting the FBAR form online is even a possibility or not.


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## SteveOdem

manny.j said:


> Not sure whether you read my question but I asked if we can submit FBAR form online or not? I know we can submit this by post, as I did that last year, and tax-returns online but I am unsure whether the option of submitting the FBAR form online is even a possibility or not.


It is a possibility and IRS prefers on line.

FinCEN Offers Optional Electronic Filing for FBAR Forms


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## Mona Lisa76

I filed my 2011 FBAR online to FINCEN last night. It seems like a much better way.


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## Bevdeforges

Mona Lisa76 said:


> I filed my 2011 FBAR online to FINCEN last night. It seems like a much better way.


I couldn't get the FINCEN site to give me a password. A tax preparer friend of mine says the site has been having technical problems. After trying for two days to get a temporary password, I decided it would be much quicker to just fill out the pdf forms, print them and mail them in.
Cheers,
Bev


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## Mona Lisa76

It was working OK yesterday. I like that it gives me an acknowledgement of receipt. I found their helpline quite helpful too. Daphne there was very pleasant


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## byline

Bevdeforges said:


> (They also mention another form, Form 3520, if you have any sort of foreign trust.)


I just found out that I have to fill out this form because I have a tax-free savings account, and that it's due on March 15. Are we required to fill out a 3520 for every year that we had the TFSA (in my case, since 2009) or starting with 2011?


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## Bevdeforges

byline said:


> I just found out that I have to fill out this form because I have a tax-free savings account, and that it's due on March 15. Are we required to fill out a 3520 for every year that we had the TFSA (in my case, since 2009) or starting with 2011?


Take a read-through of the instructions for this form http://www.irs.gov/pub/irs-pdf/i3520.pdf as it deals with foreign trusts, not savings accounts. What little I know of the TFSA's (i.e. what I found doing a quick google) indicates that this is more like a "deferred tax account" (say, an IRA or tax deferred educational account) and would be more logically reported on your US taxes as just a regular savings account. The would involve declaring the interest paid to you as it is earned and possibly paying US taxes on it - but depending on the rest of your situation, that may not involve actually paying anything.

If you treat it that way, you could then just report it as a regular old savings account and be done with it.
Cheers,
Bev


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## byline

Bevdeforges said:


> Take a read-through of the instructions for this form http://www.irs.gov/pub/irs-pdf/i3520.pdf as it deals with foreign trusts, not savings accounts. What little I know of the TFSA's (i.e. what I found doing a quick google) indicates that this is more like a "deferred tax account" (say, an IRA or tax deferred educational account) and would be more logically reported on your US taxes as just a regular savings account.


Bev, from what I understand, tax-free savings accounts outside the U.S are considered foreign trusts and have to be reported accordingly.

From _The Globe and Mail_ http://www.theglobeandmail.com/globe-investor/reporting-to-the-irs-from-north-of-the-border/article1867865/: "Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts; and Form 3520A, Annual Information Return of Foreign Trust With a U.S. Owner. These latter two forms may be required if you’ve set up RESP or *TFSA* accounts, for example."


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## Bevdeforges

I'd be cautious about applying information from the Globe and Mail too literally. Note that they do say "These latter two forms *may be required* if you’ve set up RESP or TFSA accounts, for example." It's not necessarily the case.

I only mention this because we have some tax free savings accounts here in France that I certainly report as regular savings accounts - declare my interest each year as income on my US tax forms - and have never had any problem with the IRS over this.

You'd have to check the instructions a bit more (or do some research on the IRS website), but I suspect that RESPs are considered "trusts" because they are "tax deferred" accounts - kind of like the US IRAs or 401K plans. But I think you could probably elect to report a TFSA (or even a RESP) as if it were a regular savings account, if you treat it as one on your US income tax forms. (This would also involve reporting it on the FBAR forms as a regular savings account - and possibly on the 8938, if your foreign accounts exceed the threshold for reporting on that form.)
Cheers,
Bev


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## byline

Yeah, the only reason I pointed out that _Globe and Mail_ article is because it seemed to support what I've been told. An accountant is telling me I need to fill out these forms, and they're due on March 15. She's saying this is new for 2011 tax returns. So I guess I'll have to make some phone calls to the IRS and maybe my previous accountant, to sort this out.

