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Discussion Starter · #1 ·
I realize that some of the material has already been covered but some of the posts are a little dated with regard to the latest "non-willful" certification procedure.

Last friday I received a call from my local bank branch manager asking for a "serial number" and saying that since I was a US citizen I had to come down to the bank and sign some documents confirming fiscal residence. Having no earthly idea what he was on about. I started looking around the internet and realized that what he is probably talking about is my SSN and signing a compliance statement. After a bit more searching I also made the wonderful discovery that I should have been filing Tax returns all these years and FBARS since 2009. I have been living in my own "private little Idaho" over here in Italy for 23 years having little or no contact with other Americans other than the odd call on the holidays or trips to the consulate to renew my passport.

My only taxable income is my salary which is under $40,000 a year, I am married to a NRA and we have a joint bank account that has never had a balance of over $35,000. So I don't honestly think I am a big fish for the IRS, however the hyperbole mixed with "sturm und drang" regarding possible fines and penalties has certainly made me nervous to say the least. Not to mention that the definition of "non-willful" seems to lie with the case officer that gets your file.

After a whole weekend of searching and studying various options I've come to the conclusion that my best option is probably the "Streamlined Foreign Offshore Procedures". I may even be able to get the 2014 1040-B in on time.

At the moment I have a few questions:
1) When filing the FBARS - the procedure states selecting "other" and writing "Streamlined Foreign Offshore Procedures" - Does anyone know if this is sufficient or is there need to elaborate?

2) When filling out the certification to attach to to each return there is a required space for a little essay stating facts and dates in order to prove your "non-willfulness" Anyone have any input as to what an acceptable description would be? How comfortable is the IRS with "I didn't know" as an answer?

3) On the 1040 do I have to attach anything in place of the W-2 to prove total wages?

4) On the 2555-EZ when inserting the dates of bona fide residence is the beginning date when I moved to Italy or 1 Jan of each year's return.

Sorry for being so verbose but the adrenaline is coursing strongly at the moment and I'd like to get started on normalizing my situation.

Thanks,
Joe
 

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You're hardly the first person to have just discovered all this and you're also far from the last. I think your assessment is correct - at your income level, you are definitely small fry in the IRS scope. Like the advert says, "just do it."

At the moment I have a few questions:
1) When filing the FBARS - the procedure states selecting "other" and writing "Streamlined Foreign Offshore Procedures" - Does anyone know if this is sufficient or is there need to elaborate?
That ought to do it.

2) When filling out the certification to attach to to each return there is a required space for a little essay stating facts and dates in order to prove your "non-willfulness" Anyone have any input as to what an acceptable description would be? How comfortable is the IRS with "I didn't know" as an answer?
Frankly, what you've said here is more than adequate: you've been living overseas for 20+ years with limited contact with other American expats. You only just found out about the filing requirements when contacted by your bank regarding the FATCA stuff.

3) On the 1040 do I have to attach anything in place of the W-2 to prove total wages?
Nope - they pretty much have to take your word for it.

4) On the 2555-EZ when inserting the dates of bona fide residence is the beginning date when I moved to Italy or 1 Jan of each year's return.
If doing the forms manually, just put the year you moved over. If you're using a tax prep program, it may insist on a complete date. Use January 1 of the year you moved, or July 1 if you know for sure you moved sometime "mid-year" - it's not really critical if the year is 20+ years in the past.

Courage! (as we say here in France) Despite all the high flown rhetoric, just file in "good faith" according to the streamlined program instructions (and forever more) and you should be just fine. There are remarkably few audits of us overseas types unless we're in the upper income brackets or hold dodgy looking "investments." Plus, by the end of this year, they are planning to pull back all their overseas IRS employees, so paying to ship someone out of the country for an audit will have to be particularly likely to yield oodles of unpaid taxes.
Cheers,
Bev
 

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One further note. Given Italy's comparatively high income tax rates you may wish to consider skipping the Foreign Earned Income Exclusion (IRS Form 2555/2555-EZ), relying solely on the Foreign Tax Credit (IRS Form 1116) in order to preserve some potential (or actual) U.S. tax benefits. I don't recommend one path or the other (since I don't know your situation exactly), but I do recommend running simulated tax calculations both ways to determine for yourself which is best. As Bev implied, this task is made much easier if you're using tax preparation software, even the free edition of TaxAct.com, TaxSlayer.com, or similar.

