Simonyg

Please don't judge me as this one is pretty stupid...

When completing my US tax return, i used the yearly average exchange rate to convert income and interest from the UK as per the instructions. However, in order to keep the numbers consistent, i also used the same yearly average exchange rate for form 8938. I now know that i should have used the 31st December exchange rate for form 8938.

Here is the dilemma; I am submitting my FBAR late for the same year and i have a couple of options;

1. Leave form 8938 as is and use the same yearly average exchange rate for my FBAR. This will keep the forms consistent but will mean they are not using the prescribed 31st December rate.
2. Submit a 1040X with an amended 8938 using the correct 31st December exchange rate and then use the same rate for my FBAR.
3. Leave form 8938 as is and utilise the correct 31st December rate for the FBAR. This will result in form 8938 and FBAR for the same year reflecting different dollar amounts.

Any advice would be gratefully received.

robin1234

I wouldn't worry about it. Do the U.S. treasury and the IRS a favour, don't complicate their lives. Let sleeping dogs lie. How much difference is it really going to make? I'd just concentrate on doing a more consistent & accurate job for the 2016 return, when that comes around....

Cook_County

Since you had engaged a US tax professional, if I were the IRS I would want a pretty serious excuse such as a medical condition to explain why the FBAR is late. Otherwise you risk the 50% wilful penalty for the FBAR. You probably want a legal opinion. The 8938 is wrong. Until it is amended the statute of limitations will never close.

MidAtlantic

You reported in another thread the problem you have due to appalling advice from a CPA. It is not clear if these issues are part of that same mess or something new. Either way I think you should be seeking professional tax and legal advice before digging a deeper hole.

Simonyg

This is entirely my fault. I had legal advice and entered the Delinquent International Information process based on a strong reasonabale cause case. I provided the calculations for the documents and the package went off on Friday. I then spotted the mistake on Saturday. 100% my fault.

Question is... do I leave them with a form 8938 which is wrong or do I just submit a 2nd 1040X just with the corrected form?

Cook_County

Reasonable cause is in the statute. No additional non-statutory IRS program is required.


To enable the SOL to close, you should file a second 1040X with complete copies of both previous versions explaining the mistake.


It may help the IRS if you attached copies of the advice you received, so that they can see your mistake was non-wilful.

Simonyg

Thanks Cook.

When I read the 1040X the instructions it said that if you are just updating a supplemental form then I should complete the top section and then go straight to part 3 and include and explanation of the form I am submitting why I am resubmitting the form. I was planning on following that process and including a statement saying that I had used the wrong exchange rate for only form 8938 and all other information in previous 1040X was accurate. Then include the updates 8938.

Are you saying that I should do that and then include a full copy of the previous 1040X with all the forms?

Thanks again for the help.

durham_lad

+1

FBAR to the Treasury and form 8938 to the IRS are only "reporting" forms so a slight inaccuracy on exchange rates has no consequences if either exchange rate resulted in the same accounts being reported. The 8938 only asks for a list of the foreign accounts and where on the tax return any income from those accounts is declared.

I would only file amended returns if there was under or over reporting of the income resulting in the wrong tax being paid.