# 86 year old US senior citizen, UK resident, no FBAR or Filing



## NotanAccountant (Apr 6, 2014)

I came on here looking for information and saw that the first thread ( HERE) had a lot of similarities to the situation I have, and some potentially key differences.

The person I know is 85 years old, a US citizen who moved to the UK with his UK wife in the late 80s. Both have been retired since then (no earned income).

He hasn't filed a return in about 20 years and knows nothing of FBAR.

When they came to the UK they were advised that it would be better for the wife not to exist as far as the IRS were concerned, so he says he filed as "single", although I think it may actually have been "head of household", they had a child in school at the time. He filed up until about 20 years ago, when, he says, he qualified as a Senior Citizen and his income (wholly from savings interest and Social Security) was under a threshold.

He never rescinded US citizenship because he was worried it would cancel his US pension, which is the only pension they receive. 

He does have savings which he has put by to pay for his nursing home care. 

From what I have read, he should have been filing FBAR ever since he moved to the UK in the 80s. While it isn't too onerous these days, filing on-line, he is completely computer illiterate, doesn't own a computer or smart phone. 

I haven't broached it with him since I don't want to scare him, but I am worried. As I read it, he probably was right that he was under an IRS filing threshold, while there was a child in the house, but since the youngster fledged, the threshold for a single, much less a couple, is different and he should have been filing, even though his income is still below the threshold where he would owe anything.

Filing my returns and FBAR takes me about four days, and I have my banking on-line, and a spread sheet, and recent passed forms to go from, and my income is simple wages, no investments. Even if he successfully navigates the Streamlined process, he isn't up to doing his own returns into the future and with either need help, or pay a professional. With his lack of IT, it is going to be a heavy burden any which way.

Clearly he was on their radar 20 years ago, and his citizenship is known to his bank, which does do business in the US.

I don't want to damage our friendship by pressing him to file things, especially if there is a risk of penalties, and ongoing worries and costs, but I fear what could happen to his health, not to mention savings, if the IRS were to come after him one day. 

How much danger is there of the IRS / Treasury coming after him? Further, how often does the US use their Assistance Agreements to get non-US banks to simply confiscate funds?

Best regards
N.a.A.


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## Bevdeforges (Nov 16, 2007)

NotanAccountant said:


> I
> How much danger is there of the IRS / Treasury coming after him? Further, how often does the US use their Assistance Agreements to get non-US banks to simply confiscate funds?


Virtually none, zilch, nada. Leave the poor old guy alone and let him enjoy his "golden years" in peace. (Sorry, don't mean that to be nasty. But seriously, if they haven't "caught" him this far, they aren't going to.)

US Social Security is taxable ONLY by the UK in his situation. (Read the tax treaty and it says that in the IRS publication on Social Security - Publication 915.) As a "single" or even as "married filing separately" the new standard deduction is $13,600 for someone over age 65, or for those filing jointly (where both spouses are over 65) $26,600. (Your friend would have the option to file jointly with his NRA spouse if he so chose.) So the first $26,600 of income is free of US taxes anyhow.

As far as FBAR is concerned, the Treasury Dept. only worries about filing if they have some reason to "suspect" something on the 1040. There is no evidence that they have ever bothered anyone about "failure to file" an FBAR just for the fun of it with no ongoing tax return audit. 

Let sleeping dogs lie. The IRS isn't going to bother him.


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## Nononymous (Jul 12, 2011)

Yep. If it ain't broke, don't fix it. I would think the risks to his health and well-being would stem from attempted compliance, not the other way round.

There is no collection assistance agreement between the US and UK so no means by which the IRS could collect if they somehow discovered his existence and decided that he owed them money.


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## NotanAccountant (Apr 6, 2014)

Thank you for your replies. I will do as you say, and let things lie.

Regarding the collection agreement...are you sure?

https://www.escapeartist.com/blog/irs-levy-of-a-foreign-bank-account/

_"Specifically, the IRS can seize assets in any country with which the U.S. has a Mutual Collection Assistance Request Agreement. Nations that have signed on to this agreement are Canada, France, Denmark, Sweden, Netherlands and the U.K. Any assets in these countries are at risk of IRS attack."_

Thanks again.
N.a.A


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## underation (Oct 25, 2018)

NotanAccountant said:


> Thank you for your replies. I will do as you say, and let things lie.
> 
> Regarding the collection agreement...are you sure?
> 
> ...


