# fbar problem



## canuckusa

I'm a Canadian citizen living in US. No Green Card. My accountant never questioned me about foreign accounts, and never file the 8938/ or advised me to file Fbar over 7 years. I just discovered those requirements lately. Interest from Canadian mutual funds was reported on 1040 but I think there might be some misreporting due to the complex PFIC rules . Contacted lawyer that advised to join OVDI, which I am debating to join. Any advice?


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## Nononymous

Avoid OVDI at all costs. Get a new lawyer.


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## islander_expat

Please clear up something for me...if you are not an American citizen and you have no green card, why do you have a reporting obligation?


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## jbr439

Nononymous said:


> Avoid OVDI at all costs. Get a new lawyer.


Unless the intention was to evade (not avoid, evade) taxes, I second that. OVDI is for tax cheats. If you are not a tax cheat, you don't belong in it, IMO.

Submission of FBARs includes an option for reason for filing late. One of the choices is something like "didn't know I had to file". That would be OP.

Not realizing Canadian mutual funds are PFICs *should* be seen as an honest mistake. How the heck is any normal person supposed to know they're PFICs? Even the accountant apparently didn't know.

My 2 Canadian cents.


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## canuckusa

@ islander_expat islander: One is considered a US person for tax purposes by either holding the green card (United States LPR), being US citizen (born or naturalized) or by meeting the substantial meeting test ( which is the amount of days you are present in the US-) Most people holding work visas fall in the third category. 

-From what I've read, relying on accountant's advice to prepare tax returns is a reasonable cause for the IRS not to assess penalties. However, they take into account other factors like the taxpayer's education, under reported or unreported income etc to determine if penalties are assessed or waived. 

I don't think there is one best strategy to resolve those issues, but OVDI is not for minnows, that's for sure. 

And you have all those attorneys waiting to grab your money...


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## Nononymous

The lawyer was an idiot to suggest OVDI, that much is clear. He probably found it via Google, and will charge you for the advice.

I would take the view that if you've been reporting mutual fund income on your 1040s then you're clearly NOT trying to conceal the existence of those funds. Therefore you can safely say that your failure to file FBARs was due to your accountant's incompetence. Odds of a penalty would be pretty low.

The whole PFIC thing is intensely confusing and a very good justification for willful noncompliance...


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## canuckusa

The whole penalty regime is quite scary. One can hope a request for non-assertion of penalties would be granted, but still, it looks that having some unreported income puts one at risk of audit. On a more positive note, the current US-CAN tax treaty does not provide for assistance in the collection of US tax debts owed by Can citizens (if the Can citizen resides in Canada, and have no US assets). At least, that is comforting.


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## Nononymous

To date, no real evidence of penalties being assessed against "normal" taxpayers who were unaware of FBAR filing requirements.

The protection of Canadians in Canada is of relatively little use if you're living and working in the US, unfortunately.


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## islander_expat

Some tips I can give from when I first encountered this nightmare, not in any particular order.

The internet can be your best friend and your worst enemy, there are a lot of sites out there that are helpful but some can really increase your paranoia and sleepless nights. Get professional help! Talk to few attorneys, the OVDI isn't your only option.

Start collecting records....if you think it's worth mentioning or reporting you should get the records, it will speed up the process when filling out your returns.

Read publication 54......

I kept a spreadsheet of all my data(bank balances, income, taxes)and I used it to cross check the returns after the attorney prepared them.

Cross check your submissions....I was able to find a few small mistakes with the returns although I have limited experience.

Stop worrying......it's not healthy or helpful.


Good luck


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## canuckusa

Yeah. I think it's better not to panick and "googling'' too much. Anyway, I plan on returning to Canada this year or next year, so not sure to get this done...


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## canuckusa

Is it something advisable to ignore the whole thing if I plan on returning to Canada?


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## Nononymous

If I were in your shoes... I'd look into ignoring it. (I'm dual in Canada and I don't file anything.)

Two issues: 

One, apparently you reported Canadian investment income on your 1040s, so it's unlikely (given the bureaucracy involved) but theoretically possible that someone somewhere might make the connection and say, hey, where are the FBARs? (Assuming of course your Canadian accounts are over $10k total.)

Two, FATCA. While you are Canadian, if any of your Canadian accounts have a US mailing address linked to them, and they exceed a certain threshold, that may be reported to the US at some point after 1 July (you have a month to get that fixed). Now whether the US could or would do anything with that information is another question entirely. 

To the larger point, yes, ignoring this until such time as you return is distinctly possible.


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## canuckusa

I'm still weighing the pros and cons of each option. 

-the compliance route: 
cost involved in amending 3 years returns by a cross-border tax accountant
cost involved in getting bank records that I'm missing
Pay taxes and accuracy-related penalties with interest
risk of getting fined for fbar/8938 forms and PFIC forms


It is my understanding that the SOL would require me to amend 1040 for 2010,2011,2012,2013.

-the non-compliance route:
may cause problems crossing border in future if fines are assessed and not responded to. 
-money in transnational Canadian bank being at risk (freezing assets)- not to sure on that one?- would a levy attached to a us branch of a Canadian bank (CIBC, TD bank, etc) be honored in Canada? US-CAN tax treaty prevents collection from Canadian citizens but would Canadian banks be inclined to freeze or seize assets upon IRS request? 

Just thinking to take the most rational approach to making my decision.


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## Nononymous

I think that money in Canada cannot be touched, so once you and your assets are north of the border, you're good. 

My approach would be to insulate myself from FATCA by getting any and all US mailing addresses off Canadian accounts by 1 July, then lay low and assume that if they haven't figured it out yet, they won't figure it out before you leave the US.


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## canuckusa

I'm tempted by the non-compliance option. And act before Fatca kicks off. 
Let's say I get an audit letter when I'm in Canada, could I safely ignore it or CRA would force me into audit on behalf of US ? I talked to an accountant that also recommended compliance of course and OVDI. I guess that they feel pressured to advise that and fear being sued for malpractice...


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## Nononymous

Obviously you should not expect any security from the answers to questions asked on an internet forum. I would not presume to advise you.

However, I don't think there's much you can be forced to do when you're back in Canada as a Canadian citizen. CRA will only assist the IRS with the collection of tax debts owed by individuals who were not Canadian citizens when the debt was incurred. If you have US assets, or wish to travel to the US, that would become an issue IF anything were discovered and pursued.

Lawyers and accountants have a bias towards compliance, obviously. Not only will they earn fees, but it's an ethical issue for them to counsel against following the law. 

It seems to me that if you've been reporting the investment income on 1040s, you weren't concealing anything, you just didn't know about a whole lot of other reporting requirements. So there's a case to be made for continuing to play dumb, if you are indeed leaving fairly soon. And definitely purge your Canadian accounts of any US "indices" before FATCA comes into effect on 1 July.


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