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Quiet disclosure of FBAR

Quiet disclosure of FBAR

Old Jun 18th 2011, 1:15 am
  #181  
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Default Re: Quiet disclosure of FBAR

Originally Posted by mandpete
We have two joint endowment policies which are due to mature next year and have just now realized we may have to disclose these as they both have a cash surrender value.

My husband (aged 46) also has a stakeholder pension plan and a personal pension plan, he hasn't made any contributions to either of these pensions since 2002. He cannot withdraw from either of these for a considerable time.

We have a very small amount in a current account which is used solely for paying endowment contributions.

We haven't earned any income/interest from any of these accounts and rightly or wrongly assumed we didn't have to disclose these on previous tax returns.

Can anyone confirm whether we need to disclose the endowments and pensions?
I have a similar situation:
I pay about $5/month for an insurance policy to pay off my mortgage on my flat in the UK if I die.
Yesterday i emailed [email protected] with the following question
"I have a foreign "Decreasing Term life assurance policy, without profits" This is to cover the outstanding payment of a foreign mortgage in the event of my death. It has no cash value during my lifetime. The only "signature authority" I have is to cancel the policy if I so wish.

Do I have to report this account on my FBAR?"

THE REPLY:
"Foregin insurance policies are reportable for FBAR purposes."

WOW! I have no access to the money in this policy. I had to dig out the policy and look up its current "value".

There will no doubt be LPR British expats who may have even sold their property in the UK but still have endowment life assurance etc who will slip up on this detail.

MandPete I suggest you post your question to the FBAR email address. I got a reply within 24hrs.
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Old Jun 22nd 2011, 6:27 pm
  #182  
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Default Re: Quiet disclosure of FBAR

Originally Posted by chopper40
I have a similar situation:
I pay about $5/month for an insurance policy to pay off my mortgage on my flat in the UK if I die.
Yesterday i emailed [email protected] with the following question
"I have a foreign "Decreasing Term life assurance policy, without profits" This is to cover the outstanding payment of a foreign mortgage in the event of my death. It has no cash value during my lifetime. The only "signature authority" I have is to cancel the policy if I so wish.

Do I have to report this account on my FBAR?"

THE REPLY:
"Foregin insurance policies are reportable for FBAR purposes."

WOW! I have no access to the money in this policy. I had to dig out the policy and look up its current "value".

There will no doubt be LPR British expats who may have even sold their property in the UK but still have endowment life assurance etc who will slip up on this detail.

MandPete I suggest you post your question to the FBAR email address. I got a reply within 24hrs.
I sent an email last week but have heard nothing back as yet. I called the help number this morning and after much discussion, the response I got was that we do not need to file FBAR.

If the pension plans are IRA equivalents (ISAs) we would have to report them. As for the endowments, as they have no guaranteed cash surrender value they do not need to be reported until they mature.
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Old Jun 22nd 2011, 9:35 pm
  #183  
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Default Re: Quiet disclosure of FBAR

Originally Posted by mandpete
I sent an email last week but have heard nothing back as yet. I called the help number this morning and after much discussion, the response I got was that we do not need to file FBAR.

If the pension plans are IRA equivalents (ISAs) we would have to report them. As for the endowments, as they have no guaranteed cash surrender value they do not need to be reported until they mature.
Useful tip: whenever you phone these bods have a pen and paper ready to write down their employee number. I think they are obliged to quote it. You can then quote them in an email and ask for clarification of what you were told...to provide a paper trail in the future.

To be on the safe side, maybe include the accounts that you are not sure about. I'm sure there are not penalties for including unnecessary information! The bods in Detroit can disregard anything that is not relevant.
Get your 2010 return in the post now.
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Old Jul 4th 2011, 9:35 pm
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Default Re: Quiet disclosure of FBAR

I'm Italian and my post here might be inappropriate. I'm writing here because this is the very best forum on the subject.

Since 2004 I've become a US resident (green card). Not knowing any better, I kept on paying my taxes both in Italy and in the US. Last year I've started declaring for the first time that I have accounts in Italy (I filed the FBAR, which I didn't even know existed), mostly because I moved half of my life savings to the US and bought a home. I felt like I had to justify where that money came from.
By doing so, I basically told the IRS I didn't file the FBAR the previous years.

I've always paid my taxes in Italy (which are higher for income and lower for interests and dividens) and paid my taxes in the US. Should I file for an OVDI or could I file the past FBARs paying the difference I owe?
Thanks!





