FBAR: a very worried work visa holder seeking for advice for omitted accounts

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FBAR: a very worried work visa holder seeking for advice for omitted accounts


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Old 13th May 2017, 05:03 PM
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Default FBAR: a very worried work visa holder seeking for advice for omitted accounts

Hi everyone,

Having read around 10 articles on FBAR from this forum, I believe this forum do have people that can share their experiences and thoughts with me. I understand I have to talk to an attorney for professional legal advice but I'd like to gather some opinions first before I scare myself that much. Well, I'm already losing sleep for nights over this so very appreciate any inputs and pointers!

It's gonna be long, so thank you so much in advance for reading it

About my residency:
I first became a tax resident in 2014. I'm not sure when my green card application will be approved, perhaps in a year or two?

About my foreign assets:
All of my foreign accounts were contributed and managed by my parents. My parents opened them using my name since I was young.
It's very common for parents in my country to put their money under their kid's name. And in my case, my parents opened 18 accounts for me, with amount varying from less than $1K to $20K.

Note that 18 accounts sound a lot, but I am counting each individual insurance policy, which every financial institution promotes hard and people do tend to purchase those as an alternative to saving accounts. Also, each bank in my birth country can have different branches and thus different account numbers (!), as if they were independent (albeit belonging to the same bank..). So if you ever move, it's quite likely you will open new accounts at the branch near your new location so it's not uncommon for people have a handful of bank accounts.


About my tax filing and fbar history:
2014 was the first year I became tax resident. And I filed 2014, 2015 and 2016 tax returns and fbars:
I used the famous Txxxxx tax software to report my income tax, and learned about the FBAR thing as there's a dialog showing up in the tax software. It pointed me to the fbar offical website and my boy friend and I briefly read it and understood the filing requirement.

Since I was in the states and never left when filing, and that only my parents knew the accounts I had, I called them and gathered the balance and account info as well as my foreign income (mostly interests). I reported those info in 2014/2015/2016 fbars and tax returns. To be honest, I think I overpaid foreign income tax and I also paid tax in my birth country. However, I didn't include those foreign tax credit, because it wasn't a lot and also the tax laws are SOOOO complicated and I was afraid of making mistakes so I'd rather pay a bit more tax, especially I was new as a tax resident and didn't want to get myself into troubles for things I barely understand.

About the omitted accounts in fbars that I filed:
I only reported a total of 14 accounts (including those insurance policies that worth little), and the missing 4 accounts were due to:
1.) My parents just realized there were 3 accounts they found out. And the combined unreported total balances were around $50K. (My parents are old and these accounts were opened more than a decade ago).
2.) I made a mistake in filing. As I said above, accounts in different branches of a bank are usually treated independently. But I had one bank that 2 accounts in different branches can be managed together, sort of like having a "master account". So when I reported them, I summed the total balance and reported only one of the 2 accounts that has the majority of the money (the reported account had 95% of the combined total balance). Amount reported was correct but the account that had only %5 of the combined total was not reported.


So what should I do?
The under reported income due to the unreported accounts is perhaps less than $100. And to be honest, since I didn't include foreign tax credit, technically I actually over paid more tax even including this under reported $100 income. And the reported 14 accounts had much more combined balance than the unreported ones. All that is to say I wasn't intentionally doing it - I didn't know their existence and made a mistake in merging 2 accounts' balances.


My original plan was to just report them next year now that I know their existence and am made more careful about them. I wasn't too worried since I thought I already went really far to comply with the law (collected 14 accounts info from my parents, it took them long to find those documents, .. especially the insurance polices term sheet in order to calculate the cash value as balance....) and that I'm new to this tax system / country, so IRS should have some sympathy to me. However, my bf showed me quite a few scary stories and now I'm super worried!!

Possible penalties?

Is there a chance that I will be criminally charged or put to jail?
Is there a chance IRS will request a fine that's 50% of those unreported balance?
If I just go report them next year (so 4 additional accounts), will I become a big target for IRS to audit? I have nothing to hide but I'm scared after seeing people are put in jail for fbar.

Those aren't even my money and belong to my parents. I haven't even seen or used any of those money since the beginning of the time !!

I have learned that there's a concept of willfulness.. from all the facts I think it's clear that I'm not willful (majority of accounts and balances were reported, income tax paid, omitted accounts were opened at least a decade ago), but I don't know how to prove such mental states other than having my parents to explain to them in case of audit.