Only the first five. 

https://www.irs.gov/irm/part5/irm_05-021-003#idm140468979514352

And the IRS can’t “seize assets” in those five countries. The IRS can request assistance in the collection of an assessed tax debt - provided the debtor isn’t a citizen.

You can see in the UK treaty that there is no such agreement between the US and the UK.

Not that it matters, since from the details you’ve given (hopefully with his permission?), your friend doesn’t owe any tax to be assessed.


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## Bevdeforges (Nov 16, 2007)

This is, unfortunately, a perfect example of the kind of "shock and awe" thing the IRS relies on to scare people into compliance. If they were to, for any reason, decide to take someone on for "noncompliance" they would first have to contact the person to inform them of the possible "violation." If your friend hasn't received any such notice, then their accounts are certainly not at risk.


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## Nononymous (Jul 12, 2011)

Bevdeforges said:


> This is, unfortunately, a perfect example of the kind of "shock and awe" thing the IRS relies on to scare people into compliance. If they were to, for any reason, decide to take someone on for "noncompliance" they would first have to contact the person to inform them of the possible "violation." If your friend hasn't received any such notice, then their accounts are certainly not at risk.


And for a person in the UK, even one who is only a US citizen, their UK accounts are not risk even if the IRS has found them and invented a "violation" because there is no mechanism by which the IRS can collect. Payment of taxes and penalties is a voluntary contribution to the US treasury, nothing more.


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## Nononymous (Jul 12, 2011)

That "escape artist" piece is dead wrong on several counts.

1. The UK is not on the list of countries with mutual assistance in collection agreements.

2. The mutual assistance in collection rules do not apply for citizens of the five countries, if they are living in their country of citizenship. 

3. The IRS cannot directly seize assets in any of those five countries - they must go through the national tax authority. (I've heard of it happening precisely twice, to an American in Canada and to a Dane in the US.)

4. The idea that the US can take money from your foreign account if the bank has branches in the US is false. They tried that once with a major bank in Canada. The bank agreed to give the money to the IRS, and removed it from the customer's Canadian account. The customer took the bank to court and won. The IRS wasn't interested in returning the money, so the bank was out some cash. Needless to say, this won't happen again.

In conclusion, beware of dumb scaremongering nonsense you find on the internet.


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## underation (Oct 25, 2018)

underation said:


> ...from the details you’ve given ... [the UK-resident US citizen] doesn’t owe any tax to be assessed.


Except of course to HMRC. Presumably UK tax returns have been filed every year to report the US SS pensions, and any other US-source income, and pay the UK tax due.

If this hasn’t happened - perhaps because the US citizen mistakenly thought the pensions were tax-free - it would be best to contact HMRC a.s.a.p. to get it sorted.


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## underation (Oct 25, 2018)

Also: it’s possible that under the US-UK totalisation treaty, the US citizen and his UK citizen wife may each be entitled to a (small) (UK-taxable) UK State pension if he, and/or she, has at least one year of N.I. contributions. The DWP should be able to advise. 

Likewise, if the UK citizen wife has worked in the US, under the totalisation treaty she may be entitled to a (small) (UK-taxable) US SS pension in her own right. The FBU at the London Embassy can advise, if you keep ringing long enough to get a human to speak to. If so, the resulting pension would not be subject to the Windfall Elimination Provision (WEP).

See https://www.ssa.gov/pubs/EN-05-10199.pdf for more information.


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## underation (Oct 25, 2018)

NotanAccountant said:


> As I read it, he probably was right that he was under an IRS filing threshold, while there was a child in the house, but since the youngster fledged, the threshold for a single, much less a couple, is different and he should have been filing, even though his income is still below the threshold where he would owe anything.


His Social Security is exempt from US tax under the US-UK treaty. 

If the interest is being earned by US-source savings, US tax is presumably being withheld. He might or might not be able to reduce his US tax if he filed. 

If the interest is UK-source, and has been fully taxed by the UK, he can either file and claim US tax credits, or he can just not bother.

However, if the interest is UK-source and has _not_ been fully taxed by the UK, by filing US returns and reporting the interest as US-taxable he would effectively be volunteering to pay US tax for which he can’t claim UK tax credits. 

So, if the interest is UK-source, filing a US tax return is not necessary and is not in his interest.