It would be really, _really_ nice if these things were spelled out in clear language.


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## Bevdeforges

byline said:


> Yeah, the only reason I pointed out that _Globe and Mail_ article is because it seemed to support what I've been told. An accountant is telling me I need to fill out these forms, and they're due on March 15. She's saying this is new for 2011 tax returns. So I guess I'll have to make some phone calls to the IRS and maybe my previous accountant, to sort this out.
> 
> It would be really, _really_ nice if these things were spelled out in clear language.


Why March 15th? From the instructions for form 3520:



> In general, Form 3520 is due *on the date that your income
> tax return is due*,


Normally tax returns are due April 15th, and overseas returns are due June 15th.

One of the tough things about US taxes is that there IS no one "right" or "wrong" way to do things. There are loads of choices built into the system: filing jointly if you're married or filing separately; standard deduction or itemized deduction; taking foreign income taxes paid as a deduction or a tax credit; etc.

Tax accountants make their livings by suggesting ways to minimize your tax obligation, but sometimes it makes sense to pay a bit more tax now to avoid problems down the line, or to treat something in an "unconventional" manner as long as you're disclosing it completely, consistently and without trying to evade any tax obligation.
Cheers,
Bev


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## byline

Bevdeforges said:


> Why March 15th? From the instructions for form 3520:
> 
> 
> 
> Normally tax returns are due April 15th, and overseas returns are due June 15th.


This is the date that my accountant gave me. However, when I check online, I'm seeing indications that Form 3520-A is due on March 15. So I will have to call her and ask her for a clarification.



> One of the tough things about US taxes is that there IS no one "right" or "wrong" way to do things.


And this is what makes me so angry. I want to do the right thing. But finding out how to do the right thing, in this situation, seems to be about as clear as mudflaps.



> Tax accountants make their livings by suggesting ways to minimize your tax obligation, but sometimes it makes sense to pay a bit more tax now to avoid problems down the line, or to treat something in an "unconventional" manner as long as you're disclosing it completely, consistently and without trying to evade any tax obligation.


I have no wish to avoid anything. I just want to do it the right way. My chances of owing taxes are slim to none, because I have so little income. I have never owed taxes in Canada, and so in all likelihood will not owe taxes in the States. But it's threading the needle correctly, even with a situation that's as relatively simple as mine, that seems to be such a trial. Even when I go to the "experts," I get as many different interpretations on how to do things. This latest accountant has told me that as of February 2011, anyone with a TSFA or RESP must fill out this form and have it in by March 15. So I guess I will have to call her and find out where she got her info from.


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## byline

byline said:


> This latest accountant has told me that as of February 2011, anyone with a TSFA or RESP must fill out this form and have it in by March 15.


Sorry, I should have typed as of February 2012.


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## Bevdeforges

Personally, I would treat the TSFA like a regular savings account, but I see online that a number of tax advisors are saying that the IRS "may" consider them a form of foreign trust. Not really having all that great an understanding of them (and it may depend a bit on exactly what sort of investments you have in the TSFA) I guess you have to go with what your tax advisor tells you to do - unless you're willing to assert your own position on the issue and defend it yourself if and when the IRS questions it.
Cheers,
Bev


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## byline

Bevdeforges said:


> Personally, I would treat the TSFA like a regular savings account, but I see online that a number of tax advisors are saying that the IRS "may" consider them a form of foreign trust. Not really having all that great an understanding of them (and it may depend a bit on exactly what sort of investments you have in the TSFA) I guess you have to go with what your tax advisor tells you to do - unless you're willing to assert your own position on the issue and defend it yourself if and when the IRS questions it.
> Cheers,
> Bev


Thanks, Bev! I think she's playing it safe and going with a literal interpretation, so I'll play it safe, too. Now all I have to do is figure out the danged terminology, LOL!

My TFSA isn't very complicated; it's a tax-free savings account into which we've deposited money and accrued some interest. That's all. Dunno why it warrants all this special paperwork, but there 'tis. I won't have it for much longer, and so will be happy when I don't have to deal with this paperwork anymore.


