FBAR penalties and soft disclosure

[Pathologic1]

yes I have an email to the IRS from and to me.
The first is to the IRS

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Hello Sir/Madam,

I am very confused about this FBAR requirement, which I just learned in a local newspaper.

I have been living and working in Canada for over 25 years and have reported all of my worldly income (all from Canada) and filed my taxes every year in Canada as required here. It was my understanding that Canada and the US had tax agreements and that, if anything, the taxes in Canada are higher than the US and thus I would have no taxes owing in the USA. Hence I have not filed in the US for many years but I plan on doing so from now on.

The question is, if I file my last 8 years of US income taxes and have nothing owing can I then file my FBARs back over the same time period without entering the amnesty program as suggested in the IRS's "2011 Offshore Voluntary Disclosure Initiative Frequently Asked Questions and Answers" section 17 ?

Is this what I should do if I owe no taxes?

I certainly didn't move to and work in Canada to avoid taxes.

Thanks

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From: Ellen.White@irs.gov
To:
Subject: RE: FBAR Canada
Date: Wed, 13 Jul 2011


Dear Sir :

Yes

The Statue of Limitation is 6 years

Filing a late or delinquent FBAR

When filing delinquent FBARs, attach statement to each report explaining why your filings were not made timely. Keep copies of the FBARs and statement for your records. For prior calendar years, use the current version of the Form TD F 90-22.1, but you may rely on the instructions what were in effect during the reporting period of the delinquent FBAR in determining whether you are required to file the FBAR. Mail you delinquent FBAR and explanation to:

Department Treasury
Post Office Box 32621
Detroit, Mi 48232-0621

The maximum value of account is the largest amount (not the average amount) of currency and nonmonetary assets that appear on any quarterly or more frequent account statements issued for the applicable year. If periodic account statements are not issued, the maximum account value is the largest amount of currency or nonmonetary assets in the account at any time during the year. Convert foreign currency by using the official exchange rate at the end of the year.
Though the FBAR instructions direct filers to use the official exchange rate, the Internal Revenue Service has no official exchange rate and generally accepts any posted exchange rate that is used consistently. For exchange rates, check the U.S. Treasury Web site or other commercial sites.


Ellen White
Bank Secrecy Act (BSA)
Tax Law Specialist
Small Business /Self Employed
BSA Compliance Department

[madhoa]

The IRS internal replies from the regular FBAR email address are sometimes unclear or contradict the FAQ or even each other at times (or maybe the person did not understand the question clearly).

But, the IRS has said in its OVDI FAQ that its not just tax due that is an issue, its also unreported income. "For taxpayers who reported and paid tax on all their taxable income for prior years but did not file FBARs". I assume they refer here to reporting on a US tax return, so if you had unreported income (but no tax due), then submitting your returns/FBARs is not sufficient. They even give an example in their FAQ with an example of someone who owed no tax, but had unreported income. That should be taken as their definitive position.

Now practically, they aren't going to come after someone who has little to no tax due and resides outside the US and has little to no US source income. But they don't explicitly say that.