FBAR – New Revision of TDF90-22.1 Form

Posted by Don W on May 18, 2011 under Expatriate Taxes, First Time Filing as an Expat, Foreign Bank Account Reporting (FBAR), Tax Matters in the News

The IRS has published a new revision to the annual reporting form for FBAR – Foreign Bank Account Report – Form TDF90-22.1, revised March 2011. 

The form warns not to use earlier versions of this form when reporting the existence of any NON-US bank or broker accounts in which the balance – or combined balances – exceeds US$10,000 for as much as a single day in the year (in this case, 2010).

If you have already reported for 2010 using the previous version of TDF90-22.1, I would think it reasonable that the US Treasury (to whom this form actually goes) would not have any problem about it at this writing (May 19th).  Except that they – via the IRS – have not been very reasonable in the administration of the program ever since they started ramping it up in 2009.   

Please know that this form is due no later than June 30, 2011 – and this means THEY MUST HAVE ARRIVED AT THE US TREASURY’S POST OFFICE BOX BY JUNE 30TH.  Draconian fines for being late or not filing at all.

There isn’t any good news when it comes to FBAR; it is a pain in the patoot burden to millions of US taxpayers who own or have signing authority over a non-US bank or brokerage account (and some foreign trusts) with draconian fines for non-c0mliance or incomplete compliance.

For more on this unfortunate topic, check out our webpage on FBAR and FATCA at: http://www.globaltaxhelp.com/fbar-new-enforcement.  You can also find the newly revised forms – short or long – of TDF90-22.1 PDF for download or printing.  Filing address is shown on the form.  Good luck.

FBAR Update – recent news

Posted by Don W on February 5, 2011 under First Time Filing as an Expat, Foreign Bank Account Reporting (FBAR), Foreign National Taxes, Tax Matters in the News

There are very few news or journal articles about the IRS’s FBAR (Foreign Bank Account Reporting) initiative – their Voluntary Disclosure Program (VDP),  a controversial and troubled program in which thousands of US taxpayers find themselves.

For the most recent newpaper article on the current status of the program see “Navigating the latest US Tax Maze” from Gulf News (based in UAE) which was published last week on January 29th.

One interesting recent article found on the Forbes website, “FBAR Penalty: One Court Pushes Back Against the IRS,” shows that – even when a taxpayer is hardly the model of good behavior – the penalty process is contentious.

Our website has more recent articles with additional information on both FBAR and the new FATCA (I’ll talk more about this one in future blogs!).  If you’re interested click on the “FBAR and FATCA” webpage on the site.

Q&A: Are education assistance, housing, and vehicle benefits taxable income?

Posted by Don W on October 25, 2010 under Expatriate Taxes, First Time Filing as an Expat, Relocation and Taxes

Q: I’m getting transferred to the UAE and I can get up to $13,000 USD for education assistance for my elementary school daughter. Is this taxable income? What about housing and company car? I would appreciate your assistance.

A: Yes, the money would be included in your gross foreign income.  The same applies to housing and vehicle benefits. The easiest way to think about it is that anything that you would have had to pay with your own cash is taxable.

Q&A: I don’t think I’m actually an expat. Do I need to file?

Posted by Don W on May 13, 2010 under Expatriate Taxes, First Time Filing as an Expat

Q: Hi, I’m American but I live in the Netherlands and am married to a Dutch citizen.  I am not an expat, as I’m on a highly skilled migrant visa and I work for a Dutch company, earning euros. I’ve been told that I need to file a tax return in the US– can you advise?

A: Because you are a US citizen living and working abroad, you are an expat.  Let me qualify that – by our definition you are an expat!

All US citizens are required to report their worldwide income each year.  You do have to file.

Based on what your question it looks like you will have to file Married Filing Separate instead of Married Filing Joint.  If your husband is a non-resident alien with no exposure to the US then you must file MFS.

There’s good news, though:  the IRS provides two tools to help reduce, or eliminate, double taxation.  The first is the Foreign Earned Income Exclusion, which if you qualify, allows you to exclude up to $91,500 for the 2010 tax year.  The second tool is the Foreign Tax Credit.  This, potentially, gives you a dollar-for-dollar credit against your US taxes for taxes paid to foreign country.

It is more complex than that and various factors can determine the outcome.  But, that is the gist of it.

Our web site has a great deal of information about expat filing requirements on our Expat Tax Basics page.

Q&A: It’s my first year abroad– how should I file back home, and how do I get an extension?

Posted by Don W on February 22, 2010 under Expatriate Taxes, First Time Filing as an Expat, Relocation and Taxes

Q: This is my first year abroad and I have been away since April 2009. I was a resident of Oregon in the beginning of 2008 then California as of May 2008. What do i need to do/know to file taxes? Do I automatically get the extension for filing or do i need to file by April 15th since its my first year?

A: From your email it looks like you will need to file Part Year Resident returns in both states.  It would depend on income generated in each state, if any, etc.

All US citizens are required to report their worldwide income to the IRS on their tax return. The two primary forms required for expat returns, in addition to the usual Form 1040, etc., are Form 2555 (PDF) – Foreign Earned Income Exclusion (instructions) and Form 1116 (PDF) – Foreign Tax Credit (instructions).

Yes, you get automatic a 2 month extension until June 15th. However, if you want to extend until October you will need to file for extension by April 15th. Make sure to check with each state to see if they accept the federal extension or whether you need to file an extension with the state as well. Filing an extension is never a bad idea for expats—gives you time to decide what you are going to do.

Q&A: I just found out that I should have been filing for years. Please help– where do I begin?