P.S.The voluntary disclosure would require an enormous payment. I had my life savings in those accounts, money I've earned working for 20 years in Italy, on which I've always paid my taxes.
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Old Jul 5th 2011, 2:24 am
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Default Re: Quiet disclosure of FBAR

Originally Posted by matteoec
I'm Italian and my post here might be inappropriate. I'm writing here because this is the very best forum on the subject.

Since 2004 I've become a US resident (green card). Not knowing any better, I kept on paying my taxes both in Italy and in the US. Last year I've started declaring for the first time that I have accounts in Italy (I filed the FBAR, which I didn't even know existed), mostly because I moved half of my life savings to the US and bought a home. I felt like I had to justify where that money came from.
By doing so, I basically told the IRS I didn't file the FBAR the previous years.

I've always paid my taxes in Italy (which are higher for income and lower for interests and dividens) and paid my taxes in the US. Should I file for an OVDI or could I file the past FBARs paying the difference I owe?
Thanks!

P.S.The voluntary disclosure would require an enormous payment. I had my life savings in those accounts, money I've earned working for 20 years in Italy, on which I've always paid my taxes.
Matteoc
If the only thing you have done is not file FBAR for 2004 to 2009 then see question 17 from the Q&A of the voluntary disclosure. If you have correctly filed and paid your taxes you are OK. Add a note explaining that you were not aware of the requirement to file.

http://www.irs.gov/businesses/intern...html?portlet=7
17.
I have properly reported all my taxable income but I only recently learned that I should have been filing FBARs in prior years to report my personal foreign bank account or to report the fact that I have signature authority over bank accounts owned by my employer. May I come forward under this new initiative to correct this?

Answer:
The purpose for the voluntary disclosure practice is to provide a way for taxpayers who did not report taxable income in the past to come forward voluntarily and resolve their tax matters. Thus, if you reported and paid tax on all taxable income but did not file FBARs, do not use the voluntary disclosure process.

For taxpayers who reported and paid tax on all their taxable income for prior years but did not file FBARs, you should file the delinquent FBAR reports according to the instructions (send to Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621) and attach a statement explaining why the reports are filed late. The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and the FBARs are filed by August 31, 2011. However, FBARs for 2010 are due on June 30, 2011 and must be filed by that date.
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Old Jul 5th 2011, 6:11 am
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Default Re: Quiet disclosure of FBAR

Tank you Chopper,

I've always paid my taxes in Italy for what I had in Italy, and always paid my taxes in the US for what I have in the US. The problem is that until last year I didn't tell the IRS I had something in Italy. I didn't know I had to because I was already paying taxes in Italy.
Does this quilify me as a question 17?
If so, can I file the past FBARs and pay what I owe to the IRS (which is the difference in taxation on interests and dividends)?
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Old Jul 5th 2011, 1:07 pm
  #187  
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Default Re: Quiet disclosure of FBAR

Originally Posted by matteoec
The problem is that until last year I didn't tell the IRS I had something in Italy.
I became aware of the filing requirement 8 years ago. At that time I had been in the US for 5 years. I duly filed for that tax year and included a note indicating that I had just become aware of the requirement and so had not filed previously. I made no attempt to file for earlier years... and since there is a 6 year statute of limitation on filing FBARs, I'm pretty sure nothing will ever come of it.

Ian
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Old Jul 5th 2011, 1:22 pm
  #188  
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Default Re: Quiet disclosure of FBAR

Hi Ian,

In those 5 years you didn't file the FBAR, but did you answer "yes" to the question "Do you have a foreign account?" on your tax return?
I didn't because I thought it was not their business. I was paying already taxes in Italy.

Thanks,

Matteo.
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Old Jul 5th 2011, 3:22 pm
  #189  
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Default Re: Quiet disclosure of FBAR

Originally Posted by matteoec
Hi Ian,

In those 5 years you didn't file the FBAR, but did you answer "yes" to the question "Do you have a foreign account?" on your tax return?
I didn't because I thought it was not their business. I was paying already taxes in Italy.

Thanks,

Matteo.
In your first post you said "I have properly reported all my taxable income" but then you have also said "I didn't tell the IRS I had something in Italy"

Remember as a US Legal Permanent Resident (green card holder) you are required to file your US tax return based on your worldwide income. If the USA has a tax treaty with Italy then you would not have to pay tax on the same dollar/euro twice. It sounds like you have possibly made incorrect assumptions when filing tax returns to the IRS. It IS their [the IRS] business, although if filed correctly, you would probably not have to pay tax to the IRS on Italian income.

