Questions regarding the streamlined procedures

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Questions regarding the streamlined procedures


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Old 17th November 2019, 05:56 PM
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Default Questions regarding the streamlined procedures

Hi,

I'm an "accidental american" living in europe and I'm trying to figure out how to handle my tax situation with the IRS.

Earlier this year I received a Fatca letter from my bank. This prompted me to learn about my tax obligations to the US. I thought I didn't have to file tax returns because I have so little income. I am, however, over the filing threshold for FBARs. That is why I only filed FBARs for the past six years after receiving the Fatca letter from my bank. Recently I have learned that I am in fact over the filing threshold, and I would have had to file tax returns anyway because I must file form 8621. I figured that I could try to enter the streamlined program now. I have a few questions concerning that.

1. Does the fact that I have earlier filed FBARs disqualify me from the streamlined procedures now?

2. Do my actions pass as non-willful in the streamlined procedure?

3. If the answer to the first two questions are yes, would the best way to proceed be to file the required tax returns in the streamlined procedures, and amend the FBARs to say that they are part of the streamlined procedures?

Thanks already in advance!

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Old 17th November 2019, 09:15 PM
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More details to follow, but basically the less you do the better. Obviously the IRS has no ability to determine whether you should be filing because they've said not one word to you after six years of filing FBARs.

Probably best to keep doing what you're doing, or stop filing FBARs. Actually entering the US tax system is a bad idea.

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Old 17th November 2019, 09:17 PM
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If you have been filing FBARs it just means that you would have no reason to back file FBARs as part of the Streamlined process. (It's very possible that you would have had to file FBARs without having any obligation to file income tax returns. Especially at the miserable interest rates banks have been paying lately!)

If you do file Streamlined, you just need to explain that you didn't realize you needed to file in your "explanation letter" - the fact of being an "accidental" American is definitely a part of that. But basically, your reason is that you didn't realize you were supposed to file until you got the FATCA letter from your bank. Those things have only been going out in the past couple of years.

Or consider carefully if you want to start filing at all. It depends on the amounts involved and whether you have assets or accounts in the US that might be in jeopardy should the IRS develop an "interest" in your situation.

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Old 18th November 2019, 02:47 AM
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So, a couple of questions:

(1) Are you an Accidental American with a US birthplace, or is it due to parentage? (2) Are you a citizen in your country of residence (i.e. French in France)?

Basically your goal in life should be to tell the US government as little as possible. If, unfortunately, your accounts are subject to FATCA reporting because you are identified as a US person, that does not mean you need to file FBARs or tax returns. If you have no US assets, nor plans to move to the US, just ignore tax compliance. The IRS cannot touch you, and isn't going to bother looking for you.

In this case, it sounds like you filed a bunch of FBARs at once, after learning about FATCA. I'm sure they've gone into a giant dusty pile somewhere, and remain unread. You could continue filing FBARs but file no tax returns, unless the income generated by the reported accounts exceeded the minimum threshold - not likely. (That is the only income reported by FATCA - the IRS will know nothing about employment income.) If you felt the need to comply, you could enter the streamlined program, or you could just start filing returns next year. Likely you won't hear anything from the IRS, one way or the other.

Alternatively, if you were born outside the US, you could do this: close your bank accounts, then open new accounts at a different bank but use your non-US ID with non-US birthplace and declare yourself not to be a US person. Then the IRS receives no FATCA information. At that point you simply stop filing FBARs, don't start filing tax returns, and you're back to where you were a few years ago: fully off the radar.

In the long term, filing US tax returns every year makes no sense. You gain nothing from it - there is no benefit. Even if you owe nothing now, as your income rises and your affairs become more complicated, you can easily find yourself facing a tax bill due to incompatibilities in tax systems. As there is no risk to not filing returns, non-compliance is the better plan.

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Old 18th November 2019, 02:59 PM
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Quote:
Originally Posted by Bevdeforges View Post
If you have been filing FBARs it just means that you would have no reason to back file FBARs as part of the Streamlined process. (It's very possible that you would have had to file FBARs without having any obligation to file income tax returns. Especially at the miserable interest rates banks have been paying lately!)

If you do file Streamlined, you just need to explain that you didn't realize you needed to file in your "explanation letter" - the fact of being an "accidental" American is definitely a part of that. But basically, your reason is that you didn't realize you were supposed to file until you got the FATCA letter from your bank. Those things have only been going out in the past couple of years.

Or consider carefully if you want to start filing at all. It depends on the amounts involved and whether you have assets or accounts in the US that might be in jeopardy should the IRS develop an "interest" in your situation.
Thanks for the reply!

I might have worded myself poorly in my original post. So I meant that I filed the FBARs for the past six years simultaneously (Delinquent FBAR Submission Procedures) when the Fatca letter came earlier this year. I'm actually planing on renouncing soon and that's why I'm planning on doing everything properly right now.

Quote:
But basically, your reason is that you didn't realize you were supposed to file until you got the FATCA letter from your bank.
I didn't actually realize I had to file immediately after the Fatca letter and so i didn't enter the streamlined program immediately. I'm just now over half a year later entering the streamlined processes. Will this still pass as non-willful to the IRS (it actually was, as I didn't realize I was over the filing threshold)?

