It was at a party in June in the tiny medieval village in Italy where I live that the lid started to lift on the Pandora’s Box of FATCA, FBAR etc.I had been dutifully filling out forms, getting things notarized, calling, emailing, mystified why it was taking so long to get an inheritance from my aunt of under $70,000 transferred from a bank in Minnesota to the account that I had had for 20 years or more with Morgan Stanley in Rochester, N.Y. I had just received an email from Morgan Stanley breezily wishing me a good summer and advising me that they could no longer go ahead with my account citing the Patriot’s Act! At the party I mentioned this to someone who worked for Credit Suisse in London and he said “KYC.” and explained. The next day I googled and found an article posted by American Citizens Abroad. I was still unbelieving. The senior vice president of MS in Rochester, with whom I had opened the account, had become a friend-like the kind you bring a salami and a bottle of wine from Italy to and go out to lunch with, commiserate on family problems. They don’t Know Your Client? Hey, it’s me, yep naive me. From then it didn’t take long before I found out about FATCA, FBAR, FINCEN. I became increasingly more terrified.
I have filed and paid taxes in the USA and Italy for about 25 years through the same accountants, 1 in Italy, 1 in the USA and they have contacted each other when necessary. I paid social security contributions in the USA, being a dual national and self-employed as an English teacher and my Italian tax declaration was transmitted annually to my American accountant. It never occurred to me that perhaps I would need an international professional-I paid taxes in both countries separately but openly. What would I ever have to hide?
I am 70 years old and retired. My Italian-based income is under $12,000. In the USA I own a portion of land jointly with my siblings and I receive about $825 monthly in social security. My American income is under $12,000. In the years that I was working, I managed to buy my house $130,000, put some savings in investments, and live carefully and contentedly as far as comfort is concerned. I’m of hardy stock, and most people would not choose to live as I do but apart from some health issues and a very serious problem in the family, I am generally good-spirited, very sociable and marvel at the turns my life has taken since landing in Italy by way of a disastrous marriage to an Italian in Amsterdam 44 years ago. The country of my soul is Italy although I have not a drop of Italian blood.
Coming back to the nasties served by the U.S. government, I spent my summer becoming ever more panic-stricken about what could happen to me. I had never filed an FBAR!!! Nobody ever informed me or contacted me about something missing in my American filing. I was the only American client living abroad of my accountant in the USA. I developed hypertension, acute anxiety, had crying bouts, panic-attacks. I spent my summer searching the internet for answers and reassurance.My bank in Turin had me sign the papers waiving my privacy as far as FATCA is concerned. Humiliating!
My accountant in the USA has just filed my return, with the extensions I was always granted. He is a capable, experienced CPA and tries to reassure me. We have yet to file the FBAR which is next.
I am scared sh–less. I want to get it over with and renounce my citizenship. It is only an aggravation for me. I was a fine ambassador for the USA when I taught, when the small school I owned threw 4th of July parties on the river in Turin, when I proudly recounted anecdotes on the power of individuals in the USA to act on their convictions and in many other ways. I am afraid, I am embittered, I feel threatened. Nothing has happened so far but I have not come forward yet with an FBAR. Funny, I thought that $70,000 and an extension to the land in Minnesota through inheritance from my aunt was going to allow me, at this point in my life some simple luxuries.
Why wasn’t I informed? My Italian address has always been on my tax returns. I know I’m a minnow, but maybe not too small to fry, depending on the intentions of the holder of the pan. Any suggestions from anybody?
Rita
How many of your U.S. Taxpayers Rights were not abused? You are right to feel humiliated and embittered. I hope that you will come through this soon and without penalty. It is unfortunate part of your assets (your inheritance, part of your plans for a simple retirement) is in the USA. http://isaacbrocksociety.ca/2014/10/11/similar-to-the-u-s-constitutions-bill-of-rights-the-u-s-taxpayer-bill-of-rights-contains-10-provisions/
In order to hopefully have penalties waived, you should be able to author, with the help of your CPA, your Personal Statement In Support of Reasonable Cause Arguments for FBAR, etc., ending with something like:
“Given my background it is not reasonable to expect that I should have been aware of these obligations. As soon as I became aware of my U.S. tax obligations, I immediately sought professional tax counsel to become compliant. The foregoing is true and correct to the best of my knowledge.
Filed under penalties of perjury:
xxxx ”
I wish you all the best — from another even more naive than you retiree who has now renounced her US citizenship, which you will have to as well (vs. claiming relinquishment when you became a citizen of another country) as you have been carrying on *some* of US citizenship-based tax obligations.
LikeLike
If your goal is to get right with the IRS and your only issue is delinquent FBARs and you were genuinely unaware of the filing requirement:
1) Do NOT consider OVDP/OVDI. This program is for actual tax evaders, which you are not. Again, do NOT consider it, even if a supposed tax professional recommends it.
2) Consider the Streamlined Program. This is for people like yourself that have inadvertently made filing mistakes/omissions.
