# Correcting back taxes if no money owed



## wdg (Apr 15, 2017)

Hi I was hoping for some advice on some really irritating back tax filing mistakes.

I did the streamlined procedures a few years back (2016) and have been doing my taxes on my own through 2018, but hired an account for the first time this year just as I got concerned that I may have been filing some things incorrectly.

Sure enough there was one issue: I have a couple life insurance policies here in Japan, for which I *have* been reporting surrender values on my FBARs. 

Unfortunately I did not report the increase in the surrender values (minus the premiums paid) as other taxable income in my 1040, etc. 

As it works out, these figures (increase in surrender value minus premiums paid) were negative this year and would also be negative in every past year, and all of my other income is well under the FEIE and so there would be no payments to the IRS in any of the incorrectly filed back years.

So my question is: should I go back and amend all of my past tax filings (back to 2015, when I first bought these life insurance plans) even though there is no possible outstanding payments? As I look at potential penalties for past reporting mistakes, they all seem to be percentages based on back money owed... so in that case there would be no potential penalties they could levy against me?

My account has said that they could do the past filings for me, but it would cost several hundred dollars for each year, so I would *really* like to avoid having to do that if there is no monetary penalty that I need to worry about from the IRS.


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## Bevdeforges (Nov 16, 2007)

If there are no taxes to be paid, I would just let sleeping dogs lie (as the saying goes). They're only going to "review" your returns if they have reason to believe that they can collect some additional taxes from you. And since you are reporting only the "high value" for the year on your FBARs, there is no point to them comparing any of that to your returns.

Let it go.


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## 255 (Sep 8, 2018)

wdg -- As Bev said, if there are no new taxes owed, i would recommend to not do anything. Just correct your error, going forward. If you owe taxes, you just need to complete a form 1040-X (a free fillable pdf on irs.gov.) No need to hire an accountant -- it's pretty simple. No need to amend past FBARs, in any case.

If you would like to take advantage of a potential refund -- you can only go back 3 years, again filing a 1040-X. In this case, you have a choice of taking a refund or designating that the refund be applied to a future year's taxes. Cheers, 255


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## Moulard (Feb 3, 2017)

A Foreign Life Insurance Policy on a US person even if they are not in the United States is deemed Insurance of a United States risk. 

Did your accountant file Form 720 with your returns? 
Did you pay the 1% excise tax on the foreign life insurance premiums?

If the answer is no, the chance of it being picked up increases each time one of your returns is touched by the IRS.


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## wdg (Apr 15, 2017)

Moulard said:


> A Foreign Life Insurance Policy on a US person even if they are not in the United States is deemed Insurance of a United States risk.
> 
> Did your accountant file Form 720 with your returns?
> Did you pay the 1% excise tax on the foreign life insurance premiums?


No, she did not file Form 720. I did see something about a 1% payment on insurance premiums somewhere on the internet and asked about it in my initial file submission to the accountant firm, but now that I think about it she never responded about that specifically. Did she possibly overlook it? Do all foreign life insurance policies always require a 1% excise tax?


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## Bevdeforges (Nov 16, 2007)

Moulard said:


> A Foreign Life Insurance Policy on a US person even if they are not in the United States is deemed Insurance of a United States risk.
> 
> Did your accountant file Form 720 with your returns?
> Did you pay the 1% excise tax on the foreign life insurance premiums?
> ...


I guess the issue is whether we're talking about "life insurance" in the US sense of the term, or "assurance vie" which is a form of investment that will pay out on the death of the holder of the policy - but usually is intended as a long-term investment so that the "insured" can benefit from tax advantaged withdrawals after retirement or at some other time in the future.


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## wdg (Apr 15, 2017)

I'm not really sure what you mean, but basically I get a defined payout if I die before 65 but also will be able to receive some small monthly (annual?) payment after I retire based on how much I pay through 65 (I pay the same amount every month, but the post-retirement amount I receive is based of the age I started paying)


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## wdg (Apr 15, 2017)

So I am reading about this Form 720 more and it sounds like I may legally be obligated to go back and pay quarterly excise taxes on all of my monthly premiums for the last six years, But I can't even file Form 720 unless I get an EIN as a sole proprietorship, which I cannot do simply to pay foreign life insurance excise tax?

From here https://www.kpateloffice.com/foreign-life-insurance-taxation/:

"We’ve have never seen the IRS enforce a Form 720 filing for foreign life insurance policies. At this time, it is not possible for a taxpayer to get an EIN solely for purposes of reporting an excise tax on life insurance premium. On the IRS’ own website under EIN eligibility rules it states that “You may apply for an EIN online if your principal business is located in the United States or U.S. Territories.” And when you begin the EIN application, you are required to choose the type of business entity for which you are the responsible party. Getting an EIN would require the taxpayer to falsify their purpose for applying for an EIN."


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## shuttermurgh (May 12, 2021)

Hello @wdg - did you face any issues for not filing Form 720? I am in a similar position where I forgot to file for a foreign life insurance policy in 2019, I filed the form 8631 and FBAR. I am nervous if I should file for tax year 2020 and if this might lead to an issue. I am most nervouse about criminal penalties since this was really an honest mistake


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