ask matt cpa we are free agents nation …

IRS surely has done a good job rocking the boat. For many Americans living overseas or foreign people living in the U.S, the news about FBAR got themselves a solid issue to worry about. File or no file?

It hasn’t been much an issue before because it isn’t a common knowledge, so there must be a lot of people get trapped in this situation. IRS wants to catch the big fishes in the tax evasion game; however, the voluntary disclosure program makes it hard for the small potatoes or the regular folks to come clean.

A real case
I got a concerning email from a couple who have green cards, and they happened to have some money left behind in the old country. They did their own taxes mostly because of their simple situation. All the sudden, being alarmed by the FBAR news, they wanted to get help from CPA.

It turned out their case wasn’t that bad. They have reported income earned from foreign accounts in prior tax returns. Very honest people, but they never heard about TD F 90-22.1 filing until now. So they need to file that particular form and attach with explanation. Filing penalties will be very likely abated.

What will you do
For many other people, it may not be so easy or so black and white. Many of them living abroad tend to think their earnings outside of the U.S. are not reportable, which is incorrect. To do FBAR, they need to catch up on those unreported income with IRS, and that means a chunk of money for back taxes, penalties, and interests. Putting myself into their shoes, I am sure they will debate about these options:

• Stay put and do nothing, betting that it is impossible IRS would catch every small fish in the pond
• Start filing this year only, like sneaking into a room without any attention and get a clean start quietly
• File for some years instead of the full 6 years to show compliance and hope for the best
• Or, simply follow suit by amending tax returns, filing TD F 99-22.1, paying the back taxes, plus interests and penalties for the last 6 years, on top of the fees for the professional helps.

I don’t know if IRS had actually anticipated the dilemma of the ordinary folks when they came up with those harsh requirements. Wouldn’t it be nice if they can draw up a less painful plan for the regular Joes and use other measures to distinguish the big fish in the pool.

More from Ask Matt CPA

• Hello world!
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• About
• Index Card – FBAR
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