I came from Hong Kong and imigrated to USA in August 1989. Bofore 1989, I already have a USD Saving account in Hong Kong and I keep this account until now. When I filed my tax return in USA starting from 1989 until now, I really really don't know that I need to file this in my tax return. Between 1989 until now, I only back to Hong Kong twice and I didn't take care of this account at all (since this is a passbook saving account, I don't need to do anything except holding the passbook) and I plan to canel this account for the next two weeks. Until the last 2 weeks, I heard from the news about we need to file this before 9/23/09. I have about $32,000 in this account and I don't know what to do now. Should I file this to IRS now or just leave it because I'm going to cancel this account anyway. Please advise. Thank you.
HelloCustomer I assume you are talking about the need to file Form TDF 90-22.1 to report foreign bank accounts which exceed $10,000. If that is correct, the due date for that form is actually June 30th each year, following the calendar year that you are reporting for. If you have not filed this form in the past, I would suggest that you go ahead and file the form for 2008, even though it is now past the due date. Attach a statement explaining that you just recently became aware of the requirements for filing this form, and that is why the filing was not made on time. You should also file another form next year to report the account for 2009 since it is still in existence at this time. Once the account is closed you can discontinue the reporting. The IRS does have penalties they can impose for not filing the form, but in most cases they do not actually pursue this. There are a very high number of people who are not aware of this requirement, and the IRS is aware of that fact, so that tend to practice leniency here as far as actually penalizing anyone for non-filing. If this was helpful please press the Accept button. Positive feedback is also appreciated. Thank youCustomer
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo,
This oversea account has no activities or transaction over the past six years and I already cancelled this account last week. It is true that I am not aware of this requirement to report this account. Am I in a high risk if I ignore to file this to IRS since my account was already cancelled? I really want to know how IRS can find out those taxpayers who hide their offshore accounts, it should be very difficult. Of course I don't want to be in criminal penalty; however, is it worth for me to continue ignoring this? I have filed extension for my 2008 tax return, if you suggest me to file Form TDF 90-22.1, then, do I need to file all the interests earned from this offshore account from 2003-2008 in order to make up all taxes owe to IRS?
HelloCustomer I cannot really advise you to not file this form, and cannot tell you what the risk would be by not doing so, as there is never any way to predict whether or not the IRS may ever audit your tax return, and possibly in the process they may uncover the existence of this account. As far as interest that you have earned over the period of 2003 to 2008, you cannot report all of that interest on your 2008 return. Income needs to be reported in the year you actually received it. So to be in true compliance with the regulations, what you really should do is go back and file amended returns for each of those years. I am not suggesting that this is something you should do or must do, but legally that is the way it should be handled. Personally I would think that it really depends on just how much interest you earned from that account over the years. Can you tell me about how much interest on average you earned each year from that account?
This is a passbook savings account with no statement, interests will automatically credited into the account. Interests will show in the passbook only when you update the passbook in the bank personally. Since I wasn't back to Hong Kong since 1994 until now, I only sent an interests update enquiries to the bank by mail. Now my bank just told me that my passbook was not valid anymore (may be they have changed the bank system since my account was inactive for a certain period of time). I probably have $2,000.00 interests from 2003 to 2008. Will IRS request interest income tax only from 2003 to 2009? not before 2003?
Hello againCustomer If your total interest over a 6 year period was $2,000, that is an average of approximately $333 per year. I can tell you that if this were my situation, personally I would not file an amended return to report these amounts, as they are relatively small. First, the IRS only has 3 years to go back and audit your return in most cases, so they could not even go back and audit any year prior to 2005. And for the little bit of interest that you earned in those years, I personally would not be too concerned about the fact it was not reported. The very worst case scenario is that somehow the IRS would find out about this interest, which that in itself is very unlikely to happen with the amount you are talking about here. But even if for some reason they did find out, you are only talking about possibly underpaying your taxes by $10 each year. I seriously doubt they would even bother with the paperwork involved to pursue such a small tax bill. And if they do, you would simply send them the extra money due. If you have now closed that account, then since you have never filed the TDF form in the past, I do not think I would start now with the account balance that you are talking about here. If it ever were to be questioned, you will not be the first taxpayer by far who claimed they knew nothing of this requirement. Again, this is just how I personally would handle it, as I do not see this as being a real issue. If this was helpful please press the Accept button. Positive feedback is also appreciated. Thank youCustomer