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## byline

OK, I've never filled out Form 3520 before, and I'm having a lot of trouble figuring out the language of the form, and how to identify myself with regard to my tax-free savings account (deemed a "foreign trust"):

* Am I a transferer? We have made withdrawals only this year, no transfers into the account. In January 2009, we made an initial deposit. Three more deposits were made in 2010.
* Do I hold an outstanding obligation of a related foreign trust? (I don't even know what that means.)
* I _am_ a U.S. owner of all or any portion of a U.S. foreign trust (my TFSA), so I assume that I do check off that box.
* Would I have received a distribution from a foreign trust? Is that the same thing as interest paid on my TFSA?

Thanks for any help anyone can provide!


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## quincy

byline said:


> OK, I've never filled out Form 3520 before, and I'm having a lot of trouble figuring out the language of the form, and how to identify myself with regard to my tax-free savings account (deemed a "foreign trust"):
> 
> * Am I a transferer? We have made withdrawals only this year, no transfers into the account. In January 2009, we made an initial deposit. Three more deposits were made in 2010.
> * Do I hold an outstanding obligation of a related foreign trust? (I don't even know what that means.)
> * I _am_ a U.S. owner of all or any portion of a U.S. foreign trust (my TFSA), so I assume that I do check off that box.
> * Would I have received a distribution from a foreign trust? Is that the same thing as interest paid on my TFSA?
> 
> Thanks for any help anyone can provide!


There is a thread on the Serbinski accounting forum that's called something like taking a stab at 3520. It's pretty helpful but not professional advice. Those forms are really difficult to understand.


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## byline

"These forms are really difficult to understand." No kidding, LOL!

OK, I heard back from my accountant, and basically the answer to all my questions is "yes"; I do need to check off those boxes for my TFSA. Also, my accountant said that because this is the first time I'm filling out this form, I also have to fill out Form 3520-A; _that's_ the form that is due on *March 15*. But because 3520-A and 3520 effectively go together, I may as well submit them both at the same time.

I also have to fill out Form SS-4 for my TFSA, and call to get an EIN (employee insurance number) for that. *sigh*


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## byline

byline said:


> ... and call to get an EIN (employee insurance number)


Sorry, that's incorrect; I should've looked at my paperwork before posting. EIN stands for Employer Identification Number.


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## Bevdeforges

byline said:


> Sorry, that's incorrect; I should've looked at my paperwork before posting. EIN stands for Employer Identification Number.


And why can't you use your social security number as the EIN? Normally you use your social security number for any sort of tax identification number as long as you have set up the "fund" or "trust" yourself.
Cheers,
Bev


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## byline

Bevdeforges said:


> And why can't you use your social security number as the EIN? Normally you use your social security number for any sort of tax identification number as long as you have set up the "fund" or "trust" yourself.
> Cheers,
> Bev


Dunno. But on Form SS-4 (application for EIN), sole proprietor is listed, with a space next to it for social security number. Apparently I have to get another EIN for my writing business. So it looks like the IRS is now demanding that we have both.


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## Omater

I wish I had noticed that this thread was still up and running! Good stuff!

I have read through everything and I am unclear on the consensus of how many back FBAR's I should file. Should it be 2008-10 plus this year? I did see where some people argue that 6 years should be filed?

Thanks again!


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## SteveOdem

IRS has said they expect to see 6 years including amended returns that may only have a box or 2 checked on Sch. B, if no otherwise unreported foreign interest, for example. Based on that, they may ask for more years further back.


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## Omater

Thank you Steve!

My headache is back. I have been going over the FBAR forms but when starting with Joint accounts I vaguely remember somebody saying that if you are married to a non resident alien that you only report half of the amounts in the accounts. I have been though 5 pages of this thread and can find no information or links to information that confirms this. Most of what I am finding on the IRS site pertains to both filers being US citizens. 

Thanks again for the help and once again please excuse my ignorance. I wish the instructions were more clear on this.


