Civic groups filling in where the IRS falls down on the job: educating immigrant taxpayers about FBAR and FATCA

Thanks to Congress and the IRS, ordinary taxpayers who migrate from one country to another face incomprehensible tax reporting and payment obligations, involving a burden of time and accountants’ fees all out of proportion to the actual monetary amounts involved. Immigrant and emigrant taxpayers who have failed to comply with these requirements despite their best efforts face huge fines. In response, voluntary groups are picking up the slack and holding seminars at their own expense to warn immigrant taxpayers about the burdens they face. The World Journal, a Chinese-language newspaper based in New York, reports on one such seminar held in Florida this past week. I’ve translated their article below.

海外資產報稅 專家詳解
Specialist explains tax reporting on overseas assets

記者陳文迪奧蘭多報導
Reporter Chen Wen-di, Orlando

中佛州台美商會日前在明軒餐廳舉辦三場英文專題講座,分享報稅、房地產相關訊息,以及貸款訊息。台美商會副秘書長劉廣然會計師主講稅務主題「選擇老實申報海外資產還是放棄綠卡? 」、房地產經紀人林智演講主題「大奧蘭多地區房地產最新動態分析與建議」、貸款專家廖梅芳則剖析各種貸款,該講座還開放提問,近60位會員會友與會,交流熱烈。活動由秘書長王冠亮主持。顧問陳秀美報告參加商會會議的心得,佛州學人協會秘書長穆椿榮簡報該會將於9月在迪士尼舉行的年會和北美講座等活動。活動由秘書長王冠亮主持。顧問陳秀美報告參加商會會議的心得,佛州學人協會秘書長穆椿榮簡報該會將於9月在迪士尼舉行的年會和北美講座等活動。
The Central Florida Taiwan–U.S. Chamber of Commerce recently conducted three lectures in the Mingxian Restaurant, to share information about tax reporting, real estate, and loans. Taiwan Chamber of Commerce Vice-Secretary Liu Kwang-ran, an accountant, gave a tax-themed lecture “Choosing to truthfully report overseas assets or give up your green card?”, real estate agent Lin Chih’s lecture topic was “Latest Trends in Greater Orlando Area Real Estate: Analysis and Suggestions”, while loan specialist Liao Mei-fang analysed various types of loans and then opened the floor to questions. Roughly 60 members attended and had animated discussions. The event was organised by Secretary Wang Kwan-liang. Consultant Chen Shiu-mei reported on her experiences participating in Chamber of Commerce meetings, while Florida Chinese American Academic and Professional Association secretary Mu Chun-jong announced that they would hold their annual meeting and North America lecture activities at DisneyWorld in September.

講座在午餐後登場,劉廣然首先說明海外資產超過一定金額需向國稅局申報,外國金融機構須向國稅局申報美國納稅者的帳戶。肥爸(FBAR)海外帳戶超過1萬元,肥咖 (FATCA)法案是指海外資產超過5萬元以上,向國稅局申報。針對以海外帳戶來逃稅的人,國稅局已設定各種高額罰款。她解說申報條件,海外資產超過5萬元者,需在所得稅申報時另報F8938表,不報的罰款為1萬元,被一再通知仍不報者罰款5萬元,因漏報海外資產所欠稅金另罰40%。
The lectures began after lunch. Liu Kwang-ran first explained the requirement for overseas assets above certain thresholds to be reported to the IRS, and for foreign financial institutions to report U.S. taxpayers’ accounts to the IRS. FBAR for accounts exceeding $10,000, and FATCA for foreign assets exceeding $50,000, should be reported to the IRS. The targets are people evading taxes with overseas accounts, and the IRS has already established various kinds of expensive fines. As she explained the reporting requirements, those whose overseas assets exceed $50,000 must must attach Form 8938 to their tax return. Those who do not file could be fined $10,000, while those who are notified once but still do not report could be fined $50,000 as well as 40% of the amount of unreported tax owed.

The World Journal is a pro-Taiwan newspaper with a subscriber base consisting primarily of immigrants from Taiwan, so they’re using the Taiwan-style nicknames for FBAR and FATCA: “Fat Papa” (肥爸, Féibà) and “Fat Coffee” (肥咖, Féikā). Apparently Taiwan’s translators honestly believe that the IRS is going to get “fat” by stuffing itself with expat and immigrant minnows. Fortunately, neither of these translations have caught on in Hong Kong or mainland China. I personally prefer a different translation for “FATCA” I saw on a Chinese-language bulletin board a couple of months ago: “more bandits” (匪加, fěijiā). Unfortunately, this strikingly-accurate alternative translation hasn’t caught on with the newspapers.