This is my advice, but see what others think on here too:
Get a CPA to run the numbers on amended US tax returns based on your worldwide income (have you filed correctly for 2010?)
Get him to check the various tax credits for Italian taxes paid and establish if you do indeed owe back taxes to IRS (if Italy has a higher tax environment you possibly will not owe taxes to IRS)
You may be able to do this yourself using tax return software, but i'm not sure.
It sounds like you are not "Q17" because you have not correctly filed your tax returns.


Did you move to US in 2004 and take up physical residence at that time?
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Old Jul 5th 2011, 4:19 pm
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Default Re: Quiet disclosure of FBAR

Thank you again for the response Chopper,

Yes, I moved to the US in 2004 (I always spend 7 months in the US and 5 in Italy). I incorrectly thought that paying my taxes in Italy for what I have there and paying my taxes in the US for what I have here was good enough.
I've paid and filed correctly for tax years 2009 and 2010

Now:
Italian taxation on interests and dividends is lower. I would owe roughly 3000 dollars per year to the IRS (2004-2008). My CPA wants me to do a Voluntary Disclosure, but it would cost a crazy amount of money. I had my life savings on those accounts (half of which I've recently used to buy my home in the US) and the OVDI can require a payment of up to 25% of the past highest amount on those foreign accounts.

My question is: should I file the past FBARs and pay what I owe? or should I listen to my CPA and pay 10 times more?
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Old Jul 5th 2011, 6:07 pm
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Default Re: Quiet disclosure of FBAR

Originally Posted by matteoec
My question is: should I file the past FBARs and pay what I owe? or should I listen to my CPA and pay 10 times more?
My advice... never give money to the IRS unless they specifically ask for it. I suggest you don't file the past FBARs and let them be happy with what they've got. If however you choose to file... wait for them to bill you. Then you dispute/appeal the bill. If they don't bill you in a timely manner, then it'll die a quiet death due to the statute of limitations.

Remember... first and foremost, it's a filing requirement - not a "pay up" requirement!

Ian
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Old Jul 5th 2011, 6:26 pm
  #192  
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Default Re: Quiet disclosure of FBAR

Originally Posted by ian-mstm
My advice... never give money to the IRS unless they specifically ask for it. I suggest you don't file the past FBARs and let them be happy with what they've got. If however you choose to file... wait for them to bill you. Then you dispute/appeal the bill. If they don't bill you in a timely manner, then it'll die a quiet death due to the statute of limitations.

Remember... first and foremost, it's a filing requirement - not a "pay up" requirement!

Ian
There's going to be 2 issues.

1). FBAR filing failure and possible penalty fees for that. Yes, that's a filing requirement and I'd agree with Ian's suggested approach.

2). Being less than 100% truthful on a tax return and underpaying tax, and the IRS penalties for that. That is most definitely a 'pay up' requirement and in effect they did specifically ask for it by making you fill out a tax return.

There's no statute of limitations for the second case, if the IRS deem it false or fraudulent.

The statute of limitations does not apply in the case of a false tax return or fraudulent tax return filed with the IRS with intent to evade any tax. See section 6501(c)(1) of the Tax Code and section 301.6501(c)-1 of the Tax Regulations.
Not saying this was such a case, but it isn't my opinion that counts if it comes to it. The approach taken will depend on how you like to live your life.
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Old Jul 5th 2011, 6:34 pm
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Default Re: Quiet disclosure of FBAR

Hi Celticgrid,

there was no intent to evade. I just thought that what I had in Italy didn't matter to the IRS (given I was paying taxes there). I am an Italian citizen who got to know American laws and the english language bit by bit.
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Old Jul 5th 2011, 7:21 pm
  #194  
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Default Re: Quiet disclosure of FBAR

Originally Posted by matteoec
Hi Celticgrid,

there was no intent to evade. I just thought that what I had in Italy didn't matter to the IRS (given I was paying taxes there). I am an Italian citizen who got to know American laws and the english language bit by bit.
As I said, I wasn't saying that you were. Just pointing out that should the IRS decide to come after you a simple thing such as the statute of limitations probably isn't going to stop them.

I too faced filing back-dated FBAR paperwork but I didn't have the complication of incorrect tax returns to overcome. I wish you luck, whichever route you decide to go down.
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Old Jul 5th 2011, 10:19 pm
  #195  
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Default Re: Quiet disclosure of FBAR

I think it's important to note that, although the forms are available on the IRS website, FBAR is administered by the Department of the Treasury... not the IRS.

Ian
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