Jul 20, 2012, 8:38 PM
Post #10 of 18
Form TD F 90-22.1, Page 6 states:
Re: [Ric Hoffman] Report of Foreign Bank and Financial Accounts (FBAR)
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Governmental Entity. A foreign financial account of any governmental
entity of the United States (as defined above) is not required to be
reported by any person. For purposes of this form, governmental entity
includes a college or university that is an agency of, an instrumentality
of, owned by, or operated by a governmental entity. For purposes of this
form, governmental entity also includes an employee retirement or
welfare benefit plan of a governmental entity."
So, if you qualify as the holder of a foreign financial account of a governmental entity of the US, then you are exempt.
As with most IRS issues, if you co-mingle funds, things rapidly get ugly. To meet the requirements of not reporting a foreign account under FBAR, you likely should have a single account to which the ONLY deposits ever made are from the US government as:
a. part of an employee retirement plan of a governmental entity (OK for former US govt. employees); or
b. a welfare benefit plan.
Are Social Security payments made to retired US citizens a "welfare benefit plan" or "employee retirement plan of a governmental entity"? Former US military personnel pensions and FDA/USDA/etc government employee retirement plans certainly fit.
Are we officially governmental entities? ~ Yes, if you are a former govt. employee receiving retirement benefits or if you are on a "welfare benefit plan".
It would be nice to see a citation in writing, as citizen's personal quotations of past phone conversations with IRS employees do not carry much weight in audits. It would also be good to see a ruling in writing about the consequences of co-mingling funds in a single foreign bank account from both qualifying US govt sources and other deposits. If we wanted to cite the IRS supervisor's interpretation, what was their name? What was their official employee ID? What was the date of the conversation?
The IRS FBAR requirements speak directly about commingled funds as:
IRS "FAQs Regarding Report of Foreign Bank and Financial Accounts (FBAR) - Financial Accounts
Q. What is meant by the term “commingled funds?”
A. The reference to “commingled fund” appears in the definition of the term “financial account” in the FBAR instructions. The instructions state that the term “financial account” generally encompasses accounts in which the assets are held in a commingled fund and the account owner holds an equity interest in the fund.
Q. What are the exceptions to the FBAR filing requirement?
A. Accounts in U.S. military banking facilities, operated by a United States financial institution to serve U.S. government installations abroad, are not considered as accounts in a foreign country. For this reason, these accounts do not have to be reported on an FBAR.
An officer or employee of a bank that is subject to the supervision of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, or the Federal Deposit Insurance Corporation need not report that he has signature or other authority over a foreign bank, securities or other financial account maintained by the bank, if the officer or employee has NO personal financial interest in the account.
An officer or employee of a domestic corporation whose equity securities are listed on a national securities exchange or which has assets exceeding $10 million and 500 or more shareholders of record, need not file a report concerning signature authority over a foreign financial account of the corporation, if he has NO personal financial interest in the account and he has been advised, in writing, by the chief financial officer of the corporation that the corporation has filed a current report, which includes that account. "
Does anyone else find it odd that the official IRS FAQs for FBARs describing the official exceptions to FBAR filings says not a single word about people receiving Social Security payments ?
Devils in details: Our family lost a prolonged court case in the 1970's, costing us roughly $300,000, based on US government supervisor's misinterpretations of US govt. regulations on how to properly determine and report income, so, I strongly hesitate to accept a web-forum claim about the oral word of an IRS employee, heard over the phone, on an issue whose written instructions appear ambiguous. I also believe in dotting i's and crossing every tee with the IRS.
I'd love to see something official in writing that specifically identifies Social Security payments as exempt from FBAR requirements, along with specific written instructions about how to meet the IRS FBAR requirements for properly documenting the exempt $$$. e.g. The IRS office in Washington (for FBAR requirements on real estate Fidei Comisos), was telling expats who contacted them that we did not have to file FBARs for real estate Fidei Comisos for properties near the borders or coastlines. Reality? Ooooops.... the supervisor and underlings at the Washington DC IRS FBAR office were over-ruled by the managers, and all the people who followed the "official IRS advice" were and are: on the hook.
Further, if the SSI payments are actually excepted, then consider the following scenario: If you cash your SSI check in the US, or if your SSI check is direct deposited in the US, and then you transfer or deposit the money to a Mexican account, then how do your prove that these SSI dollars are somehow different from dollars from other sources? If the IRS does allow this exemption, then you may have to have direct deposits of SSI or military payments into your Mexican account - and make no other deposits from any other sources - to keep the IRS happy. ???
Additional IRS FBAR Official Publications re Exceptions:
"Exceptions to the Reporting Requirement
Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
Look to the FBAR instructions to determine eligibility for an exception and to review exception requirement. "
- Certain foreign financial accounts jointly owned by spouses;
- United States persons included in a consolidated FBAR;
- Correspondent/nostro accounts;
- Foreign financial accounts owned by a governmental entity;
- Foreign financial accounts owned by an international financial institution;
- IRA owners and beneficiaries;
- Participants in and beneficiaries of tax-qualified retirement plans;
- Certain individuals with signature authority over but no financial interest in a foreign financial account;
- Trust beneficiaries; and
- Foreign financial accounts maintained on a United States military banking facility.
Again, 10 exceptions listed, without a single clear mention of Social Security retirement benefit payments being exempt. brrrrrrrrrr.
Penalties for "non-willful violations" are $10,000 USD per violation.
If you commit the lesser offense of just a "negligent violation", the penalty is up to $500, but a pattern of "negligent violations" is not to exceed $50,000. Throw in potential violations of not making your FBAR report on your Fidei Comiso on your Mexican home, and you can quickly be on the hook for $20,000 of penalties for not reporting FBAR eligible accounts .
I neither agree nor disagree with Ric Hoffman's interpretations and conclusions. I personally do not yet see any clear written official guidance regarding this matter.
I also do not agree to pay anyone's fines or bills that result from following my advice. ~grin~
E-visit at http://yucalandia.com
(This post was edited by YucaLandia on Jul 20, 2012, 9:03 PM)