Monthly Archives: October 2016

Snapshot in time: Eyewitness account of evolution of Schedule B and the #FBAR Form TDF 90-22.1 from 1981 to 1986

The above tweet references a fascinating discussion about Mr. #FBAR in the early years prior to the “The FBAR Fundraiser“.

Interestingly for the years 2003 to 2008 (if memory serves), IRS Publication 54 did NOT reference the FBAR requirement.

OAP says
October 11, 2016 at 4:23 pm

@heidi, @pacifica777

Now you’ve peaked my curiosity, and I’ve done a sad thing. My first filing from abroad was in 1981 and I’m sure I filed an FBAR, so I’ve dug out all the old records.

1981

A. Schedule B – It contains Part III and the question about financial accounts in a foreign country.
(I believe the instructions for Sch. B referenced FBAR.)

B. FBAR, top instructions – “This form blah, blah blah. You are not required to file a report if the aggregate value of the accounts did not exceed $1,000.”
(That’s not a typing error, it says $1,000.)

C. FBAR Line 9 – “ If you had a financial interest in one or more….accounts which are required to be reported, and the total maximum value of the accounts exceeded $10,000 during the year,….”
(Note total maximum value of the accounts, not maximum aggregate value of the accounts, and $10,000 figure.)

D. Instructions on back of FBAR – Unfortunately, for 1981 I only have the top copy and not the back.

1982
A. Schedule B – It contains Part III and the question about financial accounts in a foreign country.

B. FBAR, top instructions – Same as 1981

C. FBAR Line 9 – Same as 1981

D. Instructions on back of FBAR – Unfortunately, top copy only..

1983

A. Schedule B – It contains Part III and the question about financial accounts in a foreign country.
(For 1983, includes directions to FBAR instructions and now asks for which countries the accounts are located in.)

B. FBAR, top instructions – “This form blah, blah blah. You are not required to file a report if the aggregate value of the accounts did not exceed $5,000.”
(That’s not a typing error, it says $5,000.)

C. FBAR Line 9 – Same as 1981.

D. Instructions on back of FBAR, Who must file – Each United States Person who has financial interest in or signature authority or other authority over bank, …..or other financial accounts in a foreign country which exceeds $5,000 in aggregate value at any time during the calendar year, must report that relationship each calendar year by filing TD F 90.22.1….”
(Note $5,000 figure.)

1984

A. Schedule B – Same as 1983

B. FBAR, top instructions – “This form blah, blah blah. You are not required to file a report if the aggregate value of the accounts did not exceed $5,000.”
(That’s not a typing error, it says $5,000.)

C. FBAR Line 9 – “ If you had a financial interest in one or more….accounts which are required to be reported, and the total maximum value of the accounts exceeded $10,000 during the year,….”
(Note total maximum value of the accounts, not maximum aggregate value of the accounts.)

D. Instructions on back of FBAR, Who must file – Same as 1983. ($5,000)

1985

A. Schedule B – Same as 1983.

B. FBAR, top instructions – “This form blah, blah blah. You are not required to file a report if the aggregate value of the accounts did not exceed $5,000.”
(That’s not a typing error, it says $5,000.)

C. FBAR Line 9 – Same as 1981.

D. Instructions on back of FBAR, Who must file – Unfortunately, only top copy.

1986

A. Schedule B – Same as 1983.

B. FBAR, top instructions – “This form blah, blah blah. You are not required to file a report if the aggregate value of the accounts did not exceed $10,000.”
(It now says $10,000.)

C. FBAR Line 9 – Same as 1981.

D. Instructions on back of FBAR, Who must file – Unfortunately, I only have the top copy.

From my limited files confusion reigns. For 1983, as for 1981, (C) FBAR Line 9 mentions “total maximum value of accounts exceeded $10,000″, but the instructions on the back of the FBAR states “which exceeds $5,000 in aggregate value at any time during the calendar year”. The (B) Top instructions don’t mention $10,000 until 1986.

I’m now off to find a life.

Relinquished US citizenship in the 1970s? Are you still a U.S. “Tax Slave”?

The above tweet references a comment at the Isaac Brock Society.

Returning to the purpose of this post:

The question asked by Stephen Kish is how should Caroline be advised. Mr. Reed proposes two interpretations of S. 877A which he calls the “literal approach” and the “common sense” approach. One problem of reading articles written by the tax compliance community is, that by focusing on the theoretical, they minimize the “real life” consequences to the people they advise. So, what are the “real life consequences?” The “literal approach” results in the destruction of your life. The common sense approach means that you still have a life. (Which do you think is the better approach?)

Here is why.

