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please help,freaking out about FBAR

please help,freaking out about FBAR

Old Mar 16th 2014, 2:52 pm
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Default please help,freaking out about FBAR

hi everyone,
please forgive me if I seem to ramble, but I am at my end wits, I have slept maybe 4 yrs in 2 days, I am seriously considering going to the ER with chest pains.

I was reading on this site about people moving back to uk, my home place.
A lady asked about FBAR, I have no clue what it was so I read on...to my absolute shock and horror I realised it was to declare funds to the treasury dept, IF YOU HAD MORE THAN $10,000 IN A OFFSHORE ACCT I had no idea .
here lies the problem, due to my ignorance which is not a excuse, we have not filed FBAR ever!!!! or included the money on a tax return.
here is my background........
moved to canada married a canadian 22 years ago, we moved to usa 19 years ago, became us citizens.

I had 2 small RRSP'S $6,000 in total that I LEFT at TD AND RBC.they have been there for yrs, not touch,moved, nothing, I receive statements in dec and that all , never touched nothing, they are RRSP (LIKE IRA)

Husband has 4 small RRSP'S grand total this year $12,000...same situation as me, just left them alone,never touched anything...I think they increased in value by 1% last year.

I had no idea what so ever that the interest (gains) or anything to do with CDN RRSP'S had to be included on 1040 tax sheet...again my ingnorance.

after reading the ladies comments I went into complete shock and panic, no sleep or food all yesterday, I have no intention of malice or hiding anything, I had no clue...also I am guessing my tax guy will be shocked when I call him tomorrow about this, but he only works on information I give him,not his fault.
I am truly out of mind with worry about all this, can some please give me some information.
I want to clean up this mess and do the right thing, I will do what ever it takes.
thank you so much for bearing with me, I feel so alone and afraid.
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Old Mar 16th 2014, 3:58 pm
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Default Re: please help,freaking out about FBAR

Please calm down....for the sake of your sanity and your physical well-being.
You (fortunately) are not talking about vast sums of money + many have found themselves in a very similar situation.
When you talk to your tax person tomorrow discuss the following remedies with them:
http://hodgen.com/new-official-easy-...sp-situations/

As you're already abundantly aware - the important thing (after regaining your composure) is to get yourselves into compliance in a manner which will call the least possible attention to yourselves.

Some others should come along here shortly to add more concrete advice for you to consider.
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Old Mar 16th 2014, 4:03 pm
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Default Re: please help,freaking out about FBAR

THANK YOU XX
I am tring to be rational, I know its a small amount to the IRS, I cant help it, I will make some tea , that always helps!!!!

after more reading... I feel better and more informed.
thanks again.
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Old Mar 16th 2014, 4:59 pm
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Default Re: please help,freaking out about FBAR

Technically, if you have an RRSP you should file a form 8891 to exclude the gains. At a minimum, you should probably do this going forward. And if you're liable to file FBAR, then again, at a minimum you should do so going forward.

Regarding prior year tax returns, if you believed they were correct when you signed them, you are not under any legal obligation to amend them. In any case, as long as the amounts (of missed income) are less than 25% of your adjusted gross income, the statute of limitations doesn't go back more than 3 years. Assuming you filed on time, 2010 drops out of the statute of limitations on April 15.

Despite all the scare stories you read, there is no evidence out there that the IRS are actually launching tax audits, or levying penalties against those who simply missed out on a simple form and have not engaged in tax evasion. Really - they're interested in people who have offshore accounts and trusts in places like Switzerland or the Cayman Islands, not those who might have missed out on an information report or form relating to a Canadian RRSP.
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Old Mar 16th 2014, 5:13 pm
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Default Re: please help,freaking out about FBAR

dear JAJ,

You have made my day....I feel so much better,
I would have no idea that cdn RRSP off shore !!!! if it was Caymen or something then at least the weather would be better.

thanks again for comments xxx
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Old Mar 16th 2014, 5:17 pm
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Default Re: please help,freaking out about FBAR

Snowman..general consensus is that you'll be fine. No one is going to be banging on your door.
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Old Mar 16th 2014, 5:23 pm
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Default Re: please help,freaking out about FBAR

Originally Posted by Snowman51 View Post
dear JAJ,

You have made my day....I feel so much better,
I would have no idea that cdn RRSP off shore !!!! if it was Caymen or something then at least the weather would be better.

thanks again for comments xxx
A Canadian RRSP isn't necessarily "offshore" in the usual context of the term, but it is non-U.S. (ie, "foreign") and as far as the law is concerned, must be reported. But as far as IRS enforcement is concerned, they're much more interested in anything related to tax havens.

Have you filed your 2013 tax return yet?