應申報的海外資產包括:海外金融機構管理的帳戶,其他非美國銀行管理的海外投資用金融資產,例如外國公司/法人發行的股票或證券。居住美國者,單身或結婚分開報:年底資產大於5萬或一年裡多於7.5萬,結婚合報:年底資產大於10萬或一年裡多於15萬;定居海外者:稅法上的住宅在國外,住滿一整年,在連續12個月間住國外至少330天。外國金融機構須向國稅局申報美國納稅者的帳戶,以及其人擁有相當股份的外國公司,所有外國金融機構需在2013年6月30日前和國稅局簽同意書。
Overseas assets that should be reported include: accounts managed by overseas financial institutions, other overseas investments in financial assets managed by non-U.S. banks, such as stocks or securities issued by foreign companies or legal persons. For persons resident in America, single or married-filing-separately taxpayers: assets greater $50,000 at the end of the year or $75,000 within the year; married-filing-jointly taxpayers: assets greater than $100,000 at the end of the year or $150,000 within the year; persons resident overseas: those whose tax-law home has been outside the country for one full year, and/or have continuously lived outside the country for at least 330 days in 12 months. Foreign financial institutions must report U.S. taxpayers’ accounts to the IRS, as well as all their significant holdings of foreign companies’s shares, and all foreign financial institutions must sign agreements with the IRS before 30 June 2013.

另外,她也說明去國稅和棄籍稅,去國稅和棄籍稅是當美國居民或公民放棄身分時課的稅。棄籍並不是讓綠卡過期而已,仍然需要繳交棄籍稅,且以最早生效日為效,棄籍日需申報F8854確認過去5年有合法申報所得稅,若未申報,則不算棄籍,仍依居民身分,全球收入都要在美國報稅。棄籍時所有財產均以市值出售,計算增值在扣除65萬1000元免稅額後計算收入。所有退休金等免稅延稅戶頭,都要當做領出計算收入。如果有虧損,只能扣3000元。
Aside from this, she also explained the exit tax and the renunciation tax. The exit tax and the renunciation tax are taxes paid when a U.S. resident or citizen gives up status. Renunciation does not simply consist of letting your green card expire; you still must pay the renunciation tax, beginning on the earliest effective date (???). On the day of renunciation, you must file Form 8854 and affirm that you have fulfilled the law’s requirements for income tax filings for the past five years. If you do not file this form, then your renunciation is disregarded, and you retain your resident status and still must pay U.S. tax on your global income. At the time of renunciation, capital gains are calculated on all property as if sold at market value, and after applying a $650,000 tax exemption are included in income. All retirement funds and other tax-exempt or tax-deferred accounts must be included in the income calculation. If there are losses, only $3,000 can be deducted.

美國的公民和永久居民的所得稅,都要報「全球收入」。不過中美簽有中美稅約,很多有綠卡的海歸中國留學生是中國公民,中國居民只要一年中在中國停留時間超過半年,就可以選擇以非居民身分報稅,在中國的收入不必在美國繳稅,美國公民無此選擇,所有中國收入均需課稅。香港、澳門及台灣等地都和美國沒有稅約,因此這些地區的居民若擁有美國綠卡,就必須以美國居民身分報稅。如果合於規定,有機會選擇海外勞動力所得免稅。
U.S. citizens and permanent residents must report “global income” for their income tax. However, China and the U.S. signed a China–U.S. tax treaty. Many green card-holding Chinese international students who returned to China are Chinese citizens. Residents of China can choose to file [U.S.] taxes as non-residents as long as they spent more than six months per year in China, and their Chinese income is not subject to U.S. tax. U.S. citizens do not have this option, and must pay [U.S.] tax on all of their Chinese income. Hong Kong, Macau, Taiwan, and other places also do not have tax treaties with the U.S., and because of this residents of these places who have U.S. green cards must file [U.S.] taxes as U.S. residents. If you meet the requirements, you may also have the opportunity to choose the Foreign Earned Income Exclusion.

The translation of “Foreign Earned Income Exclusion” here is a complete disaster: “foreign labour power income tax exemption” (海外勞動力所得免稅, hǎiwài láodònglì suǒdé miǎnshuì). This sounds like some sort of obscure benefit for employers. The IRS’ official Chinese terminology for the FEIE (國外所得收入抵免部份, guówài suǒdé shōurù dǐmiǎn bùfèn) is only marginally better; it translates back into English roughly as “Foreign Income Offset Portion”, which makes it sound like it can be applied to all foreign income (rather than just wage income). Of course, if Congress and the IRS didn’t insist on trying to tax the entire world, there’d be far less need for any translations at all. Non-Anglophones — and even native Anglophones — already have enough trouble understanding Form 1040, with the only saving grace being that many can get by without filing it at all if their employer handles the withholding for them (at the cost of missing out on some potential refunds). It’s nothing more than a cruel joke to expect non-English speakers to understand the Form 3520 or 8621 filing requirements for any money they may have left behind in their home countries.

