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Delinquent FBAR/8938's

Delinquent FBAR/8938's

Old Jan 11th 2024, 1:22 am
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Default Delinquent FBAR/8938's

Hi, just joined this forum today, looking for some advise/guidance on what seems like a major FBAR/8938 submission faux pas on my part!

Been living and working in US for 8 years, GC holder, submitting my IRS tax return every year not worrying about FBAR as I had no real UK assets or income to report . . .only to realize today while researching SIPPs that my 'frozen' UK defined contribution pensions have me in scope for both the FBAR and 8938 (never heard of!) . . honestly not sure how this was missed as I had professional tax advice at the time of the relocation, but we are where we are and I am hoping I can find a pathway back to compliance.

The combined value of my two DC pensions today are around $130k, they have been 'frozen' since 2010 but likely were over $100k threshold by the time I relocated to US . . so in summary no change to any foreign income declared on any of my existing tax filings, but forms that should have been submitted as part of the annual filings have not!

Any advice greatly appreciated! Thanks!
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Old Jan 11th 2024, 11:33 am
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Default Re: Delinquent FBAR/8938's

Originally Posted by sl209hsl878d
Hi, just joined this forum today, looking for some advise/guidance on what seems like a major FBAR/8938 submission faux pas on my part!

Been living and working in US for 8 years, GC holder, submitting my IRS tax return every year not worrying about FBAR as I had no real UK assets or income to report . . .only to realize today while researching SIPPs that my 'frozen' UK defined contribution pensions have me in scope for both the FBAR and 8938 (never heard of!) . . honestly not sure how this was missed as I had professional tax advice at the time of the relocation, but we are where we are and I am hoping I can find a pathway back to compliance.

The combined value of my two DC pensions today are around $130k, they have been 'frozen' since 2010 but likely were over $100k threshold by the time I relocated to US . . so in summary no change to any foreign income declared on any of my existing tax filings, but forms that should have been submitted as part of the annual filings have not!

Any advice greatly appreciated! Thanks!
See this: https://www.irs.gov/individuals/inte...ion-procedures
The IRS will not impose a penalty for the failure to file the delinquent FBARs if you properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs, and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted.

File them on-line here: https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html
The first page gives a drop down menu re filing late.

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Old Jan 11th 2024, 3:56 pm
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Default Re: Delinquent FBAR/8938's

As MidAtlantic states, the FBARs are easy to fix provided there is no unreported income and all tax due has been paid to the IRS. Just file the prior 6 years with a statement as to why you have reasonable cause for not filing them. You can do it yourself, or a domestic CPA should be able to do so for a very reasonable rate since this is a simple process.

Form 8938 is different. FBARs are reported to FinCen, are an independent form, and have a statute of limitations of 6 years; whereas Form 8938 is attached to your tax return, reported directly to the IRS, and has a statute of limitations of 3 years. To correct delinquent Form 8938s you need to submit an amended return for the prior 3 tax years to include Form 8938 and include a statement as to why you have reasonable cause. Currently tax years 2020, 2021, and 2022 are open for amended returns. Again a domestic CPA could do this for you at a very reasonable cost or you can do it yourself.

The IRS makes it relatively easy and penalty free to fix unreported foreign accounts, provided all foreign income has been reported and tax paid. Not so much if there is unreported foreign income but even then the current penalty of 5% on unreported assets is very reasonable when compared to the alternative if caught.

In your case it sounds like you have an easy and penalty free fix. Just to be sure to include the reasonable cause statements, and keep them short and to the point. No fluff or superfluous information, simply state that you were unaware of the requirement until now. No further explanation is necessary, and can only potentially complicate matters.

Last edited by Glasgow Girl; Jan 11th 2024 at 4:08 pm.
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Old Jan 21st 2024, 3:28 pm
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Default Re: Delinquent FBAR/8938's

Great news, thanks for the quick feedback guys, will get right on this!
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Old Jan 21st 2024, 4:39 pm
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Default Re: Delinquent FBAR/8938's

Unfortunately, I might have carried on being blissfully unaware of reporting requirements of pensions... So since I'm now aware I'll have to amend our FBARs to include them - thankfully all final salary schemes so zero value with no income form them (yet).
I presume/assume we would also need to report these (for the last 3 yrs) to the IRS even with zero income?
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Old Jan 21st 2024, 6:41 pm
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Default Re: Delinquent FBAR/8938's

With zero income it’s an easy FBAR fix so I would do that for sure. On the IRS if you otherwise met the thresholds for reporting on Form 8938 then to be on the safe side I would submit amended returns for the prior 3 years to include the pensions. If you didn’t meet the thresholds without the final salary pension then there should be no reason to do that since the $0 value for a final salary scheme won’t change that. If you have a transfer value or have a valuation for some other reason then that would change that advice.
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Old Jan 22nd 2024, 12:17 am
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Default Re: Delinquent FBAR/8938's

Thanks GG - we only had an 8938 return in 2020 (2021 and 2022 were below the threshold) - so presumably just the 2020 IRS return to amend and those FBARS.
One of the pitfalls of using T.Tax is that you don't see the form numbers unless you print/read the final return. Odd that on 8938 Pt1.2 it asks for the maximum value of all deposit accounts - whereas it uses two thresholds for reporting (T.Tax seems to take the sum of the maximum values).
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Old Jan 22nd 2024, 1:56 am
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Default Re: Delinquent FBAR/8938's