You say your RRSP is only around $6,000 in value and if that's your only non-U.S. bank account or investment, you wouldn't need to file FBAR. Your husband would (if his RRSP is $12,000), but you wouldn't. FBAR is different to a tax return, and even if you file your tax return jointly, you file FBAR as an individual.
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Old Mar 16th 2014, 5:33 pm
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Default Re: please help,freaking out about FBAR

Originally Posted by Snowman51 View Post
dear JAJ,

You have made my day....I feel so much better,
I would have no idea that cdn RRSP off shore !!!! if it was Caymen or something then at least the weather would be better.

thanks again for comments xxx
I too, had a few sleepless nights when I realized that I should have filed FBAR and 8938, and ticked on tax return that I had signatory on offshore accounts, in my first year here (2011) and I do have accounts in the Cayman! ( I worked there for 12 years) We just refiled for that year and I managed to get FBAR in by June 2012 and now I actually LOOK and READ our tax return instead of blindly signing it!
Since FATCA was signed into law in 2010 - more attention has been given to these forms - FBAR has been around for years but barely enforced.
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Old Mar 16th 2014, 6:07 pm
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Default Re: please help,freaking out about FBAR

Originally Posted by Snowman51 View Post
here lies the problem, due to my ignorance which is not a excuse, we have not filed FBAR ever!!!! or included the money on a tax return.
here is my background........
moved to canada married a canadian 22 years ago, we moved to usa 19 years ago, became us citizens.
I had 2 small RRSP'S $6,000 in total that I LEFT at TD AND RBC.they have been there for yrs, not touch,moved, nothing, I receive statements in dec and that all , never touched nothing, they are RRSP (LIKE IRA)
Husband has 4 small RRSP'S grand total this year $12,000...same situation as me, just left them alone,never touched anything...I think they increased in value by 1% last year.
I had no idea what so ever that the interest (gains) or anything to do with CDN RRSP'S had to be included on 1040 tax sheet...
Just noticed you've posted your concerns at another forum, where you also indicate that neither you nor your hubby are retired yet and that the heretofore, unreported accounts, have remained untouched (tho grown in value each year).

Have you actually received any interest income - or any income of any kind from them?

If the answer is "No" - then I don't believe these accounts are of any interest to the IRS - and should not be reported. They would only need to be reported now (or in the past), if your total foreign holdings were above the minimum threshold ($50,000) which requires the inclusion of IRS form 8938 together with your 1040 tax filing. And neither you nor your husband individually, or combined (if you file jointly) appear to meet that threshold - from what you've told us here.

Now I could be wrong - and someone will hopefully come along soon to correct me (or to reaffirm for you that what I've suggested is probably correct).

I should add - I'm not Canadian and have no knowledge at all about specific IRS requirements, if any, regarding the accounts to which you refer. So certainly don't rely on what I say here.

And now - time for a 2nd cuppa

ps: If you and hubby file jointly then the threshold for IRS form 8938 may even be higher (?) - better yet, right?

Last edited by MMcD; Mar 16th 2014 at 6:17 pm. Reason: added ps notation
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Old Mar 16th 2014, 6:16 pm
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Default Re: please help,freaking out about FBAR

Originally Posted by MMcD View Post
Just noticed you've posted your concerns at another forum, where you also indicate that neither you nor your hubby are retired yet and that the heretofore, unreported accounts, have remained untouched (tho grown in value each year).

Have you actually received any interest income - or any income of any kind from them?

If the answer is "No" - then I don't believe these accounts are of any interest to the IRS - and should not be reported. They would only need to be reported now (or in the past), if your total foreign holdings were above the minimum threshold ($50,000) which requires the inclusion of IRS form 8938 together with your 1040 tax filing. And neither you nor your husband individually, or combined (if you file jointly) appear to meet that threshold - from what you've told us here.

Now I could be wrong - and someone will hopefully come along soon to correct me (or to reaffirm for you that what I've suggested is probably correct).

I should add - I'm not Canadian and have no knowledge at all about specific IRS requirements, if any, regarding the accounts to which you refer. So certainly don't rely on what I say here.

With specific reference to a Canadian RRSP, the IRS view is that any income embedded within the plan is taxable unless a deferral election is made. They have created a specific form to elect deferral. It's called form 8891 and is simple to complete:
http://www.irs.gov/uac/Form-8891,-U....tirement-Plans

The form 8891 cannot normally be filed late (for prior years), or at least not without a lot of complications. In theory, the IRS could go back and assess tax for prior years, up to 3 years normally. But since the amounts are likely to be very small, this is quite unlikely.

On the facts submitted, the form 8938 does not need to be filed, if these are the only non-U.S. assets. However the threshold for FBAR is lower. All these requirements need to be looked at independently.

Last edited by JAJ; Mar 16th 2014 at 6:42 pm.
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Old Mar 16th 2014, 6:30 pm
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Default Re: please help,freaking out about FBAR

Originally Posted by JAJ View Post
With specific reference to a Canadian RRSP, the IRS view is that any income embedded within the plan is taxable unless a deferral election is made. They have created a specific form to elect deferral. It's called form 8891 and is simple to complete:
http://www.irs.gov/uac/Form-8891,-U....tirement-Plans

The form 8891 cannot normally be filed late (for prior years), or at least not without a lot of complications. In theory, the IRS could go back and assess tax for prior years, up to 3 years normally. But since the amounts are likely to be very small, this is quite unlikely.
.
... the link I provided in post #2 (above) addresses apparent, recent changes regarding that specific form - changes which should really be helpful to the OP. The link is to a web posting by a US tax attorney.
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Old Mar 16th 2014, 6:41 pm
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Default Re: please help,freaking out about FBAR

Originally Posted by MMcD View Post
... the link I provided in post #2 (above) addresses apparent, recent changes regarding that specific form - changes which should really be helpful to the OP. The link is to a web posting by a US tax attorney.
The article suggests that an amended tax return, with an 8891 attached, would be accepted. The original poster should decide next steps. For small amounts, even this step may not be necessary.

