JAJ

I have never heard of a fine for late filing of FBAR, unless there was also tax evasion. The fact that the IRS can in theory levy a penalty doesn't mean that they will do so. Thousands of people have over the last few years have started filing FBARs for the first time (and/or filed them for prior years) without any consequence.

Getting professional advice is recommended, and it's essential for every U.S. citizen/resident to bring tax returns and other reports up to date.

However, there's anecdotal evidence that some people joined the different disclosure programs unnecessarily (i.e. they didn't owe any tax) because of the advice of a lawyer. And between IRS fines and lawyer fees lost a lot of money when they could simply have filed the outstanding tax returns the standard way. So one has to be wary of professional assistance that may create complications where none should exist.

A scare over possible FBAR fines is not a good reason to renounce U.S. citizenship.

MarylandNed

Exactly. In fact, not all US citizens even need to file a US tax return every year.

Cook_County

Yes - BUT in the United States the IRS receives 150 million individual returns from a population of 330 million (so about 45% of the population have to file) compared to the UK where HMRC receive 9 million personal returns from 55 million people (so fewer than 20% of the population have to file).

In the US there are also fixed penalties for failure to file FBARs, 8621s, 8858s, 8865s, 5471s, 8938s and other information returns reporting ownership of non-US assets; whether or not they affect the tax by even a penny. 8621s are going to be the biggie for 2012 returns if the IRS finalise the form the same way as their current draft:

http://www.us.kpmg.com/microsite/tax...Aug/12383.html

JAJ

FBAR penalties are not automatic or "fixed".

MarylandNed

I'm not sure how useful it is to compare the number of tax returns filed in different countries simply because there are different tax laws.

Just because a US tax return is filed, does NOT mean that it HAD to be filed. Many US tax returns are filed simply because the IRS owes the filer a refund - NOT because the filer had to file a tax return. For example, the US allows a tax deduction for mortgage interest paid. So many more people (i.e. home owners with a mortgage) have an incentive to file a tax return in the US. The UK does not allow a tax deduction for mortgage interest paid.

By the way, the current US population is estimated to be about 315 million.

nun

Very true. To renounce US citizenship you must be fully up to date with your taxes, FBARs etc. so it's only those that have filed all FBARs that will be in a position to renounce. Simplification of your taxes, the ability to invest in non-US mutual funds and peace of mind are reasons for some US citizens to consider renunciation. But even in those circumstances it would be a serious step for those born with US citizenship and with family in the US. For the "accidental" citizen, naturalized US citizens moving back home or US citizens who have lived outside the US for a long time and have few connections to the USA it is something to be considered, but even then carefully and with full understanding of the implications.

nun

Coming into compliance "under the radar" is what many people have done. I'm sure if they've read the FBAR instructions and seen the possible fines and filed the 1040Xs to declare foreign interest for years where FBARs were not filed, then the waiting for them to be accepted would be a tense time.

JAJ

All a question of how much tax is involved. At one extreme, if taxes have been paid and only the FBARs not filed, it's fairly clear - even from the IRS - that back filing FBAR should not attract a penalty.

At the other end, if the underpaid tax runs into thousands of dollars, then the voluntary disclosure program is appropriate.

In between these two scenarios, people have to decide what they want to do. In most cases, any underpaid tax is going to be fairly insignificant when foreign tax credits are taken into account. I'm not even sure if the IRS wants people filing amended returns if the difference is only a few dollars, it costs them more than that to process one.

DaveLovesDee

If you've never applied for a US Passport, it's a bit difficult to arrive at a US Port of Entry with it. I wonder how you'd be dealt with?

JAJ

Possible to do if you have a Canadian passport. But not recommended. A U.S. citizen is supposed to be in possession of a U.S. passport when outside the United States, unless exempted.

DaveLovesDee

Then I'd suggest whoever drafted that law is an ass. As long as the person displays a valid passport, what's the problem?

Jerseygirl

US citizens are required to leave and enter the US using a US passport...that's the problem.

lansbury

There is a real world example somewhere on BE. There was a guy who became a US citizen but before he could get his US passport had a business trip to Canada. He used his British passport and was let back into the US with a warning that if he did it again he would be fined. If my memory is correct he was told it would be $650 for not having a US passport.

Jerseygirl

I remember that.

lansbury

The problem is how do they know the person is a US citizen. By requiring that the person carries a US passport it stops the time wasting while they try and establish the legalities of someone claiming to be a US citizen, but traveling on a third part passport.