If you're an Expat -- The IRS Wants Your Blook

[Zeb]

An article written by James Guzman, who is an expat living in San Miguel about what's happening to expats living abroad.

http://www.borderlessblog.com/youre-ex-pat-irs-wants-blood/

I hate it when I make typing errors The topic should read blood not blook.

[jrm30655]

If you look on US currency, it says "Federal Reserve Note". The US just wants its money back.

What they are doing is the dumbest thing ever. They are just making life miserable for banking worldwide and for the expats.

[elpind]

This does not apply to most of the people I know. Briefly FACTA only applies for those who have more than $50K in foreign assets. Google FACTA and do a little research on the subject before a panic attack sets in.

[Guest bennie2]

last week i received a weird letter from the IRS. i think i throw it out. you would think they would have other things to do.

[vetteforron]

My citizenship is just a few weeks away. You get what you vote for.

[tomgates]

Actually the IRS is considering merging the filing requirements of the FBAR and FATCA. They are also considering making exceptions to the reporting requirements for expats with foreign bank accounts in the country they have chosen to reside.

[Zeb]

Well, for sure nobody voted to have the IRS have the absolute power they have taken. They ruin people's lives and steal their assets without due process AND you are presumed guilty right from the start.

As far as voting for representation, expats have NONE. It is only one of two countries in the entire world to force expats to pay taxes based on citizenship rather than residency. Representation is supposed to be based on geography. We have an IRS boot on our necks, so please don't tell me about how we voted for that.

Voting wise, we really don't have our choices. Big money lobbying interests will make sure of that and that is true all over the world. BUT, let's not deviate any further from the topic I started, which was to simply provide information pertaining to taxes pertaining to expats.

Here is part of the info about reporting of foreign accounts:

1. The person has financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and
2. The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

We use a CPA to get our taxes done, and so as far as I know, we are still stuck with the above regulations. That is another huge thorn in my side--that I have to pay someone to figure out how much extortion to pay.

[cbviajero]

It took me about 15 minutes to e-file the FBAR last year.

[Zeb]

There is more to taxes than filing one form. Everything from reading all the complex regulations, keeping up with the changes, maintaining all of the records properly, completely the paper work correctly, etc. If it were simple, we would have no use for CPAs to help us and they would simply go out of the tax business.

[RVGRINGO]

We always used TurboTax Online. It is an interview process and their computer knows the rules, etc. It was simple and did not take long at all. Of course, you must keep the appropriate 1099s, etc., or get them online from your bank or other sources, which is also easy.

[johanson]

I recently filed my FBAR again this year. It was easy. Now the FATCA accompanies ones 1040, I understand, so I get all the facts ready and let my CPA fill in the details. Apparently, it's no big deal. Just more stupid (my words only )piece of paperwork.

[snowyco]

Pete's experience of the ease of filing FBAR online with the Treasury department fits my experiences too.

People worried about how to do it can find summarized instructions at: Filing FBAR Foreign Financial Account Information for US Citizens for FINCEN 114 – Article

[bdlngton]

vetteforron--I am confused by your post and unsure of your point in posting it. What do you mean your citizenship is just weeks away? Do you mean Mexican citizenship? Are you currently a US citizen? Are you renouncing your US citizenship? That is quite expensive to do. If you are a dual citizen you are still responsible to pay US income tax on US-earned income even if you are a Mexican citizen living in Mexico. I

[John Shrall]

Dual citizens are still required to pay US taxes on income but once Mexican citizenship is attained you re-title your bank accounts here changing your nationality from US to Mexico as well as remove your SSN from the accounts. When and if Mexican banks start reporting account balances to the IRS yours won't be there so there will be no way for the IRS to cross check the accuracy of the FBAR data.

[tomgates]

The penalty of 30% of the account balance for failure to report the account is pretty steep. If the account is high enough to require FATCA filing, by answering NO to the question of ownership of a foreign bank account, then one would be guilty of tax fraud and there the penalties are prison.

[Zeb]

The penalty of 30% of the account balance for failure to report the account is pretty steep. If the account is high enough to require FATCA filing, by answering NO to the question of ownership of a foreign bank account, then one would be guilty of tax fraud and there the penalties are prison.

I think maybe there is a misunderstanding here. If you are no longer a US citizen, you then would not be reporting your foreign accounts on the IRS forms as it would be irrelevant. You are only liable to US earned income. As a foreigner, you DO NOT have to tell the IRS about all your world wide income.

The 30% is a tax on US income only.

[tomgates]

The 30% is not a tax on income. It is 30% of the balance in a foreign bank account that falls within the reporting requirements of FATCA and not reported. It is a penalty. As for the reporting requirements for people who are NOT US citizens, there aren't any. What others on this thread said was that they had obtained Mexican citizenship. That doesn't mean they have given up their U.S. Citizenship.

[RVGRINGO]

Zeb,

You may want to edit your post to avoid confusing folks. Too many are very easily confused and one even admits to being Clueless.

[John Shrall]

The 30% number Zeb refers to is not a tax but rather a possible withholding stemming from FATCA and to some extent the Dodd-Frank banking bill.

If you transfer money let's say by wire from a US bank out of the country, the bank must determine if the receiving bank is a compliant Foreign Financial Institution (FFI). If the receiving entity is not a FFI or the bank doesn't want to take the time to look they can withhold 30% of the wire and report it as a withholding to the IRS.