Posted by Don W on under Expatriate Taxes, First Time Filing as an Expat

Q: I am a US expat living abroad and I was wrongly informed that I did not need to file a return if I didn’t earn more than a certain amount per year and lived outside the US as there is an exclusion. This was some years ago, I cannot recall the last year I filed a return and I am now very worried as I have recently been informed that I may have been required to fill in a form each year. I don’t know where to begin now.

I don’t know how to find out when my last return was filed and do I need to file a return for all the years I haven’t filed? What forms do I need? Can I file forms retroactively? Should I contact the IRS for help or should I file all years before contacting them?

A: You can look at your situation on the bright side: at least you are getting back into compliance when you are under no pressure!  You never know if it might have come back to haunt you at a time when you could least afford it.

Your situation is not as bad as it appears. Regardless of when you last filed, what you need to do is file the most recent three years. This is what we always recommend to our clients. Technically, the IRS requires six years, but the unspoken rule is three. Then, if the IRS requests additional years the taxpayer can provide them.

Your tax return will use the same forms you would have used if you had been in the US with the addition of two forms that are specific to most expatriates: Form 2555 (PDF) – Foreign Earned Income Exclusion (instructions) and Form 1116 (PDF) – Foreign Tax Credit (instructions). The way the tax system works in the US is that a taxpayer must declare all income regardless location.

For information about basic expat tax filing requirements – as well as income exclusions, housing deductions and foreign tax credits available to US expats – please visit our Expat Tax Basics page.

Q&A: I’m about to be an Expat. What are some of the basics I need to know?

Posted by Don W on February 12, 2010 under Expatriate Taxes, First Time Filing as an Expat

Q: I’m moving to Portugal for up to four years beginning in May of this year. I’m looking for some assistance with my tax return and an estimate of what I’ll need to set aside for my U.S. taxes each year.

A: There are a couple of issues up front that you should consider.

First, if you want to claim the Foreign Earned Income Exclusion, you will need to meet the Physical Presence Test. This means being outside the US 330 out of 365 day period. Most expats tend to file extensions in their first year so that they can be eligible for the exclusion. Please visit our Expat Tax Basics page on our main site for more information.

Second, you are basically required to pay into a social security system. The US has Totalization Agreements with countries to ensure that you are not having to pay into two systems, but you must pay into one.

Third, we recommend that you contact an Portuguese tax expert as well. We use the information from Portuguese tax returns to calculate for tax paid. You can also find more information on taxation by country in the Foreign Tax: Country-Specific Sites section of our Self-Help Links page on our main site.

Q&A: I am an American living abroad. I am considered a dependent, and all taxes have been paid by my family so far. Do I need to file?

Posted by Don W on under Expatriate Taxes, First Time Filing as an Expat

Q: I am an American living abroad. My family has supported me for years, and have paid all of the taxes on the money they have given me. It is my understanding that due to this, I am their dependent, and do not owe additional taxes on that money. In 2009 I earned the equivalent of $3,200 US. Do I need to file a return on this amount? Or is it too small? How does it work with the money I have received from my family? Do I actually owe taxes on that as well, or is the fact that they have paid all taxes on it to date sufficient?

A: When your income is below the minimum filing amount you are not required to file a tax return. And, you are correct – you don’t have to declare gifts from your family.  The minimum filing amount for 2009 is $5,700. However, if you have unearned income, interests, or dividends totalling more than $950 you would need to file.

The IRS has a page with further information.

Q&A: Just found out that I should have filed. I want to avoid the bureaucracy but I don’t want to get in trouble. What should I do?

Posted by Don W on January 29, 2010 under Expatriate Taxes, First Time Filing as an Expat, Foreign Bank Account Reporting (FBAR)

Q: I worked in China for three years. While there I deposited my salary in a bank account and when I left the country I left money sitting in the account. While in China I filed and paid Chinese taxes.

After returning to the US, I learned that I was supposed to file taxes in both China and the US. I hate dealing with tax documents, so I did the easiest thing I could and just filed the missing years in the US as zero income.

Later, I learned that I was supposed to report the money I earned in China in the tax returns. I’d now like to access some of the money sitting in my account in China. I don’t want the hassle of re-filing tax returns and I don’t want to be double-taxed on the money.

The reason I’m asking this questions is because I recently got in touch with the Chinese bank to update my contact information and let them know I was living in the US. They sent me a form asking if I wanted to declare the account to the US government on a W-9 form.

I want to go through as little paperwork, expense and bureaucracy as possible. Therefore I’m not inclined to file a W-9 and declare the account to the government. Is the IRS going to come after me for money laundering?

A: It is clear from your question that you know you are not in compliance.  You know that you need to correct your prior years returns. And, you may need to file form TDF90-22.1(PDF)  which is used to report foreign bank accounts under your control IF your combined foreign balances ever equal $10,000 or more on any given day–sometimes referred to as FBAR (see IRS FAQ).  The penalties for not filing TDF 90-22.1 are very large.

You want to resolve this so you can access your funds without any concern for future actions against you. Amend your prior year returns to report any interest/dividends you received each year in your Chinese accounts. Determine if you have to file Form TDF 90-22.1.

It is important to note that you are not penalized unless you owe money.  So, it is possible that you would be fully covered by the Foreign Earned Income Exclusion and Foreign Tax Credits.  For more information on these, visit our Expat Tax Basics page on our main site.

You won’t know until you redo your tax returns.  Would you rather spend a few hours on your own, or pay a professional to do it, and know for certain that the issue has been put to bed or always wondering if you are going to get caught?

Compliance is always the easiest road because you get peace of mind.