In particular, if you have a documented U.S. citizen child, chances are excellent that the FTC-only path will be much better, notably because at that income level you'll qualify for $1000 in free money per child from the IRS. There's a deadline coming up (June 15, 2015) for claiming that free money for tax year 2011 if you/your child qualified in that particular tax year, so you'd really have to scramble if you qualify (including a Fedex, UPS, or DHL fast courier service to the IRS at this point).
 

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Discussion Starter · #4 ·
Thanks a lot for the answers!!!!

In my haste to beat the June 15 deadline I overlooked the fact that I gained about $5 of interest on my bank account last year. Is such a silly amount worth declaring and what impact will it have on using the FEIE option since it counts as unearned income. I know it sounds like a silly question but I couldn't find a sufficient answer anywhere in the IRS publication.
 

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Would that $5 make any difference in the amount of tax you owe? If no -- because you're still well within your personal exemption/standard deduction, for example -- document that fact in your personal files and that's that. If yes, you can file an amended tax return (1040X) to correct the problem.
 

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Will you be filing a 2014 return with the other '3 years' all in one, via print as part of the Streamlined Procedure?
I'm unsure weather to do this or only the 3, and 2014 vie e-file?

"(1) for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, file delinquent or amended tax returns..."


Also are you using the US Calendar year Jan 1 - 31 Dec as your accounting dates or your current dates, if they differ?
 

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Discussion Starter · #7 ·
I'm going to file the printed 2014 return tommorrow with snail mail and the other three over the weekend or on monday. Luckily, Italy also uses the calendar year 01 Jan - 31 Dec so I don't have to adjust anything. I also hope to file all FBARS over the weekend.

cheers!!
 

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Discussion Starter · #10 ·
Quick question......
When inserting account number for FBAR do you use the actual account number or IBAN / SWIFT numbers?
 

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I think what they want is the "real" account number (i.e. how the bank refers to the account inhouse) but I doubt they'd have any cause to harass you if you gave them either the IBAN or the SWIFT number. Any one of those serves to identify the account.
Cheers,
Bev
 

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Discussion Starter · #12 ·
This is becoming more and more like the Jaws movies......"just when you thought it was safe to go back into the water.....:eek:"

This years' return (2014) is all set to be mailed this afternoon, I submitted my 5 FBARS this morning and thought heck while I'm at it I'll go ahead and knock out the three 1040's in arrears........

I hit another brick wall!!!

Reading the instructions for the FEIE I came across this:

"Your initial choice of the exclusion on Form 2555 or Form 2555-EZ generally must be made with one of the following returns.


1) A return filed by the due date (including any extensions).

2) A return amending a timely-filed return. Amended returns generally must be filed by the later of 3 years after the filing date of the original return or 2 years after the tax is paid.

3) A return filed within 1 year from the original due date of the return (determined without regard to any extensions).

Filing after the above periods. You can choose the exclusion on a return filed after the periods described above if you owe no federal income tax after taking into account the exclusion. If you owe federal income tax after taking into account the exclusion, you can choose the exclusion on a return filed after the periods described earlier if you file before the IRS discovers that you failed to choose the exclusion. Whether or not you owe federal income tax after taking the exclusion into account, if you file your return after the periods described earlier, you must type or legibly print at the top of the first page of the Form 1040 “Filed pursuant to section 1.911-7(a)(2)(i)(D)"


If I'm going to participate in the Streamline Procedure I already have to write "Streamlined Foreign Offshore" at the top of each 1040. Does this trump the above clause or do I have to state both. I'm tempted to write both with the logic that more info is better than no info and possible problems. How have the rest of you dealt with this.

