FBAR Errors

Old Jan 5th 2024, 1:48 pm
  #16  
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Default Re: FBAR Errors

Originally Posted by Glasgow Girl
See my earlier post which I made a few minutes ago, but here are some other thoughts.

In your case it seems that you have 3 issues.
  1. Pension accounts that were not reported plus one other small unreported account.
  2. Under reporting of foreign account balances for the prior 3 years
  3. Non payment of tax due on foreign account interest in 2018 and 2019.
Had it not been for (3) you would have been eligible to use the no penalty program. However the 5% penalty is only applied to accounts in (3) for the prior 3 tax years. 2018 and 2019 are out of scope for that penalty. The pension accounts had no income (except for 2023 which can be handled correctly), therefore if the accounts in (3) are out of scope then it could perhaps be argued that you are eligible for the no penalty program, or perhaps you can take a hybrid approach and at least exclude the pension accounts from the penalties, but you really need a professionals view on that. This all assumes that there is no unreported foreign income in tax years 2020, 2021 and 2022 which are the years for which the accounts in (3) would count for penalties.

Another possible scenario is that there is no unpaid tax on the foreign income, which could be the case if you paid tax in the UK on your UK interest, because you generally get a credit for that with the IRS and that may wipe out any tax liability. If that is the case you would likely need a professional to look at that in more detail.

As you can see it all gets rather complicated with nuances everywhere. I hope this might help, it’s certainly worth reviewing with someone who does this for a living, and I will get you some contacts in a day or two and PM them.

Thank you Glasgow Girl
It looks like 2019 interest on the Foreign income was included in my tax return and for 2018 I have to consult the person who prepared the 1040 to see if they made a mistake by adding or aggregating it with interest from a domestic account. I agree I need to get someone who does this for a living and will wait for your PM.
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Old Jan 5th 2024, 10:42 pm
  #17  
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Default Re: FBAR Errors

Completely anecdotal but one would assume the IRS is after bigger fish with the FBAR and form 8938?

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Old Jan 5th 2024, 10:43 pm
  #18  
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Default Re: FBAR Errors

Originally Posted by mykee
Thank you Glasgow Girl
It looks like 2019 interest on the Foreign income was included in my tax return and for 2018 I have to consult the person who prepared the 1040 to see if they made a mistake by adding or aggregating it with interest from a domestic account. I agree I need to get someone who does this for a living and will wait for your PM.
That is very encouraging information. For the purposes of using the penalty free program, it does not really matter how the interest was reported, so long as the income was reported somewhere on your IRS tax return, and all tax due was paid to the IRS. If your tax preparer added or aggregated it with other domestic interest it should have had no difference on the amount of tax due, and although it may have been reported in the wrong area the key is that it was reported and tax paid. So fingers crossed for you on that one. And like I said if you paid interest to the UK it is possible that the IRS credit for any tax paid to the UK wipes out any tax due to the IRS, and so again you would be eligible for the penalty free program.Definitely go back to the person who did the 2018 return, but also do some research yourself. If you identify the interest reported on your 1040 and compare that to the domestic interest that you received you should be able to determine if the foreign income was omitted or included. Most banks can reproduce statements and information going back at least 7 years and will be able to supply that information so long as you know what financial institutions to contact. All tax returns prior to 2020 are no longer open for audit or amendment so there is no way to fix those returns, otherwise I would have them correct at no cost to you (assuming they were informed of the interest).

If you can use the penalty free program it is very easy to do, and you don’t necessarily need a professional. If your tax preparer(s) were fully informed of all pensions, accounts, and interest then I would go back to them and ask them to fix the FBAR issue at their cost because it was their mistake, however legally they do not have to do that as ultimately when we sign a tax return responsibility for the accuracy of that return belongs to the taxpayer. In any case you might want to use someone else. If you don’t want to do it yourself, or feel more comfortable using someone else then a good local CPA can almost certainly do it for much less than those who specialize in fixing foreign reporting issues.

I have sent a PM with some firms that have helped others in the same situation if you do need to use the 5% penalty program.
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Old Jan 5th 2024, 10:51 pm
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Default Re: FBAR Errors

Originally Posted by PetrifiedExPat
Completely anecdotal but one would assume the IRS is after bigger fish with the FBAR and form 8938?
Perhaps a few years ago, but not so much anymore. Anyone with unreported foreign accounts or foreign income should take the opportunity to fix the issues immediately they are aware of the issue, and before the IRS becomes aware of the situation. It is a 6 year ticking time bomb with the potential to cause serious financial pain if the IRS discovers the issue which is not at all hard to do if they are so inclined. And the clock is reset every year that the accounts go unreported.

Last edited by Glasgow Girl; Jan 5th 2024 at 10:57 pm.
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Old Jan 5th 2024, 10:57 pm
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Default Re: FBAR Errors

Originally Posted by Glasgow Girl
Perhaps a few years ago, but not so much anymore. Anyone with unreported foreign accounts or foreign income should take the opportunity to fix the issues immediately and before the IRS becomes aware of them. It is a 6 year ticking time bomb with the potential to cause serious financial pain if the IRS discovers the issue which is not at all hard to do if they are so inclined. And the clock is reset every year that the accounts go unreported.
Yeah we paid to get our mess sorted out by a CPA. Worth it.
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