Go to http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures
3) Consider just filing 6 years of delinquent FBARs (also required in Streamlined). These are filed online and one of the drop-down reasons for filing late is something like “I didn’t know I was supposed to file”. [as if any normal human being would consider their local accounts to be “foreign”]
4) Consider just filing FBARs going forward.
5) Go to the Isaac Brock website to ask more FBAR/tax questions. There’s a ton of sympathetic people there who have been thru their own OMG moment, as well as a ton of collective knowledge.
Go to http://isaacbrocksociety.ca/expat_tax/
6) For questions re renunciation, go to http://isaacbrocksociety.ca/renunciation/
Personally I’d advise doing 3 (or *maybe* 2), but IANAL and IANAA; you have to do your own due diligence (see 5 & 6).
Also, you are hardly the first person this has happened to, so take a deep breath and try to relax (easier said than done, I know). If your only issue is delinquent FBARs, you should emerge from this unscathed.
HTH
LikeLiked by 1 person
There are, quite literally, millions of people who should have filed an FBAR for multiple years and didn’t. I doubt there are many US expats who didn’t meet the $10,000 aggregate filing limit – a completely ludicrous amount that hasn’t been updated for inflation since it was created decades ago.
Because the US is currently broke, the Treasury Dept. decided to dust off this ridiculous antiquated form and use it as a way to fill up the coffers with fines and penalties. Even Nina Olsen, the IRS Tax Advocate, thinks the entire FATCA/FBAR issue is doing nothing but tormenting honest tax-paying citizens:
http://www.taxanalysts.com/www/features.nsf/Features/FD2860D17810639485257D6B0052AC9C?OpenDocument
Anyway – you are far from alone. Do head over to the Isaac Brock Society as the other commentor mentioned. There is simply loads and loads of information and sympathy there. You may also want to look into the ADCS (http://www.adcs-adsc.ca/) who are filing a lawsuit against the Canadian government for signing up to FATCA.
Like you, I live in an EU member state, and I’m hoping that some group gets their act together and brings some sort of case before the EU Court on Human Rights. FATCA is a complete violation of basic rights targeted at one group of people. It’s discriminatory, intrusive, extraterritorial and just plain stupid. Seriously.
LikeLiked by 1 person
I agree – take a deep breath and calm down, even though the underlying situation is so absurd and unfair it does literally take your breath away. Multiple tax preparers (in private) are saying that people who just file back FBARs are NOT being pursued by the IRS. They tried to pursue some minnows in the beginning of the FBAR enforcement (after, as you confirm, decades of tax preparers themselves not being aware of this requirement !!!) but some minnows fought back and won cases and the IRS now seems to be concentrating on going after whales. I’m not a tax preparer and not a fiscal expert, just someone active in American Citizens Abroad who hears MANY stories from our members. You should be OK. But what the US is doing to patriotic Americans overseas is scandalous, and extremely detrimental to the United States itself, in terms of discouraging investment from abroad (whoa, the horrible possible penalties !) and pushing Americans to such despair that they renounce and therefore do NOT work in any way on increasing exports from the US (let alone act as informal ambassadors abroad which we’ve all done for so many years). ACA is working on several different aspects of the problem, educating Congress and the Administration and presenting specific proposals, but our top priority is working on Congress to change to a system of Residence Based Taxation which would solve most FBAR/FATCA/FINCEN and other alphabet soup problems. And it’s not as far-fetched as it sounds !!!
LikeLike
Your life will not be complete until you file an FBAR. FBAR is an important life event for Americans abroad. We are born, we grow up, we file FBARs and we do. Robert Wood can help He understands how important that first FBAR is. Google “Robert Wood Forbes Your First FBAR”
LikeLiked by 1 person
Reblogged this on U.S. Persons Abroad – Members of a Unique Tax, Form and Penalty Club and commented:
No U.S. citizens are “innocent”. Ask Obama, Levin, Schumer, Baucus and Democrats abroad. They will confirm.
LikeLiked by 1 person
Anne:
LikeLiked by 1 person
In the past, the IRS offered expats some amnesty, enabling them to file FBAR’s without penalties as long as they were not previosly requested to do so and stated that they were unaware. If this is still the case today, I don’t know.
LikeLiked by 1 person
Rita:
As long as you have filed your returns and own no U.S. tax you have nothing to fear. Look at this post at the Isaac Brock Society. The first part of the post will explain why you want nothing to do with Streamlined anywhere. But if you read to the second part of the post you will see a discussion of:
How to mange a situation where your only omission is the FBAR. The bottom line is that you just file them with an explanation – “I didn’t know about them”.
http://isaacbrocksociety.ca/2014/10/12/what-are-the-benefits-of-the-coming-into-u-s-tax-compliance-through-the-streamlined-program/
You do NOT need to do anything else.
So, stop your worrying. Be happy. But, you do need to this as a “wake up call”.
Renounce that U.S. citizenship before it kills you.
LikeLiked by 1 person
Even London Mayor Boris Johnson said he is not going to pay FATCA taxes.
http://www.forbes.com/sites/robertwood/2014/11/18/mayor-boris-johnsons-terrible-horrible-no-good-very-bad-day-as-an-american/
LikeLike