# Foreign account self disclosure, timing



## Anin99 (Nov 26, 2016)

I am US resident alien , I received FATCA letter from German bank. 
Self-disclosure has to be back at bank in a few weeks (had extension) with W9. Presumably, the IRS gets the information from the bank right after.

I have two undisclosed accounts, one less 5K (in bank that sent the letter), another at different bank with just a little more than 50K. I want to do self-disclosure, I do not know yet know my path, and how. 
Question
What to do right now, this week, before the IRS contacts me? 

Is it advisable to contact the IRS myself with a letter, or in person, letting them know I want to disclose? Is it more advisable to hire a lawyer immediately, just to announce to the IRS? From all I have read, you want to contact the IRS before they contact you.
Apparently some lawyers think this kind of announcement to the IRS is only possible with the form of self disclosure called OVPD, but the IRS itself on their website says you can write a letter yourself to the IRS ,or an attorney files form 2048 for you 
Has anyone written the announcement themselves to the IRS? 

I am unable to get my records together so fast from 6 years back to file FBAR or delinquent tax returns. 
I am a small fish with some money in the country, I was born in. I had many family obligations there to need accounts there. I am completely non-willful, and I had absolutely nothing to gain by not disclosing in the USA. I loose money with the self-disclosure, possibly high legal fees and penalties.

I did not know about FATCA or FBAR at all . 
I did not need to file taxes in US due to receiving disability benefits (not taxable) in connection with an illness since I guess this law came into effect 

I paid full taxes on assets in Germany, but did not report assets in the USA. I did not have to file taxes here, in addition, even if I add up all interest and dividends, I do not get to threshold for filing. I do not owe past taxes on the foreign accounts. I really should not pay penalties

I appreciate any response from you. I am stressed.


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## Bevdeforges (Nov 16, 2007)

First of all, take a deep breath and try to relax. The "auto-disclosure" thing is not that stressful and actually won't have all that many consequences unless you're hiding vast hordes of money somewhere. (And even $50,000 doesn't qualify as a vast horde.)

First of all, fill out the form from the German bank and send it back. Chances are it's a W-9 or W-8BEN or something similar. Basically all they want is your US SSN and an indication of whether or not you are a US citizen (so as to make any withholding arrangements that are necessary). But once you send them back the form, it's all in their court. No, they will not "immediately" turn any of that information over to the IRS. They have a reporting requirement for "US persons" but not for an account of only $5000. And even at that, they send in the information only at the end of each year for all US persons (or suspected US persons) in their files.

As for the other account, you may want to start filing FBARs (or FinCENs as they are now called). You just have to report the accounts (both of them - the threshold is based on the accumulated total in the accounts, not the individual account balance) and the high balance for the year. It's perfectly acceptable to estimate what the high balance might have been - they really don't check these things too closely. Start here: https://www.fincen.gov/report-foreign-bank-and-financial-accounts

To get up to date on it all, you can file 6 years of back filings, though at the moment, you could probably get away with just starting to file now and see if they contact you. (Chances are they won't.) If you backfile, just make a good faith estimate of the high balances for the prior years.

You say you haven't had enough income to file while in the US - so that means you're done. Going forward, if and when you do have to file US income taxes, just include the income from the foreign accounts and take any taxes you paid as foreign tax credits (form 1116). But until you have to file income tax returns, your only obligation is the FBARs, and those are pretty easy to fill out on your own.
Cheers,
Bev


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## JustLurking (Mar 25, 2015)

Bevdeforges said:


> First of all, fill out the form from the German bank and send it back. Chances are it's a W-9 or W-8BEN or something similar. Basically all they want is your US SSN and an indication of whether or not you are a US citizen (so as to make any withholding arrangements that are necessary).


Just to shade this a little, because otherwise it could mislead...

What the German bank wants to know is whether or not the OP is a '_US person_'. This classification is wider than '_US citizen_' because it encompasses non-US citizens such as green card holders, people living in the US under various work-related visas such as H1B and L1, and so on. _US persons_ file the W-9.


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## Bevdeforges (Nov 16, 2007)

JustLurking said:


> Just to shade this a little, because otherwise it could mislead...
> 
> What the German bank wants to know is whether or not the OP is a '_US person_'. This classification is wider than '_US citizen_' because it encompasses non-US citizens such as green card holders, people living in the US under various work-related visas such as H1B and L1, and so on. _US persons_ file the W-9.


