Bink

I'm really sorry you got screwed.
I too got screwed but it sounds like I got off light in comparison to you.

I will comment on a couple of items I had a different experience on.

4) You don't have to have a lawyer and pay 27.5%. I took legal advice and was informed I should just suck it up and pay the fine as involving a lawyer was going to cost me a lot more and was unlikely to change the outcome.

I'm not sure on the penalty structure. I was initially told 20% of highest accumulated balance in the previous 7 years. I ended up paying $500/per account/per year for the previous 7 years.

ClosedAcc 7654

Indeed I got screwed. Glad yours settled for less.

Were you perhaps under the 2010 pogrom? This was slightly different at 20% and there was a clause in there that limited how much you had to pay to a max of taxes and penalties. The numbers I quote are for the current active pogrom, and my situation may be slightly more complicated in that I have a couple of rental properties which generated insugnificant income and mostly loss. Nonetheless they take the peak value of cash in accounts and property value over the years, and voila, it's a hit and run raid on our assets despite nothing being material and a net refund owed to us.

We decided to settle it whatever the principle as there is no viable alternative and we don't want to do a QD and wait for a knock on the door in the middle of the night, sometime in our dotage, by the Stasi.

It's possible to do this yourself but one slip in the masses of paperwork and they can come back and revisit the matter. We engaged a specialist attorney who actually did know the process well enough to make the case for the least possible amount. Horrible to say but could have been worse.

If you have property, you would think that the value would take into account the mortgage - not always true. There are numerous instances where the IRS have refused this so have hit people with assessments that don't include it. It depends on the IRS guy assigned and their whim. It's totally out of control so a lawyer helps but more expense we could like without.

Still, despite not being crazy about it, at least it puts the matter behind us. We realise that we are lucky to be able to do so even though we have to sell a flat planned as retirement income. It's not an option everyone has.

As to Congress, it's a wonderful way of raising free money from a minority, so no matter what they may say, and despite it being an easy fix, not one of them will press a bill forward that brings in less money - won't happen. Nonetheless, we've been bending their ear but really all you will get is sympathetic noises but no action.

And for their next trick.... a bill, retrospective of course, to tax the letter 'e'...., or maybe the colour red. That makes sense too....

ClosedAcc 7654

Oh,and to Bink, there are a huge number of forms that have to be filed. Make sure you got them all, one that is overlooked in the IRS 8938 which is like a super version of the Treasury version but delves deeper. Make sure you have a letter from the IRS stating you're off the hook for criminal charges etc. I should also say that if your assets are lower, under the OVDI pogrom you may pay a lower penalty but we got hit hard because of the housing bubble and that peak year being used whether the property is worth much now or not. Ditto on stock holdings whether you realized gains or not.

Were you officially part of the OVDI program?

Bink

Yes, I was under the 2010 program.
Fortunately I had kept my paperwork (I had all my pay slips for example) so although it was a pain it could have been worse. If they'd levied the 20% fine it would have been a lot worse as I'd sold a house in the UK and had a peak cash amount for that year.

I have all the docs and letters from the IRS saying the investigation was complete. They only gave me 14 days to pay the fines which I thought was harsh but given everything else I guess I shouldn't have expected any less.

I was super pissed off about it at the time but I've gotten over it for the most part now.

I transferred all my assets to the US in 2010 so I didn't have to deal with FBAR every year.

JAJ

Usually there is a statute of limitation, normally 3 years, up to 6 years. It's unusual for the IRS to be able to look back more than 3 years, and very unusual to look back more than 6 years. Over a million taxpayers are audited each year, while only a few thousand get prosecuted.

And a simple mistake or omission on a tax return, especially for a small amount, absolutely does not constitute tax fraud.


It is not normal practice to issue either warning letters, or fines, for simple late filing of an FBAR, or take action following a first-time FBAR filing. U.S. Treasury statistics show that the number of FBARs filed went up from 276,000 in 2009 to 618,000 in 2011. If all of this generated warning letters and/or fines, one suspects we would have heard about it by now.

An amended return (so-called "quiet disclosure") will be reviewed by the IRS, and standard penalties and interest will be added. It is possible that they could refer the file for further examination. There have not been that many reported cases so far, while anecdotally there have been many amended returns filed. The statute of limitations runs out on these in line with the timescale under law.

Some people simply take a view that they should correct their returns going forward. There actually is no legal obligation to amend a tax return if you believed in good faith that the original return was correct when you signed it. For relatively minor issues, this may be the best solution.