If Form 8938 was only required in 2020, I would probably leave things alone since the statute of limitations on the 2020 Form 8938 will expire on April 15, 2024.
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Old Jan 22nd 2024, 6:39 pm
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Default Re: Delinquent FBAR/8938's

Originally Posted by ckusa
Thanks GG - we only had an 8938 return in 2020 (2021 and 2022 were below the threshold) - so presumably just the 2020 IRS return to amend and those FBARS.
One of the pitfalls of using T.Tax is that you don't see the form numbers unless you print/read the final return. Odd that on 8938 Pt1.2 it asks for the maximum value of all deposit accounts - whereas it uses two thresholds for reporting (T.Tax seems to take the sum of the maximum values).
I use TT Home and Business (download version) and you can tab between Forms and “easy step” and this lets you see every form and worksheet as you go…. And had “quickzoom” and “Explain” links to link you to details…
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Old Jan 26th 2024, 3:31 pm
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Default Re: Delinquent FBAR/8938's

I heard a rumor, so big pinch of salt required, that the mission of the IRS is to get 'average' tax payers compliant with FBAR and 8938, rather than be punitive. Is that wrong?
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Old Jan 28th 2024, 4:29 pm
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Default Re: Delinquent FBAR/8938's

Another hurdle - where on Earth (on the FBAR of course...) do I put any information about pensions. My UK salary pensions have no account number (just name/NI#) - and as such are not 'accounts'. (If you do a google search on "FBAR reporting of final salary pensions" there was a fairly lengthy discussion about 10 years ago which seem to fall into, not surprisingly two camps - on reporting final salary schemes - no and yes...).

Indeed, https://www.cpajournal.com/2020/03/0...ation-returns/ notes that:
Just as there are many different situations in which a U.S. person may have a foreign retirement plan, there are also many different types of foreign retirement plans. The four basic types of foreign retirement plans are 1) a retirement plan involving a segregated foreign retirement account for the employee, which is created by the employer and funded by the employer, the employee, or both (i.e., a defined contribution plan); 2) a retirement plan created by the employer that does not result in a segregated retirement account for the employee, but instead consists solely of an agreement to pay the employee certain periodic payments upon retirement, such as an employer-created pension (i.e., a defined benefit plan); 3) a personal pension plan created and funded by the individual; and 4) a government-sponsored retirement plan, such as a foreign equivalent of Social Security.

...and...

A foreign retirement plan is only reportable on an FBAR if it is associated with a segregated foreign retirement account, since it is the foreign account—not the plan itself—that triggers the obligation to file the FBAR.

So, on the basis of this, my UK final salary scheme (falling under #2) would not be reportable. Comments welcome!
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Old Jan 28th 2024, 5:15 pm
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Default Re: Delinquent FBAR/8938's

I personally think there is no requirement to report a final salary scheme that has no known value, but since my opinion is irrelevant and the penalties are so harsh for not declaring accounts, I am of the opinion that it is safer to take a conservative approach and include on an FBAR and Form 8938. The process is simple, it takes just an hour or two, and no one ever got into trouble by over reporting.

If there is no account number I would list using my NI number as the account number (or a dummy number like 123456) . If you know the transfer value or have a statement of some kind with a valuation use those numbers, otherwise enter $0.
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Old Jan 28th 2024, 5:25 pm
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Default Re: Delinquent FBAR/8938's

Originally Posted by PetrifiedExPat
I heard a rumor, so big pinch of salt required, that the mission of the IRS is to get 'average' tax payers compliant with FBAR and 8938, rather than be punitive. Is that wrong?
I think that true and that is why those that have no unreported income can correct things very easily and with no penalty. Even those with unreported income can correct things with a 5% penalty which is considerably better terms than existed several years ago. Anyone who does not take the opportunity to become compliant is a fool, because it is becoming increasing difficult to hide foreign accounts and income and the IRS will show no sympathy or compassion for those that get caught no matter what the circumstances are.
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Old Jan 28th 2024, 5:43 pm
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Default Re: Delinquent FBAR/8938's

I moved to the USA in 1987 and that was the first tax year I filed an FBAR. (It was by paper in those days). For the first 6 years in the USA my sponsoring company, a chemical mega corporation, paid for their accountants Deloitte & Touché to do my tax returns including my FBAR. I have always had 2 UK final salary company pension schemes with no cash-in or lump sum option. Consequently, D&T never had me report those pensions so when I started doing my own tax returns and FBAR filings I continued to not report them until I actually started receiving payments and then only on my IRS return as pension income, not on an FBAR.

This may or may not reflect what should be done, just saying what my experiences have been. I don’t see any downside in adding to an FBAR the name and address of the company responsible for a final pension scheme plus your account or member number and the value of zero if there is no cash-in value.
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Old Jan 28th 2024, 6:03 pm
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Default Re: Delinquent FBAR/8938's

Originally Posted by Glasgow Girl
If Form 8938 was only required in 2020, I would probably leave things alone since the statute of limitations on the 2020 Form 8938 will expire on April 15, 2024.
The statute of limitations NEVER expires for the entire return if Form 8938 is missing or incorrect.
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