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## Bevdeforges

No, if you're claiming joint ownership in an account, you still claim the entire amount. The FBAR forms merely report the high balance in the account. These aren't "tax" forms. How much of the income from the account you report on your tax forms is a completely different issue (and depends to a large extent on the property laws where you are resident). 
Cheers,
Bev


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## Omater

You can't know how much I appreciate your quick assistance, Bev! Thanks again!


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## SteveOdem

Bevdeforges said:


> No, if you're claiming joint ownership in an account, you still claim the entire amount. The FBAR forms merely report the high balance in the account. These aren't "tax" forms. How much of the income from the account you report on your tax forms is a completely different issue (and depends to a large extent on the property laws where you are resident).
> Cheers,
> Bev


I agree with Bev. 

Consider, for a moment, a signer on a corporate account. There are regulations dealing with this but the fact that the signer may own, say 100 shares of MegaCorporation, a tiny fraction of 1% of the outstanding shares, is not relevant to the fact the signer can move lots of money, perhaps all of it, in the account.


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## Bevdeforges

Since Steve raised the issue of corporate accounts, let me just point out to any of you who are signers on your employer's account: Read the Fine Instructions!

On page 8 of the FBAR form instructions this year (for the first time, as far as I can tell) under Part IV, there is a section headed: *Modified Reporting for United States Persons Residing and Employed Outside of the United States.* If you meet the 3 requirements, you do NOT report the balance in your employer's account, nor do you give them the account number or name and address of the institution - just your employer's identification information.

It does pay to read the instructions, even if it's the umpteenth time filing the same forms.
Cheers,
Bev


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## Omater

Bev, could I use the new form for all prior years or do you think I should dig up old forms for reporting 2006 to 2010 FBAR reports?


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## Bevdeforges

Omater said:


> Bev, could I use the new form for all prior years or do you think I should dig up old forms for reporting 2006 to 2010 FBAR reports?


The current form makes you fill in the year, so I figure that means you can use it for backfiling as well as current filing.

If you'll notice, the other IRS forms have the year printed big and bold on the form, so for those, you have to get the form for the correct year.

(This is what my old employer, Price Waterhouse, used to refer to as "taking an aggressive tax stance." Or sort of...)
Cheers,
Bev


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## canmc

Hi Bev,

I live in Canada and doing my taxes again and wanted to make sure I understand these forms correctly. I just finished my 1040 (and Form 2555). Now I just want to make sure I am submitting all the other necessary forms. 

I just learned about the TD F 90-22.1. I do not have more than $10,000 to report unless I include my RRSP (Registered Retirement Savings Plan). I believe I submitted information about this account on a form last year, but am having trouble finding where I saved it. I don't think it would be included on the TD F90-22.1, but the 3520 did not seem to be the form I remember from last year. I never did hear from the IRS so who knows if I did everything correctly last year, but am hoping no news is good news. 

If you happen to know what form I should be using for reporting my RRSP please let me know. I find this so much more confusing than when I lived in the states and just used Turbo Tax! Thanks so much!
Candace


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## canmc

I just found the form I submitted...it was Form 8891 that was to be attached to my 1040. Does that sound right? I looked at the other forms and they are sooo detailed. I need to download the instructions and read through them. 

Thanks for your help!


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## Bevdeforges

canmc said:


> I just found the form I submitted...it was Form 8891 that was to be attached to my 1040. Does that sound right? I looked at the other forms and they are sooo detailed. I need to download the instructions and read through them.
> 
> Thanks for your help!


Form 8891 is a special form for those holding certain Canadian funds - so it certainly sounds like the right form. Be sure to read through the instructions for the form, though, since there have been some changes since last year (some of them actually making the forms a bit easier to do). 
Cheers,
Bev


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## Madonna

canmc said:


> I just learned about the TD F 90-22.1. I do not have more than $10,000 to report unless I include my RRSP (Registered Retirement Savings Plan). I believe I submitted information about this account on a form last year, but am having trouble finding where I saved it. I don't think it would be included on the TD F90-22.1, but the 3520 did not seem to be the form I remember from last year. I never did hear from the IRS so who knows if I did everything correctly last year, but am hoping no news is good news.



canmc, you do have to submit the TD F 90-22.1 if the total of your financial assets (including RRSPs) is over $10,000. You seemed to indicate that it would be over that amount if you included your RRSPs. You would submit both the forms 8891(to defer taxation on RRSP gains) and TD F 90-22.1 (to report RRSPs and all other financial accounts).


