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curious question about FBAR

curious question about FBAR

Old Jan 20th 2015, 11:23 pm
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Default curious question about FBAR

I have read about charging and having to report to the IRS if you have more than $10000. DH has only ever had this much when he has taken a loan to pay off credit cards. Would this count? It's not really 'his' money as he has to pay it all back.

Strange coincidence but in my job I had to do a P60 type letter today for an employee (but for the calendar year not the UK tax year) for her US tax return. I got chatting to her, she has a total English accent so obviously wasn't brought up in the US but must have lived there at some time. She told me she recently renounced her US citizenship so she wouldn't have to do US tax returns after this one until she gets her SS pension. Luckily she got the renunciation in before the recent huge price hike.

I told her DH has not done a return since he moved to the UK (not that I am advocating this) but that he only earns 2/3 what I do and has no savings or investments. She said if he wins the lottery he better declare. I replied that any big lottery win would most certainly be claimed by me not him!
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Old Jan 20th 2015, 11:33 pm
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Default Re: curious question about FBAR

If he has > $10,000 USD in an account (or a combination of accounts) for > 1 second during the year, then he has to report. (It doesn't actually say 1 second but basically if it is in your account at any time during the year it is reportable). It doesn't matter if it is a "loan" or lottery winnings or salary. If he is in control, i.e. has signature authority over that money and it in a foreign bank account, then it is reportable. It doesn't necessarily matter if it is "his" as the trigger is whether he has the authority to do something with it.

There is no tax due simply by reporting the presence of a foreign bank account--it's just a money laundering form.

If in doubt, usually best to report.
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Old Jan 21st 2015, 8:15 pm
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Default Re: curious question about FBAR

If DH is a US person he is required to file annual US tax returns if his income is above the filing threshold.

Someone renouncing is required to have filed for the 5 years before renouncing.
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Old Jan 22nd 2015, 2:49 am
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Default Re: curious question about FBAR

and i thought renouncing gave up the right to ss later on - hope she hasnt made a mistake!!!
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Old Jan 22nd 2015, 4:47 am
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Default Re: curious question about FBAR

Originally Posted by LondonSquirrel View Post
I told her DH has not done a return since he moved to the UK (not that I am advocating this) but that he only earns 2/3 what I do and has no savings or investments. She said if he wins the lottery he better declare. I replied that any big lottery win would most certainly be claimed by me not him!
One important note on this:

You are required to file a tax return if your income is > a certain amount each year. I think last year it was $9,000 USD, but you can google the exact amount (it's pretty low).

Now, with the Foreign Income Exclusion and Housing Exclusion and all that, which exempts the first $9X,000 + USD of income, you don't end up owing any taxes until you are up at quite a higher pay level.

HOWEVER, and this is the kicker, to get the exclusion, you MUST FILE. You can't just say "I made under $90k so I wouldn't owe any tax. If I don't owe tax I don't have to file". That's not the case. You won't get that $90k exclusion unless you go through the paperwork of filing.

So say hypothetically he made $50,000 USD in income. If he files, he would owe $0 because of the foreign income exclusion and/or the tax treaty, but if he didn't file he wouldn't get that exclusion and would be liable for the tax on that $50k (though the tax treaty might negate that as well). It's a tad complicated and I simplified the example to demonstrate the point.

Long and the short--he should file the tax forms if over a certain amount of income.

Last edited by penguinsix; Jan 22nd 2015 at 4:49 am.
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Old Jan 22nd 2015, 3:14 pm
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Default Re: curious question about FBAR

Originally Posted by LondonSquirrel View Post
She told me she recently renounced her US citizenship so she wouldn't have to do US tax returns after this one until she gets her SS pension.
Originally Posted by MsElui View Post
and i thought renouncing gave up the right to ss later on - hope she hasnt made a mistake!!!
Renouncing US citizenship (under current rules) does not prevent one's entitlement to US Social Security, and WEP will also still apply.

If the person continues to live in the UK (under current rules), the person (now an NRA) will not have to file a US tax return as far as the US Social Security benefit is concerned.
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Old Jan 22nd 2015, 3:25 pm
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Default Re: curious question about FBAR

Originally Posted by penguinsix View Post
Now, with the Foreign Income Exclusion and Housing Exclusion and all that, which exempts the first $9X,000 + USD of income, you don't end up owing any taxes until you are up at quite a higher pay level.
Not to digress too far from what is a good simple explanation, but:

FEIE is for 'earned' income only. Be aware of any passive income, and if the income will qualify for inclusion on form 1116 (FTC). Or, for a more in depth exercise, explore using FTC for all income. It may be a better solution, or not.