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Old 18th November 2019, 03:03 PM
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Quote:
Originally Posted by Nononymous View Post
So, a couple of questions:

(1) Are you an Accidental American with a US birthplace, or is it due to parentage? (2) Are you a citizen in your country of residence (i.e. French in France)?

Basically your goal in life should be to tell the US government as little as possible. If, unfortunately, your accounts are subject to FATCA reporting because you are identified as a US person, that does not mean you need to file FBARs or tax returns. If you have no US assets, nor plans to move to the US, just ignore tax compliance. The IRS cannot touch you, and isn't going to bother looking for you.

In this case, it sounds like you filed a bunch of FBARs at once, after learning about FATCA. I'm sure they've gone into a giant dusty pile somewhere, and remain unread. You could continue filing FBARs but file no tax returns, unless the income generated by the reported accounts exceeded the minimum threshold - not likely. (That is the only income reported by FATCA - the IRS will know nothing about employment income.) If you felt the need to comply, you could enter the streamlined program, or you could just start filing returns next year. Likely you won't hear anything from the IRS, one way or the other.

Alternatively, if you were born outside the US, you could do this: close your bank accounts, then open new accounts at a different bank but use your non-US ID with non-US birthplace and declare yourself not to be a US person. Then the IRS receives no FATCA information. At that point you simply stop filing FBARs, don't start filing tax returns, and you're back to where you were a few years ago: fully off the radar.

In the long term, filing US tax returns every year makes no sense. You gain nothing from it - there is no benefit. Even if you owe nothing now, as your income rises and your affairs become more complicated, you can easily find yourself facing a tax bill due to incompatibilities in tax systems. As there is no risk to not filing returns, non-compliance is the better plan.
Thanks for the reply!

(1) Yes, I have a US birthplace so I can't really hide my citizenship.

(2) Yes, I am a citizen in my country.

So the reason I'm trying to enter the streamlined procedures is that I'm thinking about renouncing. That's why I'm trying to do everything by the book. The point of my question really was that am I eligible for the streamlined process. Determined by your answer I guess I am.

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Old 18th November 2019, 03:45 PM
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I wouldn't fuss about the details of the streamlined program. The IRS won't care if you do or if you don't, and you will not be penalized one way or the other given that your income is relatively low.

If you are planning to renounce, three options:

1. Renounce and file up to five years' tax returns for any year that your income was above the minimum reporting threshold, then the 8854 form, and you're done.

2. Renounce and file the 8854 without any tax returns, while claiming to be in tax compliance because your income from the accounts listed on the FBARs will be under the reporting threshold, and the IRS won't know otherwise.

3. Renounce without bothering to file any tax forms, period. (Since you've already gone to the trouble of filing FBARs, there's not much to be gained by doing it this way.)

They key point is to not overthink things. You don't need to renounce "by the book", though if you're halfway there and it doesn't cost you a lot of time and money to do the paperwork, why not? If you are a citizen of your country of residence, without US assets or income sources, then the US government has no ability to collect any penalties or taxes owing, not that you would owe anything by the sounds of it. Finally, most importantly, all the evidence we have suggests that the IRS does not care about Accidentals. It's not trying to find them. It only penalizes those unfortunate souls who begin filing (see the thread about 3520 fines) and try to stay in compliance. I expect there will be no difference in outcome whichever option you choose.

And if you decide not to renounce, that is also not a good reason to enter the tax system and begin filing. You are fully protected, nothing bad will happen if you don't.

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Old 18th November 2019, 03:50 PM
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Also, have a look at this:

https://www.irs.gov/individuals/inte...ormer-citizens

https://www.hklaw.com/en/insights/pu...=View-Original

If you renounce, you probably qualify despite having filed FBARs.

The main point is, if the IRS is making this sort of offer, they clearly don't care very much about anyone who's renouncing, so whether you go through streamlined or just file a few returns or file nothing at all, it's likely the same outcome in the end.

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Old 18th November 2019, 06:55 PM
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Quote:
Originally Posted by Nononymous View Post
Also, have a look at this:

If you renounce, you probably qualify despite having filed FBARs.

The main point is, if the IRS is making this sort of offer, they clearly don't care very much about anyone who's renouncing, so whether you go through streamlined or just file a few returns or file nothing at all, it's likely the same outcome in the end.
What do you think about the eligibility criteria presented in the IRS website faq question 2? Do you think that "You have no filing history as a U.S. citizen or resident" includes FBARs or not?

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Old 18th November 2019, 07:55 PM
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I don't really know, and I'm surprised they didn't spell it out. Possibly one could ask them?

Q18 sort of suggests that the program is still available if you've previously filed FBARs. (FBAR and tax are different things, different government departments even, so when the IRS says "no filing history" Q2 I would assume they mean tax filing only, not FBAR.)

I personally don't think it matters, I doubt the IRS is going to look at these very closely. The question to ask is "Will they care one way or the other, and what can they do about it anyway?"


Last edited by Nononymous; 18th November 2019 at 07:59 PM.
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