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## rrdstarr

Hi Bev and Other frustrated Us Citizens abroad! 

I am a Us Citizen born and raised and lived there for 41 years. I have lived in Canada since April 2005 and filed a 1040NR each year with Zeros from start to finish! My Wife is Canadian, hence the reason I moved here, and is concerned about listing joint accounts as well as our home and my RRSP's! This year I will be barely under the $90,000 threshold for "Foreign earned income!" I have no US assets of any kind.. I sold my house and used that to put the down payment that we live in now in Canada.

Last week I received my 1040NR back because I forgot to sign it! "Doh!" Homer Simpson slap to the head! Along with the tax for was attached a not saying, "Our records indicate that you may need be required to file Form 8854, "Initial and Annual Expatriation Statement". Please Refer to Publication 519 for rules regarding Expatriation tax." I was a little taken back since I would not renounce my Citizenship to the US. All my friends and family are there. 

So I am a little confuse in what forms I need to fill out and how far back do I go.

Thanks to anyone who responds!


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## Bevdeforges

If you've really been filing 1040NRs instead of plain old 1040s, that may be where the problem lies.

A 1040NR is for a non-resident alien. Unless you have renounced your US citizenship, you should have been filing a regular 1040 with a 2555 to exclude your foreign earned (i.e. salary) income. You don't fill in zeros for everything - you must declare your earned income and then follow the instructions on the 2555 form to "exclude" the appropriate amount on line 21 of the 1040 form. 

You should probably file a couple (maybe 3 or 4) years of back taxes using the proper forms and as long as you still come up with 0 income taxes due, you should be ok. You still must declare your worldwide income (including interest on any Canadian bank accounts, etc.).

The forms they are asking you to file mean that they think you have renounced and thus have to settle up for the expatriation tax and all. That's not your case. And you only need to declare your foreign _financial_ assets (a new form, 8938) if you meet the threshold limits, explained here: Do I need to file Form 8938, ?Statement of Specified Foreign Financial Assets?? (Do note that the threshold for those resident outside the US are considerably higher than the $50,000 threshold for US residents.)

Don't bother with the form 8854. You need to get in touch with the IRS office and explain that you have been filing the wrong form these past few years. (I'm not sure, but I don't think you can "amend" a 1040NR to a 1040 filing. But it's a valid question to ask the IRS.)

Also, unless your wife has US citizenship or a green card, you should have been filing as married, filing separately, with "NRA" indicated where they ask for name and social security number for your spouse. Don't include any of her income in your US filings.

You probably should also have been filing the so-called FBAR forms (Treasury form TD F 90-22.1), where you will have to report joint accounts - but read the instructions carefully. I believe you can simply indicate that the joint holder on the account is your "NRA spouse" and let it go at that. The FBAR forms go to a different address than the tax returns.

You're hardly the first person to have filed a 1040NR instead of a 1040, but the current fuss over FBAR and FATCA seem to be focusing attention on the issue. Try to contact the IRS and get the matter sorted out, file your back returns and everything should return to a nice, dull roar, like always. 
Cheers,
Bev


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## rrdstarr

Any changes for 2012?
I am still a PROUD Canadian, born in US of A, and have no assets in the US! No home, no taxes, just family!

Just doing my 1040 NR and 2555. Have a question about Line 13 on the 2555? Is it still $92,900.00 I have no idea where I got that number last year?

THANK YOU!


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## Bevdeforges

If you were born in the US of A, you are a US of A citizen and should be filing a 1040 and NOT a 1040NR. (You also need to be a citizen or permanent resident and filing a regular 1040 to take the FEIE on a form 2555.) 

Use the proper 2555 form (i.e. the one for 2012) and the form itself will indicate what the amount is for the FEIE. (It's $95,100 for 2012 - just in case you're interested.)
Cheers,
Bev


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## rrdstarr

Thanks Bev! I remember you telling me that last year! 1040 not the NR! I am also a citizen of Canada since 2009! LOVE IT!