Exactly. If what they have sent you is a W-9, just read the instructions before you fill it out and return it. If what they have sent is their own form (perfectly allowable - these forms are not submitted to the IRS directly), be sure to do the same. But what they are looking for are "US persons" - US residents, citizens and probably a few other technical categories, too.

Point is, your information will be reported en masse with everyone else the bank has for US person customers at the end of the year - and at this point, all that is reported is the year-end balance (not even the same figure as what you are supposed to self-report on the FinCEN filing). 
Cheers,
Bev


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## iota2014 (Jul 30, 2015)

Am I missing something? If the OP is resident in the US and has an account over 50K (at end-of-year), isn't 8938 required?


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## JustLurking (Mar 25, 2015)

iota2014 said:


> If the OP is resident in the US and has an account over 50K (at end-of-year), isn't 8938 required?


Not unless an income tax return is required for the year. Addressed here:


> If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold.


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## Bevdeforges (Nov 16, 2007)

iota2014 said:


> Am I missing something? If the OP is resident in the US and has an account over 50K (at end-of-year), isn't 8938 required?


Not if the OP doesn't have to file a tax return (due to insufficient income). I've got a friend whose taxes I help with. She has a whopping big account in Itally - into 6 figures at last count - but she has only a couple hundred $ worth of declarable income (mostly bank interest).

Because she files single and is over 65, what reportable income she has falls well under the filing threshold. And I checked it - if you do not need to file a tax return, then you don't need to file a 8938.
Cheers,
Bev


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## Anin99 (Nov 26, 2016)

First, thank you all so much for your answers. 
I still am learning how to reply using quotes. Do not know how yet. 

First thanks BEV for your information: 
"German bank will send the year end balance sort of at the end of the year ". 

They probably will do so, as I am as US -person (resident alien) what concerns tax. 
The German Bank might not report me because of low account balance, but I do think they will send the W9 to the IRS.

I feared this might happen immediately because this little German country bank has few people like me, and they are likely to be quite diligent. That is why I asked about the letter to IRS immediately.
My concern was also founded in the fact that same small bank has just recently transferred moneys, 50K, to my American account. This was money, which was wired to me by another customer of his or her bank for my share in a sale of a house there. The German Bank needs to make sure; I am taxed on this money if not in Germany than here (need to file in a 2016 return).

Anyway, I am absolutely speechless that I just would have to file the FBARS.
(I have a question regarding FBAR, but will ask separate)
Your argument BEV is "since I do not have enough income, I do not have to file in the US". This makes perfect sense to me 

May I ask you this? 
The IRS says the FBAR penalty is waived when you have also reported you foreign accounts income in your tax return. I did not report the income in a tax return) and if I had done so would be still under the reporting threshold)
There is no statement on the IRS web page for FBAR and people who did not have to file tax returns. I was too scared to call the IRS.
That was the place where I was stuck; I did not have to file tax returns

You made it clear Bev no US tax return necessary, I assume also not past three-year tax delinquent tax return.
Unbelievable, given the money I would have had to pay for lawyers
I agree, there is no requirement for 8939 if you do not have to file taxes.

JustLurking, I would have really like to see the link "here", but I got a blank page.
. 
I asked myself before the post here , should I now file the last three years of tax returns, just to report my foreign accounts as delinquent returns ( even though I am under threshold) and just because I need to do so to file FBARs and avoid penalty . 

The IRS web page states, one must have reported the foreign assets in tax returns, as well to not to get a penalty .Required is amendment or file delinquent. I must have missed something.

Yes, I asked several lawyers on the phone about my requirement to file three years back in taxes. I got no clear answer if this also hold true for persons who do not need to file tax returns 
I heard expensive solutions, like streamline ( legal fee plus 5% penalty )or the other version, called delinquent international information returns with a letter of reasonable cause ( no penalty) , but also legal fees 5000 - 7000$ . 

All these fees are founded in the fact; I would have to file delinquent tax returns. (With foreign mutual fund, lots of work) 

Just doing FBAR would be so great


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## Bevdeforges (Nov 16, 2007)

First of all, the bank will not send the W-9 to the IRS because it says clearly in the instructions for the form that this is a form that the bank should hold onto. It is NOT something that is sent to or filed with the IRS.

