OVDI FBAR penalty experience?

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stewak2
Posts: 109
Joined: Mon Sep 18, 2006 2:47 pm

OVDI FBAR penalty experience?

Post by stewak2 »

Has anyone actually completed the OVDI process and been assessed penalties?
My USC sister in law, living in Canada, is going to do the "quiet disclosure" and just file 7 years returns and 7 years FBARs.
For 3 of the 7 years she had one bank account with slightly more than 10k in it, the rest of the years she was under 10k. It was a joint account with her Canadian husband.
She never made more than the income exclusion.
Is she really likely to have to pay 5% ( or more ) of the bank account balance? $1500 would be a lot of money for her.
She is not an accidental American, she did live and work in USA for some years as an adult and filed USA taxes.

Also, what exactly constitutes using OVDI? Using an attorney and contacting IRS and requesting it? Or does just filing the returns before the OVDI deadline include you in the program?

My own experience, more than 10 years ago, was as an "accidental American' and I just filed 7 years of 1040s and FBARs. I was never assessed any penalty. Since then I have of course filed complete returns.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

She has no RRSPs?
You guys do 't talk? Seems to mee the fact that you went through this would have allerted your sister to the need to file as well.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
stewak2
Posts: 109
Joined: Mon Sep 18, 2006 2:47 pm

Post by stewak2 »

No RRSPs.
I told her repeatedly she should file, for many years.
She thought that since she had very little income ( not working in Canada for a lot of the time ) that she did not need to file and I could not convince her.
( note it's my sister-in-law, not sister!!)

Do you think she is likely to get dinged for the 5%?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

No.

its not only the 'accidental' citizen that will get away with this. It als applied to those who did not know that they had a reporting requirement while outside US.

Seriously, the only people that IRS is interested in are those the field tax returns, but did not report foreign income, or those that simply stopped filing without any change in their circumstances. The rest can back-file without fear.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
tsanaha
Posts: 268
Joined: Sun May 29, 2011 6:51 am

Post by tsanaha »

not to suggest that they should join OVDI. As matter of rule by the law, if they join OVDI, they would have no penalty/or simply kick out and ask them to back file ?

so if someone with same situation who joins OVDI and get "penalty" -- not because he has non-compliance issue rather for being stupid to join OVDI?

Lack of the consistency from the gov should be blamed if that is the case.
baby_king_bob
Posts: 14
Joined: Tue Oct 13, 2009 7:00 pm

Post by baby_king_bob »

tsanaha raises an excellent point that has caused confusion for many, and potential aggravation in the future.

OVDI is **NOT** for individuals with no underreported tax liabilities in the US. As tsanaha has pointed out, you are needlessly subjecting yourself to potential penalties if you have no underreported US tax liabilities and file under OVDI.

Your sister-in-law should have a brief consultation with a CPA to catch up on her various tax filings and to ensure she has complied with various other reporting requirements, especially regarding her RRSP.

If your sister-in-law chooses to be defiant she should at least do so having been made aware of all the potential issues.
tsanaha
Posts: 268
Joined: Sun May 29, 2011 6:51 am

Post by tsanaha »

by the way, OVDI offers opt out -- so if you owe no tax, and you are misled to OVDI, you do not want the penalty wrongfully imposed on you, you can opt out.


even if you do QD -- it should be a clean cut that you are not subjected to any penalty -- in case you are singled out by IRS. Otherwise, QD is just like to sneak into the system --
madhoa
Posts: 29
Joined: Sun Aug 21, 2011 2:50 pm