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## DougP

Bev,

I've been living in France for over 20 years and have always filed the FBAR. Until only 3 or 4 years ago, that required my checking the appropriate box for amount (e.g., $10,000 to $100,000). Since then, we have been asked to give the dollar amount of assets. I never took this seriously and wondered why the US needed to know this, so I always put a very low figure (but over $10,000). And I only did this for my main bank account - I didn't know I was responsible for filling out separate forms for my Livret A, PEL, CSL, PERP, and life insurance. So now what do you suggest I do? I want to be accurate, now that I realize how important this reporting has become. If I put accurate numbers for 2012, the amount will far exceed my reported income (by ~$140,000). Thanks for advice.


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## BBCWatcher

You report truthfully. It is not a crime nor even unusual to have more accumulated wealth than annual income. Why would you think that's ever a problem? Congratulations: you're saving for retirement.


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## DougP

Thanks, that's exactly what I'm trying to do (i.e., saving), with retirement a couple years down the road. I'm just really nervous the IRS is going to see the unreported foreign money and think I was falsely reporting my income over the years, which is not the case. Would you suggest I attach an explanatory letter with the FBAR and 1040? It turns out I stopped paying a loan on my house 3 or 4 years ago, which also accounts for the increase in my French bank accounts.


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## Bevdeforges

In the past 20 years of living abroad, I have alternated between reporting "just" the main account (I get a single statement that shows all my accounts in the same bank) or breaking down the individual accounts. Honestly, it doesn't seem to make much difference - though with the revised forms and the new emphasis on a dollar amount rather than just checking the boxes, I'm giving them the detail these days.

Don't worry about going back to give them the detail. Next time you file (whether for 2012 or next year) just list out the accounts in full. As far as the $ balance goes, I usually provide a "good faith estimate" - and then round up by a few thousand $ just to play it safe. Of course, you should be declaring any interest from the accounts on your US tax forms, but in practice they don't really seem to check the data back and form between the income tax forms and the FBAR forms unless there is some huge anomaly.
Cheers,
Bev


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## BBCWatcher

I agree with Bev. Simply make sure your reports are truthful and complete to the best of your ability. If you discover an error or omission in a past report, send an updated form with a letter of explanation.

The only other option is to not be truthful, in which case you risk prosecution (fines and prison). The U.S. Treasury Department helpfully describes what those penalties are on the FBAR form.

So, fill out the form truthfully, and don't worry about what you cannot control (the U.S. government's reaction to your truthful report). If they send you a letter asking questions, you answer the questions truthfully. I am quite confident that the U.S. government would be MUCH more interested in what you're not telling them if you're not telling the truth.

As other examples, there are plenty of people who buy homes (or other big things). There are plenty of people who have signature authority over business accounts. There can be comparatively vast amounts of money flowing through these accounts (and reportable) compared to current income. That's all perfectly normal. Maybe the U.S. government will be curious about that, but there's nothing you can do about that curiosity. The coverup is ALWAYS worse than the crime in these matters, especially when there is no crime!

Filing truthful and complete reports? Relax, sleep well. There's way too much worrying in the world -- we Americans seem particularly prone to worrying -- and it's quite pointless.

On edit: This is a pretty common facet of criminal law. Al Capone wasn't thrown in prison for murder and extortion, but he was thrown in prison for tax evasion. FBAR and FATCA are rather black and white, and there are criminal penalties associated with noncompliance. If you aren't doing anything illegal, no problem. If you are doing something illegal, it still could be a great idea to comply with FBAR and FATCA because FBAR (at least) has its own independent penalties for noncompliance. As an example, there are supposedly small prostitution businesses that are fully tax compliant simply because they don't want to double or triple the legal penalties if they're discovered.

Anyway, the point is that either way it's a very, very good idea to file truthful and complete reports.


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## DougP

Thanks for these comments. There are probably good reasons Americans are prone to worry, especially in light of FATCA and its implications. I think the fact that banks will be sharing info on accounts sheds a whole new light on things, to the point where 'just estimating' or 'rounding' etc. become more and more risky. A lawyer advised that I send amended FBARS for the past 3 years in which I underreported the $ sums in my foreign accounts. 