I'm getting more worried by day and not sure what to do, and that makes my parents worried too since they feel guilty after I explained to them over the phone and they are asking me to go find an attorney near where I'm living now, which I'm not sure if it's necessary. Please share your thoughts.. thanks!!

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Old 13th May 2017, 05:30 PM
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I've moved you over to the Expat Tax section here because we have lots of folks who get worried about these FBAR filings and they apply to "US taxpayers " (citizens or residents) all over the world.

Quote:
Is there a chance that I will be criminally charged or put to jail?
Is there a chance IRS will request a fine that's 50% of those unreported balance?
If I just go report them next year (so 4 additional accounts), will I become a big target for IRS to audit? I have nothing to hide but I'm scared after seeing people are put in jail for fbar.
First of all, the chances of your being criminally charged or jailed are infinitesimal. In most cases, the IRS isn't going to even look at your FBAR filings until and unless they find something "odd" about your tax filings, and it sounds as if you've filed your taxes in good faith.

To become a target for an audit, you'd have to have something on your tax filings that indicates you could potentially owe a few thousand dollars at the very least.

In your situation, I'd just file the additional accounts next year - but if it helps you sleep at night, you can always file an amended FBAR (if you have the number they sent you when acknowledging your original filing). Basically, you just file it over again, with the 4 additional accounts included, and say that you only just received information about these accounts after you made the original filing. Chances are, they won't come back to you, but if they should, you just explain that you had to get the information from your parents in China, and they only just informed you of the existence of these accounts. (But I'm willing to bet they won't even ask.)

I have no idea where you have seen anything about people being put in jail for FBAR. I certainly haven't seen anything like that in the news or anywhere else. (Though admittedly, I'm overseas and don't exactly go seeking out news on US taxation.)

Besides, according to the FBAR instructions https://www.fincen.gov/reporting-fin...ncial-accounts If you have 25 or more accounts to report, you just check the box saying you have 25 or more accounts, save the information and you don't have to file any details until and unless FinCEN or the IRS asks for the information. Just make up the list and hold onto it. Chances are, they probably won't bother you for it at all.
Cheers,
Bev

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Old 14th May 2017, 10:46 AM
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Quote:
Originally Posted by Bevdeforges View Post

...

To become a target for an audit, you'd have to have something on your tax filings that indicates you could potentially owe a few thousand dollars at the very least.

In your situation, I'd just file the additional accounts next year - but if it helps you sleep at night, you can always file an amended FBAR (if you have the number they sent you when acknowledging your original filing).

I have no idea where you have seen anything about people being put in jail for FBAR. I certainly haven't seen anything like that in the news or anywhere else. (Though admittedly, I'm overseas and don't exactly go seeking out news on US taxation.)

...
Cheers,
Bev

Bev, thanks a lot for your inputs! Appreciate it, really! Can I follow up about what you recommend about form 8938? Those 4 missing accounts were also not reported on previous 8938s, obviously.

Do you think it's necessary to amend all 3 years of tax returns in my case or you would think that most people can get away by just starting to report the 4 additional accounts next year onward? (as mentioned, I don't think I actually owed tax.. or with the strictest standard, maybe around a hundred usd).

Further, do you feel 8938 having 4 additional accounts next year will make it a big audit target? Since they might compare past and this years' 8938s and noticed the 4 additional accounts in the current year, w/o boxes "account opened/closed during tax year" checked (which is true as they were opened a decade ago).


About worrying criminally charged, I admit it might be just seeing a few top stories from search engine about the criminal cases e.g., www [dot] kpateloffice [dot] com/fbar-offshore-tax-evasion but I admit cases like those are far from just honest mistakes.
I guess I was paranoid thinking that they will consider this willful.


Thank you again!

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Old 14th May 2017, 04:16 PM
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No, I don't think adding 4 relatively small accounts to your FBAR or to your 8938 next year will draw any unusual audit attention. (Unless there is something else on your tax returns to indicate that you're hiding something big. <g>)

Just go ahead and start reporting them - and if anyone ever comes back to ask you about them (which I'd be willing to bet will NEVER happen), you just say that you have to rely on your parents for the information and they only informed you of those accounts at this time.
Cheers,
Bev

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Old 14th May 2017, 09:40 PM
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I initially hired an expensive accountant and relied on him completely. It turned out he knew very little. Two years or so after my first 1040, I learnt about 8938 and FBAR. I sent a 1040x +8938 and filed the FBAR online with a brief explanation and apology with both.
Don’t worry too much, a non-willful error.

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