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: My income is suddenly above the exclusion threshold. What now?

Posted by Don W on January 29, 2010 under Expatriate Taxes

Q:  I hold dual citizenship in the USA and Canada. I immigrated to Canada from the US and have been residing in Canada permanently since that time. My income is derived solely from my employment salary. At present, my wife (Canadian citizen) and I jointly own a house which we live in. We are still paying a mortgage on this property. Aside from our pension funds through our employers, we do not hold any other investments.

Up until the end of financial year 2008, my Canadian earnings have been below the exclusion threshold (when converted to US dollars). However, in 2009, my earnings exceeded that exclusion threshold for the first time. My understanding is that, provided my home country income tax is higher than it would have been in the US, I should be allowed to claim credits which eliminate my taxable income for US reporting purposes. Could you please help me understand the details and requirements better?

A: Unfortunately, regardless of whether your income was below the Foreign Earned Income Exclusion amount, as a US citizen you have an annual obligation to file a US tax return.

Second, individual taxpayers must be on a calendar year tax year. Other types of entities can have fiscal years that do not end on December 31st, but all individuals do. What we do for clients who are in countries that are not calendar year is to compile an annual income and taxes paid by month. This way we can have the correct calendar year amounts. We also convert the currency based on an annual monthly average for the particular year.

Third, unless your wife has an ITIN (similar to a Social Security Number– for more information please see this IRS page) and intends to report her worldwide income you will be required to file Married Filing Separate rather than Married Filing Joint.

Finally, we are not experts in any tax systems except the US.  We always encourage our clients to retain our counter-parts in the host country. Please see the Tax Links section off our Self-Help Links page on our main site for useful information on specific countries.

Q&A: My mortgage interest is almost the same as my income. Can I claim the interest and reduce the tax deduction?

Posted by Don W on under Expatriate Taxes

Q: I am a retired teacher living in England. I own a primary home and a holiday home in England. I am aware that my mortgage interest is deductible on my IRS form I submit from England. The question is: My mortgage interest is just about equal to my U.S. pension. That is the only income that I have from the U.S. My wife and I work over here and live off of that income. Our foreign income is below the 87,500 cut off so it is not taxable in the U.S. Can I claim all of the mortgage interest off of my pension income or must some of it be allocated to my foreign income therefore lowering the deduction from my pension?


A:
The Foreign Earned Income Exclusion reduces your total income first. Then, if you still have income you then subtract any adjustments. Then, you subtract out the Itemized Deductions. So, you can claim all of your mortgage interest on your Itemized Deductions, but you will only get the benefit if your Adjusted Gross Income (AGI) is positive.

There is a substantive issue for you and that is that pensions do not qualify for the Foreign Earned Income Exclusion. Only Earned Income is eligible. Please check out this link to an IRS page that explains further: http://www.irs.gov/businesses/small/international/article/0,,id=96811,00.html

My interpretation of the facts presented is that you are not eligible for the Foreign Earned Income Exclusion. You must report your pension on your US tax return and you should report your mortgage interest on your tax return. Based on what you have said, you should not have any tax liability because your mortgage interest is almost equal to your pension. Add in your two Personal Exemptions and you should have a Taxable Income of zero or less.

You do need to file however. And, if you have been claiming the Foreign Earned Income Exclusion in the past you may have to amend your returns and file correctly.

Q: I am a retired teacher living in England. I own a primary home and a holiday home in England. I am aware that my mortgage interest is deductible on my IRS form I submit from England. The question is: My mortgage interest is just about equal to my U.S. pension. That is the only income that I have from the U.S. My wife and I work over here and live off of that income. Our foreign income is below the 87,500 cut off so it is not taxable in the U.S. Can I claim all of the mortgage interest off of my pension income or must some of it be allocated to my foreign income therefore lowering the deduction from my pension?

A: The Foreign Earned Income Exclusion reduces your total income first. Then, if you still have income you then subtract any adjustments. Then, you subtract out the Itemized Deductions. So, you can claim all of your mortgage interest on your Itemized Deductions, but you will only get the benefit if your Adjusted Gross Income (AGI) is positive.