Joining the OVDI is effectively the same as entering a guilty plea for tax fraud. If someone does not feel their return was filed in good faith, then the OVDI is usually not the right option. Unless there are some special circumstances, such as $1m in an undisclosed Swiss or Cayman Islands account, then the advice of many attorneys out there is to avoid the OVDI. But professional opinions differ, as do individual preferences for how to resolve a tax problem.

ClosedAcc 7654

Sorry JAJ but you need to be worried. Normal rules don't apply re statutes etc. If you only didn't list your accounts, didn't owe a penny, in any year taken individually, then stern warning letters have been issued but that's best case and owing nothing is realistically almost impossible. They've discovered a source of income and they won't let it go. They are not treating this as a minor oversight - our case certainly was - but despite pleas there is no mitigation whatsoever.

Please take a look at this - it shows exactly what they can do. QD's will simply cue you up for later prosecution and once you get a letter from the IRS, OVDI is then off the table and greater penalties apply. You will be treated as a criminal, and this may include jail time.

http://www.irs.gov/Individuals/Inter...ns-and-Answers

Honestly this seems like an unbelievable abuse of power, and it is. What would seem to make sense does not. I would recommend you contact a couple of attorneys and get their opinion if you don't believe me but starting 2014 the data starts to flow to the IRS from all British accounts by law and a reciprocal agreement. If they can link a UK account to a US address or other indicator, you will be toast.

Sure, one approach is to keep a low profile and pray, and you are correct that entering OVDI is akin to a guilty plea but a strategic one as is often the case for peace of mind. If you don't do something, you will eventually be found with the new data transfer process and then have no defense. QD is being treated as a wilful attempt to avoid detection too, so even though it should be the right action it really is being going into the pile for future action. The knock on your door, so to speak, may take years, but it will come.

Sadly damned if you do, damned if you don't. OVDI is a bad choice but the alternative is far far worse. Short of the law being changed the IRS applies the penalties as prescribed and they are not allowed any leeway.

If only they allowed minor offenders who only owe a small amount to square up, all this goes away. There is no incentive though as this is such a moneymaker for the Treasury.

Arguing the logic just doesn't apply unfortunately.

Do look into it, and,meveryone, please contact your congressman as we have done. The only way to stopnthis is to change the law and only Congress can do that. If we all do that, perhaps they will do something eventually.

angelman

Great I was feeling relatively calm about my finances and now freaking out again.. I just found that I had a pension account with about $12k in it from a job I had a long time ago (about 15 years ago). I had never logged onto the site or reviewed it. I just found that some mail from it had been sent to my parents. I have never declared it on my FBAR form. Likewise I had a small ISA (an old TESSA) account that I had opened again many years ago that had a bit of cash (not much) in it that I have never declared.
I wondered if I should just start adding them to my FBAR form going forward (and taxes) and hope for the best.
I often hear advice that says to get a good CPA to help you but the CPAs I have found seem to know nothing about any sort of foreign accounts. Many have not even heard of FBAR (well at least a couple of years ago). I fired my CPA because they completely failed to tell me about it a few years ago and I only found out from british expats. Apart from Pete how does one find a CPA who knows anything about foreign investments. This is the biggest reason I won't become a citizen because I hope that at least one day I could just relinquish my green card and never worry about this crap again. I hate that US tax is just so grey and unclear and everyone treats it like a game.

ClosedAcc 7654

Yes, make sure you declare them. The problem you have is that your accounts are over $10k so you have to provide details. Perhaps you'll be lucky. The UK banks will be identifying US people if there is any contact detail related to the US on your accounts. Later I imagine they'll get into more sophisticated data mining.

Also, there is another IRS form, 8938, with much the same on it except for a declaration of assets such as property. You are required to file this as well as FBAR starting in 2011. I even did some retroactive filings of these to be sure of avoiding prosecution.

The max our accounts and property in the UK came to was $190k during the housing bubble. As mentioned, our net tax due was a REFUND of $160, nonetheless we settled, for peace of mind, for $52k plus expenses. The stress of knowing we could be exposed to fines of 5-50x that amount was just to much for us. JAJ will doubless say we panicked and should not have done the OVDI but the truth is, we were guilty of violating a little known and draconian law. Perhaps most will get away with it, perhaps not, but many will be prosecuted as prescribed by existing law, whether it's a bad law or now. We just didn't want to roll the dice knowing 2014 is when the agreements really kick in and the identification of US people starts.


