Doing things “right” is usually a costly mistake.
I am okay. That’s why I was very reluctant…
1. Reporting your accounts on FBAR will not lead to the same banks finding out who should be subject to FATCA reporting. This will only happen if you tell the banks that you are a US citizen. Without knowing what the banks are like where you live, I can’t say if that would be a problem or not. In Canada, the banks don’t really care, but in some European countries, the banks restrict the services offered to American customers.
As silly as it sounds, but this has been worrying me ever since I found out about the FBAR reports. I’m scared to open new accounts, apply for a credit card, trade, apply for insurance packages here, etc., because everywhere they ask if you’re a US person. I’m even afraid to cash my stimulus checks, thinking I’d expose my citizenship to the bank and the IRS (because they might identify my bank account). I know that sounds crazy and stupid. All of this just makes me feel like I’ve been deprived of my freedom – to live in my “home” country and not do things like everyone else because of the blue passport.
2. If you’re silent and your banks don’t submit you to FATCA reporting, the IRS won’t find out the accounts. FBAR reports (filed by you, not the bank) are actually forwarded to another branch of the US government, not the IRS. Where you may have a problem fully complying is if you earn interest or dividends on these accounts. If so, have you declared income or completed Schedule B on your 1040?
Again the stupid mistake I made… I kind of flagged my interests and gave the names of the two banks where I had accounts. But last year after I found out about FBAR reports I was like, no, I didn’t get a W-9 form from the banks, so maybe it’s safer not to report to avoid differences. But again, it might trigger the IRS, I’m afraid.
3. Don’t overestimate the ability of the IRS to figure things out or sue you. They generally don’t care about non-residents. They lack information about you and the resources to follow up, and they can’t easily collect it.
If I hadn’t reported it since I moved here, I wouldn’t have worried. I didn’t know at first that I had to file a tax return and do the FBAR declaration. I just thought it would be a good idea to keep my SS benefits. But now, after finding out about this whole messy business, I’ve worried about it every tax year. Like living in fear, on top of having to pay taxes in both places for years. I’m perfectly fine with paying my resident’s country, however; it’s logical: you live here, so you have the duty and the responsibility.
4. You could have easily stopped filing when you left without jeopardizing your future Social Security benefits. In most cases when people file US tax returns they don’t owe anything anyway because of foreign tax credits or the foreign earned income exclusion, but it seems that you have successfully paid a US tax bill each year. That’s unfortunate (unless you’re doing it on purpose to somehow keep accumulating Social Security credits, in which case it could be beneficial if the numbers work).
I have enough credits and am entitled to benefits now. But again I just found out that 25.5% of my benefits will be deducted because once I quit I will become a non-resident and therefore my benefits are subject to a 25.5 withholding tax %!
I understand, and the tax program I used seems to suggest, that the surplus earned abroad. does not apply to self-employment, which is my case.
5. You can opt out at any time. It is your right, the application can only be rejected if the consulate considers that you are not mentally capable. You are not required to be tax compliant – citizenship matters are between you and the Department of State, they don’t care about your tax status.
Thank you. Now the waiver fee and the 25.5% got me thinking. But in the future, I imagine that if I have to live with this fear every year and not have to do stuff related to finance, it might be a good thing to give up. Sigh…