[bluewormx]

Hello everyone,
US citizen moved to UK as 11 month old baby, Grew up in UK, enlisted US marine corps age 19 (1992).

IIRC filled my 1040EZ for fiscal years 1992, 1993, 1994, 1995.

Naturalised Spanish citizen in Spanish consulate Los Angeles CA, Summer 1996.

Honarably discharged from Marine Corps, Nov 1996.


Moved to Spain and have not filed my taxes since, Just learned that I'm supposed to.

I have been married to a spanish national since 2001, we have 2 kids who are both spanish nationals and cannot opt to direct US citizenship I'm 2 weeks short of the 5 years neccessary. I was really dissapointed on hearing this, I considered it my gift to them. On learning of my and their possible future tax obligations the gift would have been a poisoned apple.

My wife and I are married under communal gains, in other words everything half each.
My wife is a civil servant and I am a simple mechanic, we own a small apartment and are paying a mortgage.
I have not been to the USA since my discharge from the service 17 years ago, and have no plans to in the future, I have no close relatives in the US, or nothing.

There is no way I owe the IRS anything. Ethically there is no way I am disclosing my wife's personal info with them. We have 2 joint accounts FATCA would violate her Data protection rights

The options I am pondering:

1. Do nothing, not file see what happens. There is no way I'm going to get compliant without expert help, besides I refuse to deal with it every year.

2. Renounce US citizenship.
I would still need expert help to do exit tax thing.

What are everyones views. Thanks in advance.

 

[BBCWatcher]

The G20 just agreed to start automatic tax data sharing within the next couple years, and that could be "interesting" let's say. I don't think we know yet what data will be shared and how it'll be used, but the whole point is to reduce tax evasion. You're probably right that you wouldn't owe any U.S. taxes (based on your general description), and, if so, it's unlikely the IRS will conclude otherwise even with data about you. But there is that pesky FBAR business which doesn't require a tax liability. Who knows if the U.S. will start to go after those relatively easy FBAR penalties.

What makes you think you need expert help, particularly in this age of TurboTax, TaxAct (even the free one), etc? You managed multiple years of 1040EZs, so you've got some good experience. Take a look at the IRS's streamlined compliance program (and maybe the free TaxAct to run a current draft filing) and see what you think.

It's very unlikely you would have to file FATCA reports from your general description. FBARs, maybe. Sorry, data protection doesn't apply for at least two reasons. One is because the U.S. limits its inquiries only to your accounts and your personal scope of knowledge. They're asking your wife nothing, and her actual secrets remain her secrets. The fact your accounts happen to have a joint signer doesn't matter -- they're still your accounts. Moreover, the EU Data Protection Directive explicitly allows tax authorities to collect your data, i.e. to do their jobs. FBAR is well within those bounds. If you think FBAR is invasive, take a look at Italy's Form RW some rainy day -- and that's an EU country. If FBAR is a bathroom scale, Form RW is like that movie in which a miniaturized crewed submarine swims around inside your body for several hours.

 

[bluewormx]

The whole nature of tax sharing sends a chill down my spine, it is so Orwellian.
I really need to find my tin foil hat.

Thanks for your reply BBCwatcher, do you have any insights as to what could possibly happen if I did nothing at all?

 

[BBCWatcher]

I think the risk is low but increasing over time. Governments want revenues, bottom line. Collecting unpaid taxes and/or penalties is a growth business.

If your real U.S. tax liability is zero or negative -- yes, it's occasionally possible for a U.S. citizen living outside the U.S. to receive money from the IRS -- then there's no penalty for nonfiling. But that has to be the real situation, and the IRS can take a shot trying to find otherwise if if wants. So far the IRS hasn't done much to pursue nonfilers with reasonably modest incomes living overseas, but who knows what the future will bring.

I get more concerned about FBARs which are something like the "Al Capone option." The government couldn't get Capone on, say, murder, but could get him on taxes. Within taxes FBARs are something like that. They provide the Treasury Department with some more clear cut leverage, and that's really the whole point. Truthful FBARs are completely boring to the Treasury. It's what people don't report that's most interesting.

My guess is that Treasury might in the future start sending out "you must file FBARs" letters. Knowledge of FBAR (and nonfiling) is enough to trigger the penalties, and (surprisingly) if you lie to your accountant on a tax survey asking about your non-U.S. accounts even that's enough. But if Treasury can't prove you knew about FBAR (or that you lied to someone in a FBAR-related way), it'd be tough for them to pursue penalties. So that's why I think they'll start sending out letters (or even place phone calls) to see how many nonfilers they then get after warning them. That'd be a way to collect some juicy penalties if they want to be only slightly more aggressive.

Congress periodically flirts with the idea of adding tax compliance to State Department (passports) and or CBP (entry into the U.S.) missions. I think that'll happen at some point. Many countries already do that, requiring "tax clearance" before leaving for example, so I don't think the U.S. will hold out too many more years. Same with things like Social Security -- the U.S. will probably get even better over time enforcing tax compliance through benefit programs.

Anyway, low -- maybe even very low -- but increasing. Good enough?