Take a look at OVDI if this potential to be fined is weighing heavy. For the small amounts you mention, you might get away with only a small penalty as it is graduated a bit. Right now though, if caught, you're possibly looking at $10k per year per account which is horrendous, and a criminal investigation.

In our case we averaged 4 accounts over the period, none with much in, but the very existence of them was a problem when combined with property.

Sorry if this freaks you but surely better to know than not.

As to GC vs citizen, I believe this applies to residents just as much as citizens. Being a GC holder though has some nasty taxes that get applied to your estate vs tax free transfer to a citizen spouse if you croak so you may want to consider that. Citizenship isn't just about taxes but think how much less you pay here vs. the UK.

andrewlohnes

my head hurts reading all this.

I thought claiming my USC and moving Stateside was a good idea but all this tax stuff is bamboozling me. Sorry I'm not putting any helpful input in to this thread but having read all that I have no idea what people are talking about!

JAJ

The United States and United Kingdom tax authorities have been sharing tax data for a long time. Nothing really changes in 2014.

You are not going to be prosecuted for omitting $2 interest from your tax return.

The statute of limitations in the United States is stronger than in most other countries and the threshold for prosecution for tax evasion or fraud is fairly high. Do your own research on both. Absent a prosecution, there's no evidence of FBAR penalties ever being levied. Many pension accounts are not even FBAR reportable.

In the highly unlikely event of excessive penalties being levied, you could get your congressman involved at that point. However if you self-declare as a tax evader you are unlikely to get much help.

Panic is a really poor basis to make decisions.

penguinbar

Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938. For example, a personal residence or a rental property does not have to be reported.

robin1234

I'm hoping to buy a small place in England soon. NO WAY would I think of renting it out, just too much of a minefield for all sorts of reasons, tax being one of them.

Bink

Actually reporting a rental income in the UK isn't too bad. There's a bit of conversion to do but I actually benefited from having it on my tax return (broke even in reality whilst continuing to pay off mortgage but on paper with depreciation and other costs, fees etc it did alright).

celticgrid

There's freaking out and then there's scaremongering, and while some of your comments approach the latter the above statement well and truly crosses the line.

It is not "realistically almost impossible". I would suggest that most people who have not filled out an FBAR have no tax liability...they just did not know about the FBAR in the first place. And quietly catching up with it, filing properly going forward, doesn't produce a murmur, let alone a "stern warning letter".

You keep linking to the OVDI site. Let me quote from it, in respect of the question: What is the objective of this program?

Note that it isn't about undisclosed foreign accounts per se, but about use of the accounts to avoid or evade tax. Most people fill in tax returns and simply 'miss' the need for FBAR. Been there, done that, moving forward.

ClosedAcc 7654

Scaremongering? Not at all. The 2014 data exchange is far different to anything before and specifically identifies US persons. This is draconian stuff. If you have declared all your accounts and were just $2 out, JAJ is right, no biggie. If you haven't declared your accounts, and owe anything, even $2, you will be prosecuted if they find you. You can't assume anyone behaves reasonably with respect to this without the law changing. I have asked my Congressman for help. They can't do anything with the IRS as penalties are hard and fast, and the only option is a law change for people with modest means like us. That's why I ask you all to do this as laws take years if ever, and congress is not known for passing bills that reduce income without impacting voter bases.

Sorry folks. This is a horrible law and running around saying 'don't panic' won't cut it. There is nothing your congressman can do if you're busted, and the penalties are fixed. Check out the recent remarks from the IRS commissioner that talks about agreements for nearly 50 countries now, and how much money is being brought in. There are hundreds of FBAR prosecutions going on right now, and IRS staff assigned to this have increased dramatically.

Ask Ty Warner (the Beanie Babies guy) if it's panic. He just had to pay $54m. Not saying he didn't deliberately evade taxes so is a bit different shall we say but FBAR got him and hundreds of others.

Still we shall only know if my experience is scaremongering in a year or two. It's not intended to be but burying your head in the sand is not a policy I would adopt, especially as our omission was due to ignorance, which is why we decided to settle and sleep easily. We didn't take the decision easily and did a great deal of research, not to mention self-denial, before we finally decided to take the amnesty.

It's up to you what you do really. Read the who link though, not just the pieces quoted that are a bit out of context. They may never find you, but then again, they may, and if they do, the penalties are as described. Take the chance if you feel comfortable but it is what it is.