Last edited by JAJ; Mar 16th 2014 at 6:45 pm.
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Old Mar 16th 2014, 8:04 pm
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Default Re: please help,freaking out about FBAR

I am back...lots of tea drinking and feeling a bit less paniced.

The cdn RRSP are the only funds we have in cananda, they were never touched, no distribution nothing... however I have failed to report the interest gained, due to my ignorance....not a excuse.
looking back at my spreadsheets, interest was small, something like 1%, a few hundred dollars at most on mine.
My husband had one that gained $500.00.
over all I would say a grand total of less than $1000 for 2013.

we have already filed our 2013 tax's we filed joint this year since I am at home (quit work 2 years ago..stay at home wife)
all previous years we have filed indiviual returns.

Thinking this mess over I will talk to my husband about filing the FBRA for this year...thanks for the head up that it is for indiviual .
For the missing years we will have file a FBRA for him, and we will pen a letter explaining why we did not file????

Hopefully when they see its a RRSP, they wont be too mad with us...I HOPE.

does this all sound ok...I read the article for post #2...thank you,that helped alot to understand what to do.
also I will talk to tax guy about the 8891's, I will ask him to write a letter.
explaining my failures.

again words can not express how grateful I am for the reassuring words, I feel alot better about this situation.
All I can do is tell the thurth, and be up front.
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Old Mar 16th 2014, 8:24 pm
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Default Re: please help,freaking out about FBAR

Originally Posted by Snowman51 View Post
The cdn RRSP are the only funds we have in cananda, they were never touched, no distribution nothing... however I have failed to report the interest gained, due to my ignorance....not a excuse.
looking back at my spreadsheets, interest was small, something like 1%, a few hundred dollars at most on mine.
My husband had one that gained $500.00.
over all I would say a grand total of less than $1000 for 2013.
It may be less than that, since you don't necessarily count the change in the value of the fund itself. Only taxable distributions.

we have already filed our 2013 tax's we filed joint this year since I am at home (quit work 2 years ago..stay at home wife)
all previous years we have filed indiviual returns.
Really - you filed married/separate returns? That usually doesn't make sense for most married people living in the U.S., other than in a few very specific situations.


Thinking this mess over I will talk to my husband about filing the FBRA for this year...thanks for the head up that it is for indiviual .
For the missing years we will have file a FBRA for him, and we will pen a letter explaining why we did not file????

Hopefully when they see its a RRSP, they wont be too mad with us...I HOPE.
Hundreds of thousands of people file FBAR every year, many for the first time. It doesn't go directly to the IRS, but to another division of the Department of the Treasury.

Your husband doesn't need to report your RRSP as long as he is not a beneficiary of yours. Same goes for you - if you are a beneficiary of his RRSP, you may need to file as well. "Beneficiary" is defined in the instructions to form 8891 and FBAR. As long as each are held individually, there should be no requirement for you to report each other's.

Should you file outstanding FBAR or just do so going forward? The IRS would tell you to back-file up to 6 years, but really, there's no evidence that anyone has actually been prosecuted for failing to file an FBAR over a Canadian RRSP. So the option is there to decide to file FBAR on a go-forward basis.


does this all sound ok...I read the article for post #2...thank you,that helped alot to understand what to do.
also I will talk to tax guy about the 8891's, I will ask him to write a letter.
explaining my failures.
A letter to whom?
That article suggests filing amended tax returns for the relevant years (up to 3 years), including the form 8891, but really, that could well be an over-complication. Your next tax return (for 2014) is due in early 2015, why not just decide to get that right?

I don't think there is a single reported case out there of the IRS trying to audit or penalize someone for failing to include a form 8891. And in the highly unlikely case of the IRS auditing you, and asking about this, you've already told us the amount of tax involved is likely to be very small. A penalty of x% on a small amount is still a small amount.




again words can not express how grateful I am for the reassuring words, I feel alot better about this situation.
All I can do is tell the thurth, and be up front.
No, that's not always the best option. Do you often go to the local police station and admit to driving at 1 mile per hour over the speed limit?

You filed your tax returns in good faith (based on what you say) and there is no material non-compliance, so there is absolutely no obligation to amend. Just file correctly going forward. Your 2013 return will exit the statute of limitations, under current law, in April 2017.

Last edited by JAJ; Mar 16th 2014 at 9:08 pm.
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Old Mar 16th 2014, 8:48 pm
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Default Re: please help,freaking out about FBAR

HI JAJ,
Thanks for all the great information.
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