Just a couple more clarifications, if you know the answers. Is it necessary to report on the FATCA and FBAR forms bank accounts linked to retirement (e.g., PERP) or insurance accounts not associated with any banks? Also, on the new FATCA form (form 8938) there is a column that asks 'Where reported - form/schedule and line'. Is it better to leave this blank if a large part of the account is just accumulated savings? If not, what does one put there?


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## BBCWatcher

I don't generally worry about things I can't control. I worry (a little) about filling out the forms correctly. I don't worry about what the government does with those accurate forms. There's no point.

Yes, by all means correct prior filings if you need to.

There's no penalty for reporting accounts you're not legally required to report. There is a penalty for intentionally not reporting accounts you are legally required to report. Consequently you should err on the side of reporting. If the instructions give you confidence you don't have to report a particular account, don't. Generally U.S.-style government social insurance work credits don't have to be reported, but if such accounts have a private and/or control aspect to them then they probably are reportable. Check the instructions, though.

You're referring to Part III of Form 8938. I think the instructions are pretty clear. In Part III you're supposed to list all the interest, dividends, royalties, gains/losses, deductions, and credits attributable to your foreign assets that appear anywhere else in your entire tax filing, then specify where each category appears. Anything not listed in Part III would have line 3d checked in Part I and/or Part II. For example, interest is normally reported on Form 1040 line 8a and on Schedule B line 1 at least (and perhaps elsewhere). If you can't fit what you need in the tiny boxes then you can put "See attached Statement 23" and, well, attach a piece of paper (with your Social Security number and full name) labeled Statement 23 that provides the information. (You'd number such statements consecutively of course. Hopefully you don't have 23 of them.)

Yes, this is tedious. Stipulated. It's kind of like doing a partial audit for the IRS. But they want to make sure your foreign accounts match your other tax-related reporting, so if you have to file Form 8938 you're providing some detail for them. Some accounts will have tax liabilities (before foreign tax credits anyway) and some won't, but the information is supposed to be consistent.


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## Bevdeforges

As I understand it, the full force of the FATCA stuff doesn't really come into effect until 2014, so I wouldn't worry about estimates and other "minor" adjustments to prior years' filings at this point. Going forward, I'd be inclined to err on the side of rounding "up" rather than down - but the FBAR reports are subject to far less scrutiny since they aren't directly related to your income tax calculations.

The way things currently work, I believe you do have to report income from investment accounts like PERPs and life insurance contracts, whether or not they are related to retirement. The US does NOT grant the same "courtesies" to retirement investment accounts located overseas as they do to US based IRAs or 401Ks.
Cheers,
Bev


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## DougP

Wow - it never occurred to me to add my French bank interest on the 1040 line for interest. That is akin to my investing my own money in France for US profit.


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## Nononymous

The US wants to see worldwide income, and interest from an overseas account is income. 

However, as you presumably paid French tax on French interest income, that amount would be credited against anything owed to the US, and the US would likely not see a dime. 

So no US profit - in fact quite the reverse, as the IRS gets to process the paperwork but receives nothing in return.


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## BBCWatcher

Exactly. French bank interest goes on the taxable interest line on Form 1040 and (if required) on Schedule B. Tax paid on that interest comes out via the Foreign Tax Credit. If the French tax is higher than the U.S. rate then you'll get excess FTC which can be used to offset other U.S. tax liabilities.

I'm puzzled why you'd assume interest from a French bank wouldn't be included. The form asks for interest, not American interest (or domestic interest). Words and the absence of words have meaning.


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## Bevdeforges

DougP said:


> Wow - it never occurred to me to add my French bank interest on the 1040 line for interest. That is akin to my investing my own money in France for US profit.


The US requires that you report your worldwide income - as does France. Though France does allow you not to report income earned on your US IRA and/or 401K or other retirement plan, usually because these meet the definition of a "life insurance contract" under French tax law. I declare my US retirement funds as "foreign life insurance contracts" on our French declarations, just to make sure there are no "misunderstandings" later on.
Cheers,
Bev


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