Fatca advice

Question

Hi everyone, I am just looking for some advice.  I was born in the United States and lived there until I was around 25 years old.  My last year of college, I got to study abroad and I have never moved back and have been granted citizenship in my new country. I moved way before Fatca ever became law. I never filed my income tax when I lived in the US because I never earned enough money to have to file.   I have kept my US Citizenship for 2 reasons.  Firstly, I had no idea that if I worked and lived oversees for time and probably for the rest of my life that the US government still expected me to file my taxes.  The second reason is my mother still lives in the US and I want to be able to get to her quickly if need be.

Several years ago, at least 5 or more, I received an email from my bank here requesting tax information.  The first question was, am I a tax resident of the US under Fatca.  I had no idea what Fatca was and answered NO and provided my certificate of Naturalization as proof.  I never got a response from my bank and time went on, I forgot all about this.  Last week however, I got another email from my bank requesting I answer the same questions again.  This time, I decided to look up Fatca to see what exactly they were talking about as I found this email strange and thought it might be a scam.  I was horrified.  I was not horrified because of the law its self but at the damage this has caused to American expats and to "accidental Americans" living abroad.  The problems don't seem to stem from the IRS themselves but from the foreign financial institutions reaction to Fatca.  I have been lucky in this regard, at least so far although my luck may be about to run out.  Look I did not move to my current country in order to cheat the IRS.  I didn't move here so I could stash movie overseas.  I am not one of the big **** cats they claim this law was passed to catch but I may have been caught all the same.  I'll disclose here that I make 50,000 per year, that shouldn't be a problem as based on what I have read, I shouldn't have to pay the IRS any taxes.  But since I got my citizenship over a decade ago here in my current country, I have been saving every spare cent I have earned and put it in a savings account.  My goal was to buy my own home.  I now have 30,000 in my savings and have been approved in principle for a mortgage with my bank and have even made an offer on a home..all this before I got this last email.  I'm afraid that 30,000 in savings I have may make me a target for the IRS as I believe the threshold is 10,000??  But at the moment, the IRS is not my biggest fear.  I'm afraid that if I admit to my bank that I am a us citizen that they will also want to close my account so they don't have to comply with Fatca and likely will also cancel my mortgage offer.  This has happened in other countries..I was even reading a story of a former US war vet who had to renounce his US citizenship just so he could continue living overseas because banks would not deal with him otherwise and I found that very sad.  The only tie I really still have to the US is my mother.  The only problem is, if the IRS finds out, they will see this as decete and it is I suppose but not to them.  I'm just terrified that the life I have built over here for more than a decade is about to be turned upside down because of some **** law that I didn't know existed at the start of last week.

So here is my question as I am currently trying to figure out what I am going to do.  If I do allow my bank to report via Fatca my financial information.  What are the odds that the IRS will even react?  What are the odds that I will even hear from them?  I have read that the IRS is very understaffed and are getting more information from Fatca than they can process…again most of the Fatca problems you hear about on the internet is not from the IRS.

If I do hear from the IRS and ignore them, being that I have citizenship in another country and a passport in the other country and no assets in the US..not even a bank account.  What can they realistically do to me?  Could they force my foreign bank to close my accounts?  Could they file criminal charges against me and have me extradited to the US?  If my mother gets sick and I return to the US to visit her, am I going to be arrested at the airport?

Everything I have read tells met that I won't owe the IRS any money being that I make 50k per year and have 30k in the bank with my foreign tax credit, I won't owe them any more so my goal here is not to cheat the IRS.  If the forms were straight forward and easy, I would have no issue filing but I have read it is very complicated and not very straight forward.  Furthermore, if I don't fill it our correctly or make a mistake, the IRS will come after me or send me a tax bill for income that I have already been taxed for in my current country.  The other option is paying an American tax specialist over here to prepare my taxes.  I just got off the phone with one discussing my situation and they will charge over 1k each time they prepare my taxes..so once a year basically for no tax return.  My mother pays around this amount to get her taxes done but she always gets a refund and uses the refund to pay the tax preparer.  I wont' be getting a refund, just the honor of not owing them any money.  That is the only reason why I am seriously thinking about just ignoring this or delaying hoping the US will come to its senses and at least amend the law to make it easier to comply with for foreign banks so they will stop closing accounts.  I'm just so scared now that my bank, who I have been doing business with for almost 20 years is about to close my accounts and cancel my mortgage..that is my real concern and is the only reason I have to be deceitful.  Any help or advise would be greatly appreciated.  Sorry for the long read and I appreciate everyone who made it to the end.

KristineS · Answer

Hi Ohoopee,

Thanks for writing in. Sounds like you have some decisions you'll need to make.

FreeTaxUSA Support will not be able to address many of your questions since they are outside the scope of our service, such as how the IRS may or may not respond. However, we can provide you with general information on reporting requirements to help you in your decision making process and what our software supports.

First, I would encourage you not to let fear drive your decision making, rather, the facts and circumstances of your situation.

Here is a quick reference on FACTA, Foreign Account Tax Compliance Act. "Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets" … and, "The aggregate value of these assets must exceed $50,000 to be reportable."  Do you have financial assets valued in excess of $50,000 to meet the reporting requirements? An example would be a savings account or investments valued in excess of $50,000.

In addition, as a U.S. citizen, or resident with a financial interest in, or signature authority over, foreign financial accounts exceeding $10,000 or more at any time during the year, you may have an FBAR (Report of Foreign Bank and Financial Accounts) filing requirement with FinCEN (Financial Crimes Enforcement Network). This is filed directly on the FinCEN website, BSA E-Filing System. Did you have a foreign financial account with a value of $10,000 or more at any time in 2023?

If you were born and lived in the United States until age 25, you're a U.S. citizen. If you're a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad. Your income, filing status, and age generally determine whether you must file an income tax return. Typically you must file a return if your gross income from worldwide sources is at least the amount shown for your filing status as shown on page 9 of this PDF in IRS Publication 17.

If you made $50,000 in 2023, you'll likely have a tax filing requirement. If you meet certain requirements, you may qualify for the foreign earned income exclusion, the foreign housing exclusion, and/or the foreign housing deduction. We don't currently support the foreign earned income exclusion however, so you'll need to find another provider to assist you.

We suggest you talk to a professional in your country of residence that has experience with these types of issues or a U.S. based licensed tax professional, also with experience in these issues. You can also review IRS Publication 54 for additional detailed information.

MintchipLover · Answer

Wow a lot of info! I think FreeTaxUSA only supports filing if you're living in the US, so I'm not sure many people in here will have helpful info for this unless they were in a situation like this in the past.

Sorry it sounds stressful.

I wonder if there is someone in your current country who has experience working with banks/facta? If there is a brick and mortar locally? It would be nice to find someone who has helped other people in this exact position.

Wish you the best of luck!