In any event, this explains the differences between the two filings: https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements
Technically speaking, you don't file FBARs with the IRS but with another office of the Treasury Department. They are related, but not the same office.
Cheers,
Bev


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## JustLurking (Mar 25, 2015)

Anin99 said:


> ... Just doing FBAR would be so great


That is what I would do, if I were in your shoes. All of the 'expensive' options -- OVDP, domestic streamlined, anything involving accountants or lawyers -- are vast overkill and make no sense here.

File the back FBAR(s), selecting "didn't know I had to file". Close the German account(s), or at least reduce them to well below FBAR limits. Wire the cash to the US and invest there as you like. In the process, be sure to get rid of any German and/or non-US mutual fund holdings, as these are completely toxic from the US tax perspective. If you must hold money in Germany, use only vanilla interest or current accounts.

Then just get on with your life.


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## Anin99 (Nov 26, 2016)

Thank you both. 

So what I am gathering overall from this , 
in my case , I need not be concerned about “penalties” called for by the IRS of not having reported the foreign funds in my tax returns with the IRS as I did not have to file taxes prior, and will not do now.

I have some questions re FBARS, Bev


I guess. I file my delinquent FBARS in the same place as all others file their FBARs, the link you gave me. Each account, each year , just one after the other? 


I learned from the IRS website, and other websites, there is an option to explain late filing , one can say “I did not know of FBAR “ which is what is true for me. One assumes that is sufficient for non-willfulness. 
There seems to be another option under “other”, where one can give a longer explanation . I wonder whether this better for proofing non-willfulness? 




My most important question, prior 2013, I have had two more accounts in addition to the two I spoke of in year prior. I have a FBAR reporting question regarding them.!!!!
Both were a CDs. They both changed accounts numbers within the year, because the CD ended 
So for example in 2013 year 5 K will appear in one account as well as in a second account . It is the same money, but in reporting it in two accounts it looks like I have 10K in foreign assets that year I may even have some point have transferred 3K in that same year to a checking account . So to the treasury or IRS it looks like my 5K were 13K in that year when I report all my accounts .

There seems to be no place when filing FBARS to explain this, is there? . 
I would be reporting more money than I actually had. Would this not be noticed by the IRS? 

PS: You are correct , JustLurking, to advise me to get rid of the German mutual fund ,as I just learned myself .( PFIC) .
But just as info to the readers, the tax on the entire capital gain is taxed in Germany at point of sale 28% , this is what I understand so far . ( no capital gain taxed yearly basis) All transfer of funds reported to IRS by German central tax agency, needs explanation than as well.


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## Bevdeforges (Nov 16, 2007)

Anin99, you're really overthinking this.

The FBAR is a simple report of overseas accounts. And what you report is the "high balance" for the year, not anything regarding total balances or year-end balances or whatever. If you transfer money from one account to the other, yes, the transferred amount will show up in both accounts - but that happens all the time and whoever it is who collects this information realizes that. 


> I learned from the IRS website, and other websites, there is an option to explain late filing , one can say “I did not know of FBAR “ which is what is true for me. One assumes that is sufficient for non-willfulness.


The simple fact that you didn't know you had to file is all the proof you need of "non-willfulness." Anything you put in the "other" category is just further complication.



> ) All transfer of funds reported to IRS by German central tax agency, needs explanation than as well.


At the moment, the only thing that the Germans report to the IRS are the year-end balances in your accounts. They only report "transfers" that are into or out of the US - and that's handled by the banks making the transfers (and only on individual transfers for $10K or more). 

Frankly, at this point, the FBAR reports are only used as a point of reference should anything "odd" crop up on your income tax returns. At your levels, they're basically filed away and forgotten unless you suddenly leap onto the IRS radar somehow. But under a million dollars or so in an account or an inordinately huge number of small accounts, chances are they'll never really be looked at that closely.
Cheers,
Bev


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## Anin99 (Nov 26, 2016)

*Foreign account self disclosure, timing -*

Thank you very much.!!! 

I really appreciate your help with this.
I am off to gather my balances for the FBARS..
I guess, I was over- thinking this, because I had read about all these penalties and was scared.

Just to clarify, 
when I spoke about “_money transfers” being reported to the IRS _, I did not mean money transfers between accounts in Germany.

I was talking about the transfer of larger amounts of _money from Germany to the US_. I was simply commenting on JustLurking's recommendation to me, to dissolve the mutual fund in Germany, and then send the money to US. I figured ,when I sent over 50K to the US, I must explain this to IRS as well .
This is, where my head was at.


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