Faery

I am FREAKING OUT please someone help me! Where to start...I am a green card holder pending naturalisation and have lived in the U.S. for over 4 years. My husband does our taxes as I am hopeless with numbers and the complexity of taxes. This year he told me I no longer have to send off the form to report my UK bank accounts and that the FBAR form is now digital, so I looked at it and read about form 8938, mentioned it to him and he then tells me he never completed it nor sent it off with our tax return. So he amended it and sent it off, during this process I discover that he has not done form 8938 for 2011 and 2012 either!!!!!!! So now after reading about the horrendous $10,000 fine for each time it is not filed I am on the verge of fainting. But it gets even worse....he did not declare my foreign accounts on our 2009 tax return, he ticked the NO box in section B, he said he did not realize about my foreign accounts and no TDF form was filed that year either.

We did the TDF/FBAR forms for 2010, 2011, 2012 and 2013 but NOT 2009 (I arrived in august 2009) so we were clueless and dumb about my foreign accounts. Form 8938 (which I believe came into existence 2011) we have never filed though we just sent it off with our amended tax return for this year and we have amended 2011 and 2012 and about to send it off.

So, can anyone advise as to what to do in this hellish situation? If we are audited, would our failure to disclose foreign accounts for 2009 result in massive fines or worse? What should we do about it? What should we do about the TDF form we did not file in 2009? I cannot eat or sleep this is such a bloody mess I am soooooooo angry with my husband's carelessness and I am angry at myself for not checking these things and being so ignorant.

Any interest we might owe on my UK accounts would be minimal but I think the 2009 tax return would be considered fraudulent even though it was an honest mistake. I am sorry if this is difficult to understand, I am in a right state and can't think straight.

JAJ

I guess the most important thing to do is not to panic. The IRS do not usually prosecute for failure to file an information report (such as FBAR) if there is no significant under-payment of U.S. tax. Significant = (for example) a million dollars in an undeclared Swiss account.

Do you have enough assets to need to file a form 8938? The reporting thresholds are much higher than for FBAR.

2009 is outside the normal 3 year statute of limitations, (if you filed on time only 2011-13 are open), so it's highly unlikely that there will be any audit. Unless you omitted more than 25% of your adjusted gross income. Did you omit any income or under-pay U.S. tax? If so, how much was the under-payment? ($5 or $5,000)?

robin1234

I've just seen that the IRS now have a very useful chart setting out comparison of 8938 and FBAR requirements. I've never seen it before, this version is dated February 2014. Folks may find it useful. (Maybe it's been online a while, I've not seen it before.)

http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements

theOAP

Please don't panic, and don't be too hard on either yourself or your husband. There is at least one post like yours on the expat sites every week. You are not alone in making this oversight. Many others have made the same omission.

Read the post above from JAJ carefully, and you should be fine. Your defence is 'reasonable cause'. (You didn't realise the information was required.)

Faery

Yes, I have enough assets to need to file form 9838. Because we did not declare my foreign accounts for 2009 we might owe on any interest I earned but it wouldn't be much, under $50 at most. We did not omit anything else.

Faery

I just don't know what to about it, leave it be or try to put it right? What about the FBAR I didn't file for 2009?

lansbury

With FBAR I believe most of us who discovered it should have been sent in previous years, have just started sending it from the year when we realized we should have.

Faery

Yes, it seems to be common that people did not know about the stupid FBARS, Right now that's the least of my worries, I'm more concerned about the the fact that my husband did not check the YES box on schedule B of our tax return for 2009. That would be considered fraudulent even though it was a genuine mistake. Quiet disclosures are discouraged I read, so what the hell do we do about it?

lansbury

Re-read the last paragraph of JAJ post (post #2)

The IRS can audit back 3 years, unless a substantial error is identified. You indicated perhaps $50 was involved. That does not seem to fit the description of substantial.

Faery

Yes, but then I read this on a website:

Exceptions to the 3-year statute of limitations on assessments and audits:

The IRS has six years from the date a return is filed to audit a tax return and to assess additional tax if the taxpayer omits income that amounts to more than 25% of income that was reported on the tax return.
The IRS also has six years to audit a tax return and assess additional tax on income related to undisclosed foreign financial assets if the omitted income is more than $5,000.
The statute of limitations on audits and assessing additional tax remains open indefinitely if the taxpayer files a false or fraudulent tax return.

lansbury

I think there is a difference between error and fraud. Fraud requires intent. Perhaps the false is a little more open, but if you filed it believing it to be correct I wouldn't call that filing a false return.

theOAP

I'm sure you realise any opinions given on this site are from non-professionals, so they are worth absolutely nothing. Having said that, we can offer suggestions as to what we would do in similar circumstances, even if it is worth nothing.