The idea that expat US citizens should file US returns “to be on the safe side” is the opposite of the reality. Filing a US return may be necessary or may be advantageous, but no way is it the safe side.


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## Bevdeforges (Nov 16, 2007)

underation said:


> His Social Security is exempt from US tax under the US-UK treaty.


Right. See IRS Publication 915 if there are any doubts. 



> If the interest is being earned by US-source savings, US tax is presumably being withheld. He might or might not be able to reduce his US tax if he filed.


Not necessarily - a US citizen has to request withholding on most sorts of savings or investment accounts. The banks certainly don't do so automatically.


> If the interest is UK-source, and has been fully taxed by the UK, he can either file and claim US tax credits, or he can just not bother.


Filing for the Foreign Tax Credit may not be that straightforward. I'd lean toward the "just not bother" approach.

Since the OP states that the US citizen's income is entirely from "US pension" and savings interest, and chances are that US pension is US SS (from other comments made), the only potential taxable income is the savings interest. Seeing as where the gentleman has every right to file jointly with his wife, their standard deduction in 2018 is already $26,600 (filing joint with both spouses age 65 or over). If they're making more than $26,600 in savings interests, they're sitting on a huge stash of money, which I really doubt is the case here.

With $0 tax due, there is no way the IRS is going to waste time bothering them, or even looking into their situation.


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## underation (Oct 25, 2018)

Bevdeforges said:


> Right. See IRS Publication 915 if there are any doubts.


Or the UK-US treaty, which gives taxing rights on social security payments exclusively to the residence state.




> Not necessarily - a US citizen has to request withholding on most sorts of savings or investment accounts. The banks certainly don't do so automatically.


Thanks for the correction. In that case, presumably the taxpayer can choose between requesting withholding or filing a return to report the interest and pay the tax due?



> Filing for the Foreign Tax Credit may not be that straightforward. I'd lean toward the "just not bother" approach.


That’s interesting. Why might there be a problem with claiming FTCs?



> Since the OP states that the US citizen's income is entirely from "US pension" and savings interest, and chances are that US pension is US SS (from other comments made), the only potential taxable income is the savings interest.


As I understand it, all the income mentioned is taxable by the UK or by the US. Am I wrong?



> Seeing as where the gentleman has every right to file jointly with his wife, their standard deduction in 2018 is already $26,600 (filing joint with both spouses age 65 or over). If they're making more than $26,600 in savings interests, they're sitting on a huge stash of money, which I really doubt is the case here.


It certainly won’t be enough to pay his nursing home costs if isn’t a huge stash of money.



> With $0 tax due, there is no way the IRS is going to waste time bothering them, or even looking into their situation.


Of course. If no US tax is due, and there’s no need to file to claim a refund, there’s no incentive to file a US tax return, and no risk in not filing. The risk, as I said, is in filing a US return unnecessarily.

On the other hand, when it comes to HMRC, the risk is in failing to file a return and pay tax on the UK-taxable income (the social security, and possibly the interest.


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## Bevdeforges (Nov 16, 2007)

> Thanks for the correction. In that case, presumably the taxpayer can choose between requesting withholding or filing a return to report the interest and pay the tax due?


Banks in the US usually don't offer the "option" of withholding taxes. The interest will, however, be reported by the bank to the IRS on a form 1099 (assuming a US bank). For a non-US bank, there's no option to have US tax withheld anyhow.



> Why might there be a problem with claiming FTCs?


Read the instructions for the FTC form 1116. 



> As I understand it, all the income mentioned is taxable by the UK or by the US. Am I wrong?


I thought we were discussing the US taxation issue. I'm referring to the US taxation of the items the OP mentioned. This discussion has nothing to do with UK taxation of the items under discussion.


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## underation (Oct 25, 2018)

Bevdeforges said:


> Read the instructions for the FTC form 1116.


No thanks. 



> I thought we were discussing the US taxation issue. I'm referring to the US taxation of the items the OP mentioned. This discussion has nothing to do with UK taxation of the items under discussion.


OK. In any case, I expect the OP’s friend is indeed filing his UK tax returns, as it sounds to me like he has got his head screwed on pretty well when it comes to taxes. My comments were addressed to the OP - discussing why (IMO) the friend is probably being sensible rather than risky in not filing US tax returns. But I will say no more.


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