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When to file FBAR and form 8938?

My wife and I moved...

My wife and I moved to the USA in May 2009 (my wife permanently moved here in Feb 2010). We both have pensions over $10000 each when we left. They are not payable until retirement age. Thus they earn no income. Our house sold in March 2010 and I received money from that (lived in it for over five years etc- main home). Thus the gains are exempt. The money transferred into my foreign bank account and has been there since (checking account- no interest) in order to wait for a more favorable exchange rate. We decided to look at bringing it across and buying a house. I became aware of FBAR on (05/01/2012). I have filed Form 1040EZ for tax year 2009, 2010, and 2011. I did not file Form 8938 with my 2011 return. Also I have never filed an FBAR. Please help since it appears the IRS has penalties that could seize these monies? The monies is from our house, which I paid over 8 years for and was going to be a down payment on a house here. I was genuinely unaware of this requirement as no other country does that. What do I do?

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5/1/2012
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,133
Experience: Taxes, Immigration, Labor Relations
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Welcome to JustAnswer!

Several issues:

1. If you are US citizen or US resident for tax purposes you need to report all your worldwide income on your tax return.

If you have earnings in your foreign retirement account these earnings are taxable in the US even if they are deferred in a foreign country.

So be sure that you report all earnings in your foreign accounts on your US tax returns.

2. In additional you should report a foreign account by

(1) Completing boxes 7a and 7b on Form 1040 Schedule B - http://www.irs.gov/pub/irs-pdf/f1040sb.pdf

(2) You are a subject of FBAR reporting if a foreign account value is above $10,000. The form to use is TD F 90-22.1, this form is mailed separately. There is no tax associated with these reporting.

If you was required and did not file FBAR forms in previous years - you might want to that now. As long as you correctly reported all your income - most likely - there will not be any penalties.

3. You need to file form 8938 ONLY if your amount is more than $50,000 www.irs.gov/pub/irs-pdf/f8938.pdf , that form is attached to your tax return.

The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts.

That is a new form starting 2011.

Based on your information you do not need to file that form.

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Customer reply replied 5 years ago

The pension value stopped when I left my employment. It has not grown since I left and will not grow (government pension). Thus there was no income earned.

The amount in one pension is 26000, roughly $43000 (current 1.66 to 1 exchange rate) my pension. It will be taxed when it can be taken out at 65.

The other is 23000, roughly $38000 (same exchange rate and conditions wife's pension.

It will be taxed when it is given to me by the country of origin at 65.

Thus no income or earnings were earned since I left my country of origin. Does that mean it is taxable on something I have not received?

Finally the account has 73000, roughly $119000 (same exchange rate. My Form 1040EZ did not come with Form 8938 otherwise I would have been aware of it prior to today, and would have filed it.

Thus I presume I am in violation of FBAR x 2 (2009, 2010) and failing to file Form 8938 before April 17th 2012.

I presumed income meant income, not asset evaluation. Will this be a reasonable excuse, or will I definitely be fined. It seems I am going to be penalized over something, and for monies not even earned here, and before I got here, because of an IRS thing, which does not exist in any other country.

Thus no income or earnings were earned since I left my country of origin. Does that mean it is taxable on something I have not received?

Absolutely not if you have no rights to receive these pensions and there are no earnings in this account - you do not need to report any income.

Thus I presume I am in violation of FBAR x 2 (2009, 2010) and failing to file Form 8938 before April 17th 2012

If you do not have signature authority other than this account and may not request the distribution you are not required to file either form.

You need to be clear you defer distributions by choice or you have no choice and funds in these accounts are fully under government control.

If the latter you do not report these accounts.

It seems I am going to be penalized over something, and for monies not even earned here, and before I got here, because of an IRS thing, which does not exist in any other country.

If you did not hide assets, did not have unreported income and willing to step forward disclosing assets as soon as you learned it is required I do not see any reason for the IRS to penalize you and I feel you are overreacting.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,133
Experience: Taxes, Immigration, Labor Relations
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Customer reply replied 5 years ago

I do hope there is a significant amount of understanding in my situation however I have personally seen extreme reactions and common sense reactions from government agencies. Always depends on the zealous nature of the investigating officer. I could do with rectify this situation. I may need to re-amend my tax forms for tax year 2009, 2010, 2011 from Form 1040 EZ to Form 1040. Submit 3 x FBARs, Form 8938, plus work out if my main house sale was except from gains taxes, which it should be. Finally I have a feeling that the IRS will look at the tax year of 2009 being from Jan 1st to Dec 31st. We came here in July and my wife still kept her job while we transitioned to the USA.

1. No need to amend your past tax returns if only changes are FBAR reporting.

FBAR form is send separately.

2. You may amend your 2012 tax return - adding from 8938 as long as you determine it is required and explain on the form 1040X the reason of amending.

So far I do not see any reason to worry as long as there is no any additional tax liability you are OK.

Lev
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Category: Tax
Satisfied Customers: 30,133
Experience: Taxes, Immigration, Labor Relations
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