If that does indeed happen you would report the amount withheld as a tax payment on your next 1040 and get it back as a refund but in the mean time the IRS holds your money.

Having said that I've sent several wires over the last 2 years from Ameritrade to Bancomer Mexico. Other than being a bureaucratic PIA, waiting for the phone call to verify who I was, there was no withholding involved.

[tomgates]

To repeat, failure to disclose a FATCA applicable foreign bank account, if caught, can result in 30% of the account being taken by the IRS. I can't speak for monies "withheld" in wire transfers, 30% or otherwise. I will mention that I use the currency house, XE, to transfer monies from my US brokerage to my local HSBC account with no problems whatsoever.

[snowyco]

When talking about IRS and US Treasury Law, it's best to go straight to the source:

"Summary of Key FATCA Provisions"
,,,

"Failure to report foreign financial assets on Form 8938 will result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notification)."

"Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent."

http://www.irs.gov/Businesses/Corporations/Summary-of-Key-FATCA-Provisions

This basically says that the 30% FATCA tax withholding is different from the various IRS penalties for not properly handling foreign financial accounts and IRS/Treasury Dept filings:

a. $10,000 as an initial penalty for not filing,

b. plus up to $50,000 for multiple years of not filing (after IRS notification),

c. plus a 40% penalty for under payment of taxes on foreign financial assets.

[pappysmarket]

So unless you have a total of at least $10,000US in all foreign accounts you do not need to file anything?

[snowyco]

I think maybe there is a misunderstanding here. If you are no longer a US citizen, you then would not be reporting your foreign accounts on the IRS forms as it would be irrelevant. You are only liable to US earned income. As a foreigner, you DO NOT have to tell the IRS about all your world wide income.

The 30% is a tax on US income only.

The FATCA penalties (re IRS form 8938) listed in the earlier post above are different from FBAR penalties.

This thread has both FATCA and FBAR comments & questions, so here's Forbes magazine report on FBAR's theoretical penalties:

"The IRS says failing to learn of foreign account reporting requirements can be evidence of “willful blindness.” ...

"FBAR Penalties.

The penalties for failure to file an FBAR are worse than tax penalties. Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation.

But if your violation is found to be willful, the penalty is the greater of $100,000 or 50 percent of the amount in the account for each violation—and each year you didn’t file is a separate violation. "

"Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment.

If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment. "

http://www.forbes.com/sites/robertwood/2012/06/04/fbar-penalties-when-will-irs-let-you-off-with-a-warning/

So, according to Forbes and the IRS websites, FBAR and FATCA penalties can be confiscation of 40% of the account for FATCA violations and confiscation of 50% of the account for FBAR violation.

This means that Zeb's prior advice that IRS only collects penalties on income taxes, does not fit published IRS and Treasury (FINCEN) rules.

Unfortunately, they have the power to confiscate substantial 40% + another 50% of our foreign fiscal assets/accounts.

[snowyco]

So unless you have a total of at least $10,000US in all foreign accounts you do not need to file anything?

According to IRS and Treasury info, that's correct, as long as our total (aggregate) foreign financial assets never exceeded $10,000 at any point during a calendar year, then we don't have to file.

Details, from: Filing FBAR Foreign Financial Account Information for US Citizens for FINCEN 114 – Article

"Who must file a Form 114 FINCEN FBAR Form:

• Any United States person who had a financial interest in or signature authority over at least one financial account located outside of the United States;

  and

• the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported. "

and

For FATCA 8939 filing, from: FATCA Requirements for Expats with over $50,000 total in Foreign Accounts and Trust and Recent July 2014 requirements to File W-9’s to certify your Exempt status.

"On Feb. 1, 2012 the IRS updated requirements for Expats who have over $50,000 total of foreign financial/savings/checking/investment accounts to file a new form with the IRS every year, starting with our 2011TY filings in 2012."

[Zeb]

The FATCA penalties (re IRS form 8938) listed in the earlier post above are different from FBAR penalties.

This thread has both FATCA and FBAR comments & questions, so here's Forbes magazine report on FBAR's theoretical penalties:

"The IRS says failing to learn of foreign account reporting requirements can be evidence of “willful blindness.” ...

"FBAR Penalties.

The penalties for failure to file an FBAR are worse than tax penalties. Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation.

But if your violation is found to be willful, the penalty is the greater of $100,000 or 50 percent of the amount in the account for each violation—and each year you didn’t file is a separate violation. "

"Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment.

If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment. "

http://www.forbes.com/sites/robertwood/2012/06/04/fbar-penalties-when-will-irs-let-you-off-with-a-warning/

So, according to Forbes and the IRS websites, FBAR and FATCA penalties can be confiscation of 40% of the account for FATCA violations and confiscation of 50% of the account for FBAR violation.

This means that Zeb's prior advice that IRS only collects penalties on income taxes, does not fit published IRS and Treasury (FINCEN) rules.

Unfortunately, they have the power to confiscate substantial 40% + another 50% of our foreign fiscal assets/accounts.

First of all, I am not giving advice as I don't presume to have expertise in this area.

To clarify, my comment about the 30% had to do with income earned in the US by non US citizen, nothing to do with US citizens having foreign accounts.

And, yes, there are several, onerous and completely outrageous penalties for not reporting foreign accounts which is totally different situation.