 

[bluewormx]

Thanks allot, very good awnser.

 

[maz57]

Hi bluewormx. After reading your description of your situation I did a quick internet search of the Spanish rules. Spain does not allow dual citizenship except with certain Latin American countries!

I expect as far as the Spanish government is concerned you are a Spanish citizen and only a Spanish citizen. Therefore the Spanish government would presumably not assist the US government in collecting any US tax liability while you are residing on Spanish soil.

Of course, the US government has a totally different view on this, considers you a US citizen, and expects you to file US tax returns forever. Unless there are complicating factors which you have not mentioned, it appears to me you have a case for applying for a CLN (Certificate of Loss of Nationality) backdated to 1996 when you became a Spanish citizen. This would have to be done in person at a US consulate. Everything would hinge on establishing your intent at the time of becoming a Spanish citizen. If you intended to lose your US citizenship and did nothing in the meanwhile to exercise it (like voting, using a US passport, filing US returns, and so on) you would have a pretty good case, I think.

If you could shed you're US citizenship in this fashion, I expect you could safely ignore all of the five years of 1040's and the exit tax form (8854). Technically you would then be classified as a "covered expat" but realistically, what could the IRS do about it? If you have no ties to the US, no assets, and no expectation of ever returning, why should you carry this burden any longer.

All of this has to be carefully researched and considered before you make your move; it's been 17 years-no need to rush things at this point. The IRS simply doesn't have the resources to micromanage all of the expats of modest means scattered around the globe. In summary, my take is to combine your two options; i.e. renounce (technically, relinquish) and do nothing taxwise.

Disclaimer: I'm not a lawyer, tax expert, or immigration consultant. This is my take on your situation as you have described it on an internet forum; my .02 only. This course of action is similar to what I have chosen to do personally. It will take years for all of this to play out.

 

[Nononymous]

My situation is not unlike yours, as I only lived and worked in the US for the first half of the nineties. I am on record as being a big fan of the "if they don't know about you, think long and hard about making your existence known to them" approach. Because right now they don't know, but once they do, there's no turning back.

Your kids should consider themselves lucky. (And if you change your mind, and it really is only two weeks you need to make up, then presumably you move to the US for three weeks and you're good to go.)

Here's my suggestion.

Filing taxes shouldn't be that hard, and if you're not philosophically opposed to the idea, maybe that's the safe thing to do. But it means they know about you, and you'll be filing for the rest of your days.

Renouncing is pretty straightforward. You can then send them five years worth of paperwork (ballpark numbers are probably okay if you don't owe anything) and be done with it. Or pull a fast one and try to do it without.

If you choose to remain non-compliant, which is probably what I'd do (because I'm, um, a rebel) then there are two issues you need to think about:

1. If you ever want to visit the US, then you really should have a US passport, if you have a US birthplace. It be the law. Obtaining a US passport may (or may not, for all we know) alert the IRS to your existence. At least now you are only requited to add your SSN to the application and sign a little declaration that it's true; a few years ago you were required to sign a little oath that your taxes were up to date, but thankfully that has disappeared.

2. Think if there is anything in your Spanish banking records that would make you look like a US citizen - a record of your birthplace associated with bank accounts (which you presumably opened as a Spanish citizen). If there is, that may one day cause your existence to become known to the US.

All in all, you could most likely ignore this as long as you intend to remain in Spain and not return to the US. You're a Spanish citizen living in Spain. You likely owe no US taxes. There's the goofy FBAR thing but really, what are the odds of the US assessing a penalty and collecting anything if you stay put and are a small fish?

On the other hand, it's not that difficult to become compliant - if you can hold your nose and do so. (I'm not, but I recognize that my decision is not entirely rational. I'm driven by a strange mixture of laziness and contrariness.)

 

[BBCWatcher]

There is however the fact that the Spanish economy is in a dire situation, and the Spanish government is particularly highly motivated to collect unpaid taxes and penalties. Thus Spain will likely be enthusiastic about exchanging data with, among others, the U.S. -- to find the individuals owing Spain.

I really don't know the amount of risk now. "Probably low" is my best, imprecise guess. Increasing? Yes, that's a pretty safe bet. Increasing from extremely low to very low, or increasing from low to moderate? I have no idea.

"Increasing" combined with "I don't know how much" would make me inclined to take the penalty free deal on offer. But that's how I would assess that situation, not the only way it could be assessed. There are also CLN/renunciation options.

 

[Bevdeforges]

I've been travelling and so am just catching up with the posts here on the board while I was "up in the air."

At the moment, the risk of your being sought out by the IRS for failure to file (tax returns or FBAR forms) is minimal, as long as you haven't somehow managed to come up on the IRS' radar. How long that will remain the case is hard to tell.

You are by no means the only US citizen living abroad who didn't realize they were supposed to file - and to be honest, the IRS resources to check compliance outside the US are limited at best. Even within the US, you have to have somehow come to their attention before they start audit or other procedures against you.