房地產經紀人林智, 以數據投影片說明房地產概況,並做分析。他指出,目前法拍的住宅房產已減少,一般房屋交易增加且較少論價,國際投資機會活絡,大體來說,仍是買家市場。林智分析國際投資的益處,由於油價上揚,許多市區中心裡的住宅公寓,以其出入方便,成為新寵,有些地區甚至不需開車,以步行即可至各商場,完成生活所需採購或娛樂活動。他亦認為商業投資是很好的選擇,不論是倉庫、辦公市或零售業區,目前都有許多空屋。另外,公寓房屋也是很好投資,尤其是多家庭大戶型的很被看好。
Real estate broker Lin Chih explained the condition of the real estate market with a data-filled video, and also provided analysis. He pointed out, at present foreclosures of residential real estate have already fallen, ordinary real estate transactions show less haggling, and international investment opportunities are picking up. Broadly speaking, it is still a buyer’s market. Lin Chih analysed the benefits of international investment: due to rising oil prices many urban-area houses are becoming new favourites due to their accessibility. In some areas, [residents] don’t even need to drive but can walk to various malls in order to complete shopping errands or [participate in] recreational activities. He also believes commercial property investment is a good choice, as warehouses, offices, or retail space all have many vacancies at present. Other than that, apartment buildings are also a good investment. and in particular multi-family units have a good outlook.

第三位主講人是貸款專家廖梅芳,分享目前一般貸款的情況,解說幾種貸款FHA、HARP、HAMP等。她指出,只要信用好、收入夠,就可重新貸款,若符合條件,甚至最高貸款額沒限制,低利率。目前有很多人貸款被拒,都是因為條件不符合。
The third lecturer was loan specialist Liao Mei-fang, who discussed the situation with regards to ordinary loans, and explained various types of loans such as FHA, HARP, and HAMP. She pointed out, as long as you have good credit and sufficient income, it is possible to refinance, and if you meet the requirements, there’s no limit to how much you could borrow, and interest rates are low. At present many people have been refused for loans, because they do not meet the conditions.

So, sixty taxpayers have got the message: give up your green cards and invest overseas. That just leaves 100,000 other Chinese Americans and Taiwanese Americans in Florida …

Advertisements

5 thoughts on “Civic groups filling in where the IRS falls down on the job: educating immigrant taxpayers about FBAR and FATCA

  1. Immigrants at the bottom of the economic ladder rarely worry about the US tax system, and probabably don’t need to, but those who are moving to the US to set up businesses really need to be concerned, so this sort of thing is important for them. Once they have moved here they soon realize they wished they had known about them before they made the move. So this kind of activity is not only welcome but important. If you have money to tranfer to the US when you come as an immigrant, it is easy, but it is a lot more difficult to “pick up your dolls” and go back home and take your new wealth with you to go back where you came from to continue life or to retire as a result of US tax laws.

  2. I am impressed Eric, at the fact you can read/translate Chinese. Wow!

    The nicknames are cute but I agree “more bandits” – that is juicy.

    I suppose this information is not (?) included in whatever the process is for immigrating to the US? I should probably look however, if it isn’t, then it’s just another evasion of responsibility for proper notification of one’s requirements. Same-old, same-old.

  3. I think some of the information is incorrect. To my knowledge, you are entitled to renounce even if you have not complied with US tax requirements.

  4. @Greyowl,

    Yes, that is true. It is also untrue that you have to file the 8854 on the day of renounciation.

    One thing I had never thought of though, was mentioned on Phil Hodgen’s site. Once you do renounce, you create a time limit for getting the 5 years of returns done so you can certify on the 8854 that you are compliant. I guess strange things could come up to prevent that getting done and then one would be “covered.”

  5. @greyowl: I’m guessing the journalist was just summarising what she understood from the talk, and wasn’t able to do much fact checking. On the way back into English I’ve probably introduced some translation errors too. The sad thing is, we can see the errors easily, but there’s a lot of people for whom news reports like this are their only real source of information on the topic.

    @nobledreamer: well, I’ve been here for a decade. Kinda had to learn, otherwise my career would have stalled 🙂

    @Roger: the other problem is that the E2/EB5-visa investors often get their tax advice from their immigration consulting firm’s lawyers — who have an obvious conflict of interest: they want the client to go to the US so they can get paid and puff up their “success rate”, and they have no desire at all to point out the drawbacks or ongoing costs to the client.

    But L1 and H1-B workers have it even worse. Not only could their savings easily exceed the FBAR threshold, but they may also have home country purpose-savings plans that can’t be withdrawn or closed, and that the IRS sees as PFICs/foreign trusts trusts/CFCs/FDEs. $500 in a foreign retirement plan means you’re stuck filing Form 3520 or 8621 for the rest of your life. But they certainly can’t afford $300/hr advice from a tax attorney to assess their situation and advise them whether the increase in wages from migrating to the US is really worth the risk of massive international taxation fines …

Comments are closed.