IMHO, the FBAR for 2009 is not worth worrying about. You have filed the FBAR for '10, '11, '12, and '13. It's obvious you are not hiding anything. Again, you have reasonable cause for 2009. If the 4 past years of filing have raised no issues, then let sleeping dogs lie. If you are still concerned and cannot let it go, you can file for 2009 using the new FinCEN 114 Format (the digital submission). The form asks for the tax year, (put 2009) and there is a drop down box where you note the reason you are filing late (mark the one "I didn't know I had to file an FBAR").

On to 8938. There are only a few options available. The first would be to 'file going forward'. If I understand you correctly, you have submitted a 1040X for 2013. File correctly, and on time, when 2014 filing comes around next year, and go forth from there. Yes, it is a risk, but all your options will come with a risk.

Another option is to do as you've suggested and file a 1040X for '11 and '12. A key question, as JAJ asked, is did you declare any interest (or income) from the foreign accounts on your 1040 for '11 and '12? If the income was declared, then you can not be accused of evading tax. Again, you have reasonable cause for not filing (you didn't know about 8938). If the interest amounts were not declared, and are less than $50, is it really worth the Treasury's time to pursue penalties on a late filed 8938? You'll have to decide that, but IMHO it would seem unlikely, although anything concerning the IRS is unknown territory.

You could contact a tax advisor (and I'm not talking about cheapo national firms), and ask for their opinion as to how to proceed. IMHO, they may be straight and honest, but it will cost. At worse, they'll feed on your fears and charge you a great deal of money for a resolution you can achieve on your own.

Or, you could call the IRS and say oops, made a mistake, reasonable cause, what does one do to correct it? They may say just file the 1040X's and pay any tax or penalties that may be due. They may say join a programme for those who are delinquent. IMHO, it's doubtful they would say the latter, but it all depends on which agent you get a hold of. Whatever you do, DO NOT sign up for any programme. You are not a tax evader. Again, you have reasonable cause.

Sorry if some of this is confusing. IMHO you have a problem, but I would suggest it is not that great. The IRS is realising that it has (inadvertently) caught a number of 'minnows' in this exercise, and is really most interested in those who have an undeclared million or 50 stashed abroad.

The unfortunate news is there is no oops, made a mistake, hit the reset button, and all will be resolved with no risks. IMHO, the worse you may face (in todays climate) is perhaps some rather small penalties.

EDIT: after reading the last few posts, I would remind you that you filed with the best intentions, and you did not wilfully attempt to conceal taxable income. Therefore, it is not fraud. It's a reasonable error.

Sorry about that, I can't get my edits in the right place!

Faery

Thank you for all your replies and thank you so much for your detailed reply theOAP WE are going to file a 1040X for years 2011 and 2012, we didn't declare the interest but what we owe for both years comes to just over $50.

I want to file one for 2009 too but my husband says to just leave it. Easy for him to say, I am in the middle of naturalisation and cannot lie when asked if I owe any overdue taxes at my interview!!! This is horrible nightmare.

JAJ

If you believed your tax return was correct when you signed it, there's no legal obligation to amend it. However, you tell us you already amended your 2013 return, so that means you may need to be consistent on the open years ...

Nothing is likely to happen other than an assessment for the $50 + interest, normal under-payment penalties etc. The bar for prosecution for tax fraud is actually quite high. Much higher than the scaremongering on forums would make you think.




The naturalization question asks if you filed tax returns. Not if the tax returns were perfect. As for owing taxes, you don't owe any taxes unless and until the IRS levy an assessment and it goes unpaid beyond the due date.
And the FBAR report isn't a tax return, it's an information report filed with the Department of the Treasury.

Once again. 2009 is outside the statute of limitations (if you filed on time) so based on the facts supplied, you do not need to even consider amending for that year. Same applies to 2010.

Faery

Thank you JAJ, really appreciate your reply we will go ahead and amend the 2011 & 2012 tax returns. I read the FBAR statute of limitations is 6 years.

Yes, I did pay tax in the UK, it was taken into account.