Cheers!!!!
 

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If I'm going to participate in the Streamline Procedure I already have to write "Streamlined Foreign Offshore" at the top of each 1040. Does this trump the above clause or do I have to state both. I'm tempted to write both with the logic that more info is better than no info and possible problems. How have the rest of you dealt with this.
Write small? In any event, this is kind of why you can't e-file your back-filings in the streamlined compliance program. There's so much "stuff" to write on the top of the form.

Be sure to keep copies of everything you do file. But actually, folks have come through the streamlined process without having written any of the stuff on the top. Or at least not the "pursuant to section..." stuff.

Just keep repeating to yourself that you are making a good faith effort to file, and they really aren't going to haul you off in irons on tiny "technical" points like this.
Cheers,
Bev
 

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Discussion Starter · #14 ·
Thanks Bev,

My paranoia stems more from having dealt with the Italian Treasury Dept. over the years, where small and seemingly insignificant "technical" points can carry severe fines you don't even know about (until 10 years later when you receive a whopping fine plus years of accrued interest and penalties on said fine :crazy:.......been there done that!!)
 

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On their own turf, most tax departments and treasury departments wield a whole lot more power than they do on "foreign soil." The US claims the right to tax its citizens anywhere in the world - but its actual ability to carry out audits and/or to assess and collect penalties is very limited (and will be even more so later this year when all 12 people in the 3 European IRS offices are transferred back home).
Cheers,
Bev
 

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Discussion Starter · #16 ·
Last question I swear (I hope...)

I'm filling out delinquent 2555's and I'm wondering if they should follow a certain virtual chronology.
I've never filed one before so the first one will technically be that of 2011. For the following years (2012-2013) with regard to the question "enter the last year you filed the form" do I write 2011 and 2012 for the sake of filling out the forms or since I've never filed and I'm sending all three together do I just leave it blank for all three?
 

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Probably best to fill in 2011, since that is the first year you filed the 2555 form (at least on the 2011 return), and then the immediately prior year for each of the other returns.
Cheers,
Bev
 

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Hi to everybody,
I have spent last 15 days searching on the web about FACTA and the Streamlined Foreign Offshore Procedures. Finally 3 days ago found this forum and at least I was calming a little down seeing that I am the only persons in this situation. Hope you can help and give me some suggestions:
my husband (US citizen) moved to Italy in '78 and didn't know anything about his obligations with IRS tax returns and the most recent FBAR obligations.
He has been a self employed person since '98 but due to lack of work didn't work in 2014.
Has always paid taxes in Italy but never reported his income to IRS.
Since he quitted his job he is helping a team receiving a non taxable expenses reimbursement.
We have some joined bank account and investments in Italian/Lussemburg Fonds and the amount is about € 400.000.
I was looking for some account specialists and/or layer but for their services they are asking around € 10.000 and with him not working it is really hard.
Was wondering what you think about our situation??? Do you think we will be able to file the procedure by ourselves??? Sceadugenga made it seems pretty easy but I dont think my English is good enough to be able to go through all the IRS instructions and taxes exclusions - deductions ecc.
What are your suggestions???
Alepuppy
 

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If only your husband has US citizenship, then only he is liable for filing US taxes. It depends a bit on how familiar he was with the process before he came over to Italy, but using some of the tax software available online it shouldn't be too difficult. (Was going to say "using some of the free tax software" but generally the companies charge for the back years. TaxAct only seems to charge $15 for the prior years, though.)

He should take a look at IRS publication 54 and maybe bits and pieces of Publication 17, too. But then go to either the TaxAct or Tax Slayer website and just play around with the free version of the software to see what he thinks.
Cheers,
Bev
 
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