# US taxes: To FATCA or not?



## Guest

Hi,

I am getting ready to start my 2011 U.S. tax package and am trying to go carefully, so I'm hoping to hear from a few others who will not need to file FATCA informations (Form 8936). Of course, I want to be sure that I'm proceeding correctly in not filing! My own circumstances are "simple" (I think): 

1) married, filing separately (U.S. citizen with Canadian spouse)
2) less than $100,000 U.S. in assets (includes those I hold solely and jointly) in any of the described foreign financial institutions (or anywhere for that matter  - would be nice to have a little more )
3) no signing authority over anything except my own stuff
4) I've read in numerous articles and discussions and done a little digging with the IRS to make sure that my jointly-owned principle residence is NOT included (it is NOT :clap2.

Any thoughts on anything I might have missed? Bev, I think you posted somewhere that you won't have to file FATCA either. Did you do a little checklist, too?


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## Omater

CanadianAtHeart said:


> Hi,
> 
> 4) I've read in numerous articles and discussions and done a little digging with the IRS to make sure that my jointly-owned principle residence is NOT included (it is NOT :clap2.
> 
> Any thoughts on anything I might have missed? Bev, I think you posted somewhere that you won't have to file FATCA either. Did you do a little checklist, too?


I would love to see a checklist! What determines if you have to report a jointly owned residence or not? 

Good questions!


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## greyowl

I am interested in this as well.


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## Bevdeforges

This is the closest thing to a checklist that the IRS puts out: Do I need to file Form 8938, ?Statement of Specified Foreign Financial Assets??

Note especially under #3 (which discusses the thresholds for filing) that taxpayers living abroad have significantly higher thresholds for filing than do US residents.

If you still wind up having to file (or think you do), download and read carefully the instructions for form 8938 http://www.irs.gov/pub/irs-pdf/i8938.pdf

On page 4 of the instructions, they specify what they mean by Specified Foreign Financial Assets and on page 6 they list specific exemptions from reporting. On page 4, be sure to read the whole section because they mention specifically the definition of "assets held for investment". If you are not holding a given asset as an investment, it seems you don't need to report it. This would seem to apply to stock in a small family operated business, where you are declaring your salary as earned income. (We've had inquiries about this in the past.)
Cheers,
Bev


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## Guest

*Definitions*

Hi,
I did use the Form 8938 instructions for sorting it out and then did the following to confirm about principle residence (as in the place where you live and don't use as any specified form of investment or income):

1) Checked the IRS definition of "foreign estate" (IRS definitions Section 7701a(31) because I wasn't sure what they meant by "estate":
(31). Foreign estate or trust. - The terms "foreign estate" and "foreign trust" mean an estate or trust, as the case may be, the income of which from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, is not includible in gross income under Subtitle A.

2) I was clearer on the definition, but still not certain, so I decided my best bet was to talk to the IRS. I called (34 min. wait) and was assured that my principle residence should not be included under the circumstances I described (though I am distrustful of any clarification or information I receive from them because it can change at any time). 

3) I'll post just one article, though there are several out there, where it states that real estate does not need to be included. See Paragraph 14: New IRS rules demand more info on foreign holdings - Yahoo! News

Please accept my apology in advance for going through this in so much detail and being so needy . I'm still very concerned about NOT filing these forms, even though I am below the threshold. I guess I'm spooked because of not knowing about FBAR filings and trying to get through that. It is a little scarier that I DO know about FATCA, but don't seem to need to file. I even contemplated outlining my assets (without acct. numbers) and attaching a note to my 1040, but that just seems stupid when I really think about it. I just don't want this to come back to bite me!


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## Guest

Omater said:


> I would love to see a checklist! What determines if you have to report a jointly owned residence or not?
> 
> Good questions!


Sorry, Omater, I missed your question. What I meant by "jointly owned residence" is basically the home that my spouse and I own and live in as our only principle residence. We don't rent any part of it, don't operate any type of business from it, etc. We just live in it and it is the only place we live. Both our names are on the deed, so, for me, that constitutes jointly owned. Hope this clarifies!


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## SteveOdem

CanadianAtHeart said:


> Hi,
> I did use the Form 8938 instructions for sorting it out and then did the following to confirm about principle residence (as in the place where you live and don't use as any specified form of investment or income):
> 
> 1) Checked the IRS definition of "foreign estate" (IRS definitions Section 7701a(31) because I wasn't sure what they meant by "estate":
> (31). Foreign estate or trust. - The terms "foreign estate" and "foreign trust" mean an estate or trust, as the case may be, the income of which from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, is not includible in gross income under Subtitle A.
> 
> 2) I was clearer on the definition, but still not certain, so I decided my best bet was to talk to the IRS. I called (34 min. wait) and was assured that my principle residence should not be included under the circumstances I described (though I am distrustful of any clarification or information I receive from them because it can change at any time).
> 
> 3) I'll post just one article, though there are several out there, where it states that real estate does not need to be included. See Paragraph 14: New IRS rules demand more info on foreign holdings - Yahoo! News
> 
> Please accept my apology in advance for going through this in so much detail and being so needy . I'm still very concerned about NOT filing these forms, even though I am below the threshold. I guess I'm spooked because of not knowing about FBAR filings and trying to get through that. It is a little scarier that I DO know about FATCA, but don't seem to need to file. I even contemplated outlining my assets (without acct. numbers) and attaching a note to my 1040, but that just seems stupid when I really think about it. I just don't want this to come back to bite me!



