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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29569
Experience:  Taxes, Immigration, Labor Relations
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Hi Lev, By chance I discovered that it seems I should have

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Hi Lev,
By chance I discovered that it seems I should have declared the interest gained in 2010 even though I do not need to file a 8938 form for that year.
And, I have the doubt I have to do it also for years 2006-2007 and 2008 even though in those years I gained very little bank interest and I did not have a green card (I was on F-1 and J-1 visas).
Now I sent my Fbar form a few days ago for 2012 and still I have to send the ones for the prior years(2006-7-8 and 2010, in 2009 I was not in the US and I did not have any visa, got the green card in 2010), I am kind of scared as in 2010 I had over 400000$ in my account, as my family wired a huge amount of money on it since I was planning to buy a house (it did not happen and I wired the money back after a year or so).
This is my situation, what would you advise? Am I at risk of some serious penalty?
Hi and welcome to Just Answer!
For years 2006-2007 and 2008 - when you were on F-1 and J-1 visas - if you were a nonresident alien - you should be taxed ONLY on income from US sources. Interest income generally is not considered from US sources - and should not be reported on your US tax return.
The situation is changed after you became a resident alien. Resident aliens are taxes on ALL their worldwide income. Thus if you were a resident alien in 2009-2012 - you are required to report your interest income.
Another issue - if you were required to file your tax return. If your total taxable income is below filing requirement threshold - there is no need to file and report anything.
For instance - in 2012 filing requirements for most taxpayers are $9750 - so if your taxable income is below that limit - no need to file and report any income - and there is no tax liability.

Foreign account reporting requirements is a separate issue. As you were required to file FBAR form - I suggest to do that. Possible penalty for not complying is up to $10,000. However - if there is no tax avoidance and the taxpayer is trying to comply as soon as he/she learn about filing requirements - the IRS usually doesn't apply the penalty.
Customer: replied 4 years ago.

Hi Lev,

thanks, XXXXX XXXXX heard that people on H-1 should declare they worldwide income and thought that working under F-1 (OPT) and J-1 was the same.

In any case what concerns me is mostly 2010 (I was not in the US on 2009).

I did not know that I had to file a FBar and that I had to file my foreign bank interest(I don't even know how much I made then).

2011 is not of concern as I did not earn enough (made less than 9000) so I did not file taxes nor the 8938.

2012 I filed my taxes, the 8938 , reported (and paid taxes on) my foreign bank interest gained and sent Fbar ( I learned all of this just year).

The CPA that filed my taxes told me to send the Fbar just for this year as IRS would be happy enough that I reported all my foreign assets and interests.

The questions is, how shall I behave? Do I risk criminal prosecution?

I honestly do not think there is any criminal element or any risk for the criminal prosecution... That is very unlikely.
As we already discussed - tax fraud (which is a criminal offense) requires both:
•a tax due and owing; and
•fraudulent intent.
Non reporting without fraudulent intent is NOT a criminal action.

The IRS is a very large and very bureaucratic organization - it may not be happy or not happy - so do not even try to make it happy.
Your purpose - to stay in compliance with the reporting requirements.
So far your reporting requirements for 2012 are satisfied.
As you investigated - your reporting requirements are also satisfied for 2011 as you are not required to file your tax return and form 8938.
However - you did not comply with FBAR reporting requirements for 2010. Your choices are:
-- to file late reporting asking to abate any possible penalty as there is no tax liability and you are trying to comply as soon as you learned about these requirements, or
-- not to comply in hope that the IRS will never come back, but if they will - you would not be able to say that you had not know about filing requirements.
That is up to you what option to choose.
Customer: replied 4 years ago.

that's exactly my point, I want to be as clean as possible, my fear is that if I comply, they will still charge me penalties, is it likely?

In any case I do not have much of a choice.

If, for example, I would go for the second option (unlikely), is there a possibility of criminal prosecution?



Non reporting without fraudulent intent is NOT a criminal action. Thus - I do not think there is any risk for the criminal prosecution...
If you want to comply - just file reporting form - attach a letter with explanation - and I do not see any issues.
If you do not comply and the IRS will know that - there will be penalty - and it would be hard to abate the penalty in this case.
Will or will not the IRS have any information about your account - that we may not know.
Customer: replied 4 years ago.

Of course there was no fraudulent intent, the fact is and you know that, many CPAs are not really knowledgeable and give bad advices.

I will take care of it. Also Irs has the info from my account through this year FBAR and 8938 so if they want to investigate they can.

Last question, so the OVDI program is not for me right?


Customer: replied 4 years ago.

in addition who should help me a CPA or a Tax lawyer?

I do not think that you need a tax attorney - as long as there is no any litigation with the IRS. Tax attorneys rare do tax form preparations.
You are not required to have anyone helping you - and may prepare all your tax forms by yourself,
If you do not feel comfortable - you may hire a tax preparer - not necessary a CPA - any tax preparer may be helpful. But that is your choice.
Customer: replied 4 years ago.

you confirm that I do not need go through the OVDI program right?

That is correct - if you do not have any tax liability for past years - there is no need to use OVDI program.
Customer: replied 4 years ago.

sorry I am not sure I understand. By having to amend my 2010 tax returns (adding up the interest I gained on my foreign bank account) means that I have tax liability, so do I have to go through the expensive OVDI or I just need to amend that return and send the FBAR for the past years?

I appreciate your response on this.

If you received interest income in 2010 that was NOT reported on your 2010 tax return - and if you amend your 2010 tax return - there will be additional tax liability.
As a result of additional tax liability - there will be penalties and interest charges.
In additional - you might be subject of up to $10,000 penalty for not filing FBAR form.
If all above is correct - you MAY choose to apply for the offshore voluntary disclosure initiative (OVDI) program - that is not mandatory - this program is optional.
The law requires all taxpayers to comply with reporting requirements - so I may not advise you not to comply.
Customer: replied 4 years ago.

In any case, and then we covered it all, my case is not a criminal one as I did not know truly that I had to report this interest for 2010, right?

I agree with your assessment - and honestly do not see any criminal elements in your situation.
Moreover - your wiliness to report and pay your tax liability may be used as a proof that you had no any fraudulent intention.
Non reporting without fraudulent intent is NOT a criminal action.
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