Tax Seminar 202 -- 2015
Published: 13 April 2015
AARO held its Tax Seminar 202 on March 17, 2015 at its new headquarters, Reid Hall. The room was packed with more than a hundred attendees. Lucy Laederich, AARO president, introduced the speakers, John Fredenberger and Tim Ramier.
The meeting was not so much about how to go about filing your taxes as an update on where we stand.
John started with a brief recap of our recent Overseas Americans Week in Washington. As he said, DC was frigid, due to both the snow and the relationship between the IRS Commissioner John Koskinen and the Ways and Means Committee Chair, Paul Ryan. The IRS budget has been cut down to the 2000 level and the service must make do with less and less. They have announced that 50% of all telephone calls will go unanswered and all the foreign offices will be closed by the end of the year. For the estimated 8 million Americans abroad, he wondered if they weren’t sending the wrong message. Where was the service that could improve compliance?
Tim, who was unable to attend the meetings in Washington this year, thanked the association for the work it is doing and then dove right into tax matters.
Otherwise known as FBAR (foreign bank account report), the online FINCEN 114 form is functioning well, now, after some glitches the first year. E-filing is a requirement. The deadline is still June 30. The filing threshold is still $10,000 aggregate in all accounts held outside the US. The penalties for not filing are still $100,000 or half the amount in the account, whichever is greater.
For those who have not been reporting foreign bank accounts or filing tax declarations in ignorance of the law, there is now a streamlined program to come into compliance. Some call it the 3 + 6 program: 3 years of back tax filings and 6 years of back FBAR filings. Tim passed out a copy of the forms.
Once people have come forward with these back filings, they are expected to continue their annual filings.
John presented his handout “FATCA for Dummies” and described, briefly, the two anti-FATCA actions currently underway: Senator Rand Paul has introduced legislation to repeal most of FATCA and James Bopp, lawyer, is bringing suit in Federal Court against FATCA as being unconstitutional.
France ratified its IGA on January 2 and the next day, January 3, 2015, it was published in the Journal Officiel. The US Senate does not need to ratify the IGA because it is not a treaty. It is a "Model 2" agreement: Banks will not report accounts under $50,000. They also will not report on certain types of accounts; the full list is in the Annex of the IGA.
The first year, in September 2015, the banks will report the account holder’s name and address, the bank and account information, and the balance on Dec. 31, 2014.
In 2016, the banks will add income to the report.
In 2017, the banks will add capital gains to the report.
The banks must find their US person customers and the first indication is birth in the US. If a customer was born in the US, the bank will presume US citizenship and require a Certificate of Loss of Nationality if the customer claims not to be American. Banks may require American customers to file a W-9 form with them. For people uncomfortable with giving their Social Security Number to a foreign bank, John suggests that one might leave out the Social Security number, or just fill it in partially, or even use a US passport number, which has the same number of digits.
Same Country Exception
Short of repeal, the same country exception, also called “safe harbor” in Washington, has been AARO’s position concerning FATCA. The idea is that we are bona fide residents of another country than the US and the accounts in that country are our domestic accounts. We would like the US to consider them as domestic accounts and not foreign accounts. To do this would require regulatory change in Washington, which, given the frigid relationship alluded to before, will not happen without congressional mandate. It would also require the banks where we live to agree to it.
Worldwide Bank Data Exchange
The OECD has published its version of bank data exchange, the Treaty for the Mutual Assistance in Tax Matters. So far, over 40 countries have signed it, but not the US. It would have to be ratified by the Senate. This treaty allows for exchange of information on request, automatically, spontaneously (if country A suspects that a person might be in fault regarding country B, it may report spontaneously to country B), or even simultaneously (some kind of joint meeting of the countries’ tax offices about a person).
Foreign residents of the US
There was a guest in the audience, Mr. Damien Regnard, representative of the Louisiana region (includes several states) to the French Assembly of French Citizens Abroad (Assemblée des français de l’étranger). During the Q & A, he addressed some of the issues we have in common concerning bank discrimination and the difficulty of correct filing.
Q & A
When reporting a capital gain, report the gross amount of the proceeds; when reporting the value, report the “montant de cession”.
Report the cash surrender value. The account must be reported on the FBAR and 8938, if the thresholds are met, and the income is reported as interest on Schedule B.
Excluded accounts from FATCA reporting
The question was about the PERP. Yes, it is excluded. The full list is in Annex II, part III of the France-US IGA.
If the person is a US citizen, then use the Social Security number. If the person, a foreign spouse for example, does not have a Social Security number, then get a TIN (tax identification number), in order to benefit from him or her on your return when “married, filing separately”.
For the moment, it appears that banks are handling W-9 forms in their own specific ways and not all know what to do with them.
FFIs on the FBAR and form 8938
Our obligations are not the same as the banks’. If we meet the thresholds ($10,000 aggregate for the FBAR and $200,000 for form 8938, or $400,000, if filing jointly) then we must declare all the accounts, no matter if they are not reported by the banks or how little the account may hold. It’s the aggregate amount that counts.
The question was about association treasurers. If you have signatory authority over the account you must report it. FINCEN has defined signatory authority and given extensions for filing: http://www.fincen.gov/statutes_regs/guidance/pdf/FinCEN_Notice_2014-1_FBAR_Filing_Extension.pdf
Tax-free Money Market Accounts
If you live abroad, they may not be tax-free. And, of course, what is tax-free where you reside is not tax-free in the US.
The US is not ready, yet, for reciprocity. It is scheduled to take effect in 2017. We should expect that US financial institutions will be reporting on residents in France, whether they are US citizens, or not.
This was not addressed during the meeting, nor was there a question about it, but it did come up later. This reporter has found some information.
If you spent 330 days or more outside the US or were a resident of a foreign country for the entire year, then you are not required to have health insurance in the US.
1 - Being a bona fide resident abroad, or having physical presence outside the US for 330 days gives you an automatic exemption. Nothing extra to file.
2 - To claim your exemption, include Form 8965 with your declaration and complete section III for each member of your household In Column C, use Exemption Code C. If you were abroad the entire year, check the box in Column D that states ‘Full Year’.