Now, what will happen with this FBAR stuff is anyone's guess. This year they are requiring all FBAR reporting to be done online, but there seems to be no exception procedure for people who honestly don't have a computer or Internet access. (I have a friend in this situation.) There is also the matter of whether or not foreign banks are simply going to give the IRS a data dump on anyone who "might" have US ties. The big banks with US offices, sure, will comply - but smaller regional banks may not have quite the motivation to comb their records for "potential" US persons.

It's really a matter of you plays the game and you takes your chances. And yes, it could change in the future.
Cheers,
Bev

 

[bluewormx]

I am really greatfull to everyone for spending the time and thought to awnser in this thread.

Over the last three days I have been kicking about my options, The wisdom I have perceived from those that have written here and certain other experiances in the last three days have led me to the point where I am going to try to get compliant.

Do I like it? NO!

Do I feel that as a point of principal I should not ? YES!

Do I think that the Spanish government going along with FATCA is little more than "Un brindis al sol" (a toast to the sun), kisses on the wind if you will. YES!

Never the less I filed out the DS-4079 and in all honesty I have never had an intention to relinquish my US citizenship, I voted in 2008 and I renewed my passport less than three months ago.

I certainly feel for the moment I'm ok but this world we are living in is changing fast. Just yesterday to transfer 600USD from my only US account I had to awnser security questions based on public data which some computer spider put together, it blew my mind. Orwells predictions where only off 30 years!
Data protection is a joke. As many have said the day will come when I wont be ok.
Thanks again.

 

[Nononymous]

If you recently renewed your passport, then (theoretically at least) the IRS will have record of a US citizen with a given SSN living at a given address in Spain.

In that case, compliance is probably your best option.

 

[bluewormx]

I Looked over IRS pub 54, and it raised a few questions.
Do I have to declare my NRA spouses earnings?
Can I not claim my 2 NRA children as dependents?

My NRA kids each has a savings account in their respective names, my wife and I are signatories do I have to send FBAR on those?

 

[Bevdeforges]

The simple answer is that no, you do not have to declare anything (income or accounts) for your NRA spouse and children, if they don't have US citizenship. That said, if you hold accounts in joint name with any of them, then yes, you do need to declare those accounts on your FBAR form. For the spouse, at least, you can simply indicate "spouse, NRA" rather than having to give name and taxpayer number. For the kids, I would just give their names and NRA for the ITIN with no relationship information.

To take the kids (or anyone, for that matter) as a dependent they MUST have an ITIN or social security number.
Cheers,
Bev

 

[bluewormx]

Thanks Bev,
I got ahead of my self with my kids accounts since neither has been >10k

But for the future it sound like it would be wise to remove myself from their accounts, and likewise my spouses.

If none of my accounts has ever been over 10k, do I still need to file FBAR, or if the banc erases data after 3 years and I don't know myself?

 

[BBCWatcher]

Read the instructions carefully: $10K or more total. A pair of $5000 accounts is enough, for example.

 

[bluewormx]

Thanks BBVCwatcher, have now read the FBAR guide, seems straight forward enough.
A few more what if's...

What if account data for say 2007 is unavailable because banc only keeps data 3 years?

What is the deal with FATCA form 8938.

Wont FBAR be pointless once FATCA comes online in 2014.

 

[Bevdeforges]

FATCA forms and FBAR forms are two very different things.

FATCA forms are filed along with your annual tax return. And if you aren't required to file a tax return (i.e. because your total gross income falls below the filing threshold for your filing status) you do not have to file the FATCA forms.

The FBAR form is a separate filing - to the Treasury Dept. and not to the IRS - which must be filed if you have $10,000 or more cumulative total in foreign accounts over which you have signature authority (separately or jointly with others). Even if you aren't required to file a tax return, you are still required to file an FBAR report if you meet the criteria.
Cheers,
Bev

 

[BBCWatcher]

As for the "my bank doesn't keep old data" issue, from now on keep copies of your statements, going back as far as your financial institutions allow. (These days that's pretty easy to do with electronic statements if available.) Then take your best, most truthful guess and estimate. Was it a $1,000,000 or $5,000 account at its peak balance for the year? You should have some idea, so take your best (high) guess, which is all you can really do anyway if there are no surviving data.

 

[bluewormx]

Thanks again BBCwatcher, I've been digging around, and only missing data from when the bank went all e-file. 2010 and 2011 I'm sure they have it.

I've also been having a go at 2555ez and 1040.

2555ez was simple enough.
I'm a bit confused on 1040.

I'm on line 37 $000,00.00

Could'nt lines 38 thru 76 be $000,00.00 also?

 

[islander_expat]

I'm also in the process of preparing my data for entering the streamlined process. I was born in the US but moved to the Caribbean when i was 4 months old, got dual citizenship when i was 13 years old. I am now 27 and just waking up to my filing obligations and FBARs.

The strange thing is that i've always renewed my US passport at the local consulate but was never informed of my filing obligations. I just assumed that because i was paying taxes in my country of residence i did not have to file with the US. oh well..... i know what i have to do now and want to get into compliance. However, I don't want to be penalized for not being aware of my obligations.

I've probably only been sleeping for about 2 hrs every night since i found out about 3 weeks ago.