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Americans must report money in foreign banks and securities

Posted on September 11, 2009 at 9:13 AM

Jason Turflinger, of the American Chamber of Commerce in Norway, was kind enough to call me this summer at the one-room cabin on the fjord, noting the American tax deadline of September something, 2009, and the question and alarm of some callers to their office. Being the thoroughly modern Millie I am, I turned to the coffee-table-desk-station and Googled the tidbits.


This turns out to be a reference to the U.S. deadline for Americans with money in foreign banks - or financial interests in the money that is in foreign banks - to report some general information about that money to the United States government. Since we're in the acronym age, let's call it like it is: It is FBAR. I will think of that as the letter F, followed by the word, BAR. You can decide what the F stands for if it does not stand for Federal, by the way, as this is what most Americans, hard-working overseas, probably think of this requirement.


I, meanwhile, have been simply bowled over with responsibilities since this inquiry, which has caused the delay of some superb blog entries (still forthcoming), and the complete re-painting of the main-home kitchen, among other things such as swimming, working, teaching courses and helping students. But now is the time to ring the bells.


Time to report on the FBAR! Americans, Awake! Time to report!

Not just American citizens but all those subject to filing with the IRS, including, for example the categories identified as non-resident aliens with U.S. income and those holding green cards while temporarily living and working overseas who wish to keep those cards active. 


The United States, besides being one of the only countries in the world to tax its citizens when they live abroad and make money from foreign sources only (geez), is also interested now in catching up with those who have stashed money in foreign banks - and, by the way, securities. They want to know the names of the banks, the account numbers, and the amounts in those accounts.


Conceptually, we recognize the new reality as a great Grisham novel: Here's the American company CEO with a foreign bank account, into which he somehow stashes some money that he does not claim for U.S. taxes. We get it. The rub, however, is that, conceptually, it is also this person: the American overseas who simply lives overseas and has a bank account of their own - and/or 'interests' in another person's bank account. This would include, for example, in a Norway example, an American woman married to a Norwegian man who has the right to inherit from him, and then how much does he have in his banks, whereever they are in the world? Well, how much? The U.S. government would like to know.


The authorities are kind enough to excuse those of us who do not report if the amount is under $10,000. Be any better off than that, and you're just the sucker that the Federal Treasury department wants to hear from - BEFORE September 23rd. This is called a "Voluntary Disclosure" deadline, after which one may or may not be eligible for an exception from penalties imposed by someone.


How does this affect you? Maybe not much, depending on how cash-poor you are, that is. There is the general $10,000 dollar minimum. Surely this is one of the only moments at which I find myself glad to be married to a man who is relatively cash-poor, as am I. In Norwegian kroner right now (September 11, 2009), that $10,000 dollar amount over which reporting is required is a mere 59,189.51 NOK! Darn it!  The kroner is so strong.

Here is how clearly the IRS tells us about this:


" The purpose for the voluntary disclosure practice is to provide a way for taxpayers who did not report taxable income in the past to voluntarily come forward 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." -IRS website.  This means that those of you who have been filing IRS tax forms - and paying taxes when you are supposed to - should not use the voluntary disclosure process, for some reason? whatever that is?


The IRS continues, "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. Send copies of the delinquent FBARs, together with copies of tax returns for all relevant years, by September 23, 2009, to the Philadelphia Offshore Identification Unit at:

Internal Revenue Service

11501 Roosevelt Blvd.

South Bldg., Room 2002

Philadelphia, PA 19154

Attn: Charlie Judge, Offshore Unit, DP S-611" - IRS website.


We take this to mean that you better send in an FBAR to DOT in Detroit as soon as you can. This simplifies things, don't you think?


I can hardly bring myself to list some links, they are similarly somewhat confusing. However, I have seen the FBAR form and it is really quite straightforward. Here is a copy attached as a link: http://www.irs.gov/pub/irs-pdf/f90221.pdf.  (Just fill out the pages that apply to you and your 'interests.') 


 And don't ask me how the Treasury or IRS plan to follow-up on this routine. Let's just say, it will be interesting to see who the BIG fish are who get caught having been living the good life in the U.S. of A. while stashing their cash in other countries. I will welcome all the stories, just like the good collectivists and egalitarians that most Norwegians are.


But as for poor Mrs. American-in-Norway, if you fall into this category, little lady, you better list up your and your hubby's accounts and totals. The U.S. government will be watching for it. And if you have been smart enough to keep your personal income low, but the financial interests lie in corporate or security accounts, or savings, well, you don't get a 'free pass.' In Monopoly terms, the government wants you to know that you could get the 'go to jail' card for not reporting, okay? So take the Nike road: "Just Do It."


For those interested in finding more information online:

Who must file? http://www.irs.gov/newsroom/article/0,,id=209418,00.html  

FAQs regarding the FBAR filing requirement: http://www.irs.gov/businesses/small/article/0,,id=210252,00.html  

The excuse notice on the September 23rd deadline: http://www.irs.gov/newsroom/article/0,,id=210174,00.html


Categories: Law Stuff, International Miscellaneous, Auditing Stuff