# Experience of audit us abroad



## salrasheid

Hi..This year I concern more about my tax issues after the new regulations of FATCA . I review my income with bank deposit , i found alot of my deposit not reported , many of them are loans come out and come in from friends ,other are support to my brothers ( non us citizen ), and others from investing with a personal sharing fund distributing the profit as deposit in my bank account and later distribute between my partners without official agreement through local investor friend 
My questions as follow :
1- Do any deposit in my account cosider income even if it comes from my home cash. How can i prove it is not earned income
2- Is it enough to provide report income statement from work or i must obtain bank statement ( abroad ) and i am obligated to do that during audit process and i have to justfy any cash deposit and withdrawal of not income related tax matters
3-Do any body have his own experience of auditing and required things and how to be contacted while he is working and living abroad


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## Bevdeforges

Have you actually been contacted by the IRS regarding an audit? If so, what have they asked you to produce?
Cheers,
Bev


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## BBCWatcher

....But to answer your questions directly, IRS Form 8938 and FinCEN Form 114 are information returns only. They are not income reports. It is quite possible, even common, to be relatively income poor and financial account rich, or vice versa.

If you have misreported or not accurately reported your financial accounts then that can be a problem, but it's a separate (and correctable) problem. If you have accurately reported your income then you don't have that problem.


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## FFMralph

FACTA should not be your worry about incoming deposits. Individual transactions are not being reported. Right now the U.S. (and other) governments are concerned about identifying oversea accounts and their total account balance.

Also, the reporting is not retro active. Only current information will be reported. That means what happened in the past, stays in the past. Naturally, large differences in account balance might awaken someone's interest. 

See the Summary-of-FATCA-Timelines to see what is being reported.


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## salrasheid

I am talking about my 1040 return.I did't get an audit but to be in the safe side for the worst case. For US citizen living and working abroad ,I want to know usually for IRS do ask for my bank statement and I have to justify for all my deposit which sometimes coming from my withrdrawn cash ,and friend loans without interest.
Regarding FATCA do you think they report accounts below $ 50,000 .


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## FFMralph

You do not have to supply proof of earnings from a foreign employer with your 1040. You are required however, to report all of your income. 

Bank deposits may or may not be income. It depends on the source. 
Income: compensation for a service, the sale of something, investment returns or royalties, interest payments, etc. If a friend repays you (no interest) for money you lent him, you did not earn anything, so this does not need to be reported as income. The 

You will only get audited if the IRS suspect irregularities. They know nothing about your withdrawals or deposits. Only the balance gets reported.
The $ 50,000 limit does not apply to the financial institute doing the reporting. The financial institute is required to report all accounts held by or accessed by Americans.
Regardless of the account balance. Things used to determine your citizenship are: the passport you used when opening the account, your place of birth, your current address, your last name and out right asking if you are an American citizen.


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## Bevdeforges

One other thing to remember is that, if you are living outside the US, the FATCA reporting threshold (for "certain foreign financial assets" that must be reported on a form 8938 or similar) is $200,000 or $400,000, depending on your filing status. The $50,000 threshold is only for the banks at this point (and for those resident in the US). (At least according to a couple of the bi-lateral agreements I've read.)

Besides, even the IRS admits that your chances are being audited are slim and getting slimmer (as Congress cuts their operating budgets): How to avoid getting audited | US Tax Center
Cheers,
Bev


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## salrasheid

I think FFMralph the bank here do'not report to irs directly and they must report all the information for us citizen who in balance more than $50000 to some higher local supervisory.
I plan to start from a new clean account this year complying with all regulations for irs and closed the other messy accounts which i am sure have no tax liability except the missunderstood of deposit and lending without caring of any related deposit questioning .
My main question do i am obligated to disclose my bank statement for any applicable audit year for the past and how they deal with local missunderstanding of some wrong habits of money given or coming of friends without any prove to them this money coming from investment
So ,in your experience what are requirements for auditing us citizen living abroad and do you think is it necessary to amend past returns if there is no tax liability except the more money and time lost in many forms specially there is no expert accountant in our local community.


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## BBCWatcher

You are not required to provide "bank statements." You are required to report all your income and all your highest financial account balances accurately. As long as you've done that, you're fine.

What are you trying to imply? Did you launder money in support of illegal activities, for example?


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## salrasheid

know it is not rquired bank statement to include with 1040 but I am talking about when selected for audit.What all my saving in 20 years is about $80,000 without owning even a house and now my saving is about $30000 .
My concern is my deposit s and withdrawals are not for income and expenses as they require and it would be more tough for me to explain why this and why that ? .
Since I realy have only salary income ( though mentioned as business income to pay fica ) ,all other transactions are loans, and some personal investments with brother but without corporation or partner registration and mostly or generally is without profit,so I do't bother my self to include extra comlicated forms for no official business


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## FFMralph

Like we have already said. The transactions are not relevant. The only thing relevant is the "high balance" and the "year end balance". Your balance is below the required FBAR and Form 8938 reporting requirements.
They are no concern of the IRS if they are not income.
You are worrying to much. There is no reason that you should be audited. As Bev pointed out, less than 1% of the expats were audited last year.


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## BBCWatcher

And if you are audited, the truth is an absolute defense. If you've filed truthful tax returns and financial reports, no problem.


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## Bevdeforges

Just clarify, with $30,000 in the accounts, our OP should be filing FBARs. That threshold is still $10,000 even for those of us who live overseas. But the FATCA filing threshold is at least $200,000 for overseas residents.

Really, there is no need to start worrying until and unless you get an audit notice from the IRS. And as long as you can explain whatever it is they ask you about, you should have no problems. Unless they pick you for a "compliance audit" they normally have to state in the audit letter exactly what it is they are looking for (or looking to validate). Wait until you know what you need to produce before you drive yourself nuts with worry.
Cheers,
Bev


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