Rather than frame the issue as “the literal approach” vs. the “common sense approach”, the issue should be framed as:

Approach 1 – Your Life Is Over: Under this “literal” interpretation of S. 877A, you poor dumb former American will have to turn your life savings over to the IRS (and pay the adviser to help you do this) because you did not go out and obtain a CLN. It doesn’t matter that a CLN was not required by law. It doesn’t matter that you didn’t know what one was. It doesn’t matter that the U.S. Government was threatening you with the loss of your U.S.citizenship if you became Canadian. It doesn’t matter that in some cases the U.S. was denying entry to the USA to those who had become Canadians. What matters is ONLY that this is what the statute says NOW!!!!!!! So, you better step right up and turn your life savings over to the IRS.

Approach 2 – It’s Your LIfe! Why don’t you keep it!: Let some “common sense” prevail. You were one of the smart ones. Because you relinquished U.S. citizenship – according to the clear laws of the USA in the 1970s – you are not affected by this new law. The only people affected by this new law are the “dumb bunnies” who decided it was a good idea to be a U.S. citizen AND were U.S. citizens when this law took effect on June 16, 2008. I don’t think you should draw attention to yourself. You might want to document the circumstances that led to your becoming a Canadian citizen in 1978. When documenting those circumstances, you probably should make it clear that you were intending to relinquish U.S. citizenship. But, either way you have to sleep. So, you might as well – Sleep well!. There is no good reason to turn your assets over to the IRS and pay your adviser to help you do it.

A fair reading of the legal commentary on this issue appears to be:

One group of lawyers (including the three who commented on this article) do NOT believe that the “literal” (or as Michael Miller says, the “absurd”) approach is correct.

A second group of lawyers thinks that the “literal” approach MIGHT be correct. But, they aren’t really sure. Even though they are not sure, for reasons known only to them, they usher clients into turning their assets over to the IRS. Hmmmm, …

Given the existing commentary and lack of certainty (on the part of those who recognize the “literal approach”), what I can’t understand is:

1. How any adviser could possibly advise a client that the “literal” approach is correct (turn your assets over to the IRS). Yet, we know that a very large number of people are being advised to do just that. (Note that, since June 16, 2008 a CLN is most certainly required lose U.S. tax subjectness. But NOT before.)

2. How any client, given the existence of conflicting views, could possibly allow themselves to be guided into accepting that they should turn their assets over to the IRS. (Actually I know the answer. It’s because there is ONLY one certainty in life. If you turn over all your assets to the IRS, then you will never have tax problems again. But, you won’t have a life either and then you will have a different set of tax problems.)

This reality notwithstanding:

There is/are a large number of people who clearly relinquished U.S. citizenship many years before the current laws, who have allowed themselves to be guided into the “literal appraoch” – turning their assets over to the IRS.

Conclusion: The result that you get will be determined by your choice of adviser. Think about it!

The pain of renouncing US citizenship: It’s not about the loss of citizenship

The above tweet references an article at swissinfo.ch written by Christina Warren. She describes her feelings about renouncing her U.S. citizenship. It is an interesting article which describes the pain and turmoil associated with renouncing her citizenship. Rather than attempt to comment at the site, I decided to write a comment as a post. Please read her article

Christina:

Thanks for writing this article. It’s clear how painful your “decision” to renounce your U.S. citizenship was. You “never had a say” when it comes to U.S. policies including citizenship-based taxation and FATCA.

As a result, you “never had a say” in whether you could retain your U.S. citizenship. For the most part, tax complaint U.S. citizens living abroad, can no longer survive if they continue to be U.S. citizens. Your renunciation was reasonable, necessary and inevitable.

I understand the tremendous pain your loss of U.S. citizenship has caused you. But, I would like to suggest that the “pain” may not be the loss of U.S. citizenship. I suggest that the “pain” is for at least two other reasons.

Reason 1: The realization that American NEVER stood for and embraced the values that you thought it stood for. It’s the feeling of having been “duped”, perhaps “lied to”.

Reason 2: The realization that you never did and never will matter to the United States. You thought that you could get the U.S. government to listen. To understand. To do the right thing. To treat its citizens with “concern and respect” or (considering Americans abroad) with “equal concern and respect”. The United States doesn’t care about its citizens (no matter where they live). This is evident from the response from Elizabeth Warren. The response from Ms. Warren is NOT about FATCA. The response from Elizabeth Warren is a clear statement that what matters to the United States of American is NOT “citizens” but “revenue”.

“Citizenship-based taxation” is bad enough. But, “taxation-based citizenship” is much worse. My point is that the ONLY thing that “U.S. citizenship” is about is taxation.

Here is the excerpt from Elizabeth Warren that you quote:

“…I recognize that FATCA implementation has not been perfect, and it troubles me that financial institutions overseas would deny services to Americans out of concern over FATCA compliance. However, according to the U.S. Senate Permanent Subcommittee on Investigations, the U.S. Treasury may be losing more than $100 billion in tax revenues every year as a result of offshore tax havens. I believe measures like FATCA clamp down on overseas tax evasion and help make sure that everyone pays their fair share of taxes. …”

You should be happy that you are no longer a citizen of a country that doesn’t care about its citizens. Believe me the U.S. Government understands what it is doing to it’s citizens abroad. It doesn’t care.