FBAR filing date extended

Quietly and with no fanfare, a bill was signed into law by the President on July 31 that  comes in direct answer to proposals made for several years by AARO and its partner organizations, as well as the National Taxpayer Advocate.  Beginning in 2016, taxpayers (including overseas filers) will file FinCEN Form 114 at the same time, and subject to the same extensions, as their 1040.

HR 3236, the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015”, dealt with a host of things that have nothing to do with transportation or health care, including extending the IRS filing date for certain partnership, corporation and trust forms as well as the “FBAR” (Foreign Bank Account Report), due up to now on June 30 with no provision for extensions.  It also gives the Secretary of the Treasury discretion to waive certain penalties for first-time filers.

The new law [Section 2006 (b) (11)] states:

“The due date of FinCEN Report 114 (relating to Report of Foreign Bank and Financial Accounts) shall be April 15 with a maximum extension for a 6-month period ending on October 15 and with provision for an extension under rules similar to the rules in Treas. Reg. section 1.6081–5*. For any taxpayer required to file such Form for the first time, any penalty for failure to timely request for, or file, an extension, may be waived by the Secretary.”

It goes without saying that this extension will be welcomed by great numbers of overseas filers.

* the section of the Treasury Regulation that provides for an automatic extension to June 15  for overseas filers, with the possibility of a further extension to October 15.

 

IRS videos assist international taxpayers

As almost everyone knows today, most US citizens and greencard holders are required to file an annual tax return on their worldwide income, whether or not any tax is owed (see page 7 of the 1040 Instruction booklet for the minimum filing thresholds).  Whether we like taxes any more than equally inevitable death, we do need to stay informed and know our responsibilities!

While AARO officially protested to the IRS regarding the closing of their last offices abroad, we must applaud their virtual outreach efforts to provide assistance to international taxpayers in other ways.

One of these is an International Individual Taxpayer Assistance (IITA) program which has, to date, released six videos covering basic questions that most overseas Americans ask themselves at one time or another:

  1. International Taxpayers – Introduction to the International Taxpayers Web page
  2. Filing requirements
  3. The Individual Taxpayer Identification Number (ITIN)
  4. The Foreign Earned Income Exclusion
  5. Filing Status if married to a Nonresident Alien
  6. The Foreign Tax Credit

While these do not take the place of an actual IRS agent to whom you can speak, they are clear and helpful, and are specifically designed for the overseas population.  So far, they do not appear to have been viewed by many people, and we encourage our readers to share this information with others!

Two other helpful resourses are the dedicated website for international individual taxpayers, and the international index of tax topics

 

 

Taxpayer Advocate: Most Serious Problems & Recommendations

In her Annual Report to Congress for 2014, National Taxpayer Advocate Nina Olson addresses certain issues (her "Most Serious Problems") and makes certain Legislative Recommendations specifically related to overseas taxpayers.

We need actively to support her recommendations that seek to alleviate both the loss of access to IRS service abroad and the excessive burden of our mandatory filing of a Foreign Bank Account Report (now using FinCEN Form 114).

Most Serious Problem #1 concerns IRS budgetary allocations that prevent it from providing the optimum service that could increase compliance.

Most Serious Problem #3 concerns the elimination of a functional geographic presence, with IRS employees understanding the needs and circumstances of a specific geographic economy.

Both of these issues relate directly to FAWCO’s concern with the closure of the last IRS offices abroad.

Most Serious Problem #7 once again charges that the IRS Voluntary Disclosure Programs violate taxpayers’ rights.

Most Serious Problem #15 concerns the delay in implementing and maximizing Virtual Service Delivery to enhance taxpayer services.

For the global community, now losing its last effective access to IRS support and services, VSD represents one of the best opportunities to assist overseas taxpayers.

In addition, Ms Olson makes specific recommendations that could vastly improve the situation for both US citizen and Non-Resident Alien taxpayers abroad:

Legislative Recommendation #3 calls for the development and implementation of Virtual Service Delivery.

Legislative Recommendation #6 addresses ways to reduce the burden of FBAR filing.

You can add your voice to hers!

Write to your legislators (Representatives can be found at www.house.gov and Senators at www.senate.gov) in support of one of these recommendations - remember that it is said that 1 email = 10 voters; 1 phone call = 50 voters; 1 letter = 100 voters!

The entire report can be accessed here.

Tax Seminar 202 -- 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.

FINCEN

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.

Streamline Program

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.

FATCA

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.

The Franco-American IGA

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

SICAVs

When reporting a capital gain, report the gross amount of the proceeds; when reporting the value, report the “montant de cession”.

Assurance Vie

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.

TIN

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”.

W-9 forms

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.

Signatory Authority

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.

Reciprocity

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.

Healthcare

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’.

 

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