IRS admits the error rate on the phone line is varies around 50-60% depending on the year.


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## pauly.mcnamara

I am having a dilemma on whether I should submit FATCA form or not. My situation is as follows: 

My wife and I live in the US and file joint tax returns
I have approx. $150K worth of savings jointly with my mother (non US citizen) outside the UK; hence my share is $75K

From instructions on form 8938, if a tax-filer is filing jointly with their spouse, the amount money abroad for reporting purposes is $100K and above but if filing jointly this is $50K. 

However, I was unable to determine whether if only one US spouse has assets abroad and other does not and they both file joint tax-returns, then what should I do? From the rules of filing jointly with my wife, I am safely within the $100K requirement hence no need to file; however, because I solely have these outside and not my wife, I wonder if maybe I am required to file as single tax payer threshold is $50K. 

Any suggestions anyone? Thanks


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## Bevdeforges

You're definitely NOT required to file as single, nor are you required to file separately solely due to the joint holdings.

The instructions for this new form are indeed pretty vague for someone in your situation. Have you been declaring your share of the interest from the account you hold jointly with your mother? If you have, I'd continue to do so, and then report the account on your Treasury form (the FBAR form that you send separately to the Treasury Dept) as an account you have a joint interest in - according to the instructions on that form.

Whether or not you file the FATCA form (8938) is your call. If they come back and say you didn't file it and should have, your defense is that, as joint owner, you declared the account and your share of the interest, and by your reading of the instructions, you fell under the threshold amount for filing. As long as you're not "hiding" the account (by not including it on the FBAR form), you're clearly not "willfully evading" anything. Chances are they aren't going to bother with a borderline case like this when there are much bigger fish to fry out there.

OTOH, if that's all you have to report on the FATCA form and it will help you sleep at night, by all means, file it (and show them where you have declared any interest). Give them a little more work to do and maybe they'll re-think the rules for next year. (Well, we can always hope!)
Cheers,
Bev


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## SteveOdem

pauly.mcnamara said:


> I am having a dilemma on whether I should submit FATCA form or not. My situation is as follows:
> 
> My wife and I live in the US and file joint tax returns
> I have approx. $150K worth of savings jointly with my mother (non US citizen) outside the UK; hence my share is $75K
> 
> From instructions on form 8938, if a tax-filer is filing jointly with their spouse, the amount money abroad for reporting purposes is $100K and above but if filing jointly this is $50K.
> 
> However, I was unable to determine whether if only one US spouse has assets abroad and other does not and they both file joint tax-returns, then what should I do? From the rules of filing jointly with my wife, I am safely within the $100K requirement hence no need to file; however, because I solely have these outside and not my wife, I wonder if maybe I am required to file as single tax payer threshold is $50K.
> 
> Any suggestions anyone? Thanks


Shares are not relevant to either FATCA or FBAR. Title 31, USC, (NOT the Internal Revenue Code, Title 26) makes it clear the aggregate of all such accounts or assets, as appropriate, is what drives the reporting. If your name is on the account or asset, you are presumed to have the power, exercised or not, to do with the account or asset, AND you MUST report. 

There is no tax associated with either report (although income such as rent, interest, dividends, capital gains may produce taxable income, and shares may be relevant for those purposes), but failure to file required reports has obscene penalties plus interest.

Also, the US has treaties and information exchange agreements with many countries that provide for exchange of information. This is typically electronic - computer to computer.

I urge to to report.


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## pauly.mcnamara

Bev:
I have been lawfully reporting any interest earned on my last year's tax-returns as well as to FBAR as they were opened in 2010. 

Like you said, the instructions for this at present are very vague and that is what makes it so frustrating for someone in my situation as my threshold is above for a single filer but low for joint however, like you read above, this amount is solely in my name abroad and not with my wife.

Just to be on the safe side, we decided to report it and your comment at least gave us support in case we didn't nonetheless I need to sleep well at nights so very likely will end up reporting it  

Thanks for your help.


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## SteveOdem

Good choice ! ! !


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## Bevdeforges

Good choice! The rule of thumb I tend to use is, if in doubt, disclose. By disclosing everything, you at least open up the possibility of "discussion" should the IRS come back later and claim that you gave it the wrong treatment somehow.

It's when you fail to disclose something that they get really ugly and start accusing you of "hiding" things. And that's not good at all.
Cheers,
Bev


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## pauly.mcnamara

Thank you Bev and Steve for your suggestions


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