Originally Posted by penguinsix View Post
HOWEVER, and this is the kicker, to get the exclusion, you MUST FILE. You can't just say "I made under $90k so I wouldn't owe any tax. If I don't owe tax I don't have to file". That's not the case. You won't get that $90k exclusion unless you go through the paperwork of filing.
+1

This is the important part!
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Old Jan 23rd 2015, 12:42 am
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Default Re: curious question about FBAR

Originally Posted by penguinsix View Post
HOWEVER, and this is the kicker, to get the exclusion, you MUST FILE. You can't just say "I made under $90k so I wouldn't owe any tax. If I don't owe tax I don't have to file". That's not the case. You won't get that $90k exclusion unless you go through the paperwork of filing.
To be precise, the IRS insist that a return be filed within 1 year of the original due date in order to claim the Foreign Earned Income Exclusion.
Choosing the Foreign Earned Income Exclusion

So say hypothetically he made $50,000 USD in income. If he files, he would owe $0 because of the foreign income exclusion and/or the tax treaty, but if he didn't file he wouldn't get that exclusion and would be liable for the tax on that $50k (though the tax treaty might negate that as well).
Tax treaties only rarely give a U.S. tax exemption to U.S. citizens/residents. However, contrary to popular belief, claiming the Foreign Tax Credit (as opposed to a tax exemption) is not normally dependent on a tax treaty.

Originally Posted by theOAP View Post
FEIE is for 'earned' income only. Be aware of any passive income, and if the income will qualify for inclusion on form 1116 (FTC). Or, for a more in depth exercise, explore using FTC for all income. It may be a better solution, or not.
All valid points. However, in a "typical" case, to the extent such a person exists, earned income would normally be covered by FEIE. While the small amount of "passive" income most people have would then be covered by the standard deduction and personal exemption (around $10k for single, more in some other situations).
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Old Jan 23rd 2015, 2:08 am
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Default Re: curious question about FBAR

A person's SS payment are not changed if they renounce US citizenship. If SS is their only US sourced income they won't have to file US taxes either.
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Old Jan 23rd 2015, 11:39 am
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Default Re: curious question about FBAR

I do wish DH would do his returns. He's one of those people who wouldn't do anything without a rocket up his a*se. I swear we would not have left the UK for the past 7 years if I had not sorted out renewing his US passport!
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Old Jan 23rd 2015, 12:12 pm
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Default Re: curious question about FBAR

What irks me is that if you switch your savings from one account to another (or have them switched by merging banks), then each account is an individual listing as far as the forms go.

I'm over the limit anyway, so I have to fill in the forms, but it makes it look like I have much more money than I actually do.

In fact, if someone was under the limit, but changed accounts or moved money from one to another, so that the GROSS for EACH account over the year were combined it could be over the limit - they would need to do a filing. Is that right?
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Old Jan 23rd 2015, 12:38 pm
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Default Re: curious question about FBAR

Originally Posted by stephend- View Post
In fact, if someone was under the limit, but changed accounts or moved money from one to another, so that the GROSS for EACH account over the year were combined it could be over the limit - they would need to do a filing. Is that right?
Yes.

Yes, it is ridiculous.
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Old Jan 24th 2015, 1:37 am
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Default Re: curious question about FBAR

Originally Posted by stephend- View Post
In fact, if someone was under the limit, but changed accounts or moved money from one to another, so that the GROSS for EACH account over the year were combined it could be over the limit - they would need to do a filing. Is that right?
Yes, at least based on standard interpretation. But at the same time, the IRS/Treasury are not out there looking to penalize people in this situation and the actual likelihood of getting a penalty (since even if tax was missed, it would be minimal), close to zero.
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Old Mar 13th 2015, 10:14 pm
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Default Re: curious question about FBAR

Hi,
I tried to move (more than $10k ) from the UK to the USA December 2013 to get out of
having to file FBAR in 2015 for 2014, the transaction got held up and it did not transfer until Jan 2nd 2014, bummer for me, last year you had to file prior to June 30th 2014 my question is has the date of June 30th changed for this year or does it remain the same for all years?
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Old Mar 13th 2015, 10:34 pm
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Default Re: curious question about FBAR

Originally Posted by Westham View Post
...has the date of June 30th changed for this year or does it remain the same for all years?
Bad luck on the 2-day slip - bloody typical, eh? You weren't just moving it to avoid filing were you? The filing is fairly easy if it's just a handful of accounts - I hope you didn't loose much on exchange rates.

My understanding is that it is ALWAYS due on June 30th after the year in question. However if you only have signatory authorisation but no actual financial interest in the accounts in question, they give you an extra year to get it done. See here: Report of Foreign Bank and Financial Accounts (FBAR)

Also, don't forget if your money adds up to $50k or more (even counting the same money twice if it was moved from one account to another) you must also file the same information with your Tax Return by April 15th using Form 8938. [EDIT: the rule for the 8938 is slightly different to the FBAR - the threshold is if you had $50,000+ on the last day of the tax year or $75,000+ at any time during the tax year]

Last edited by stephend-; Mar 13th 2015 at 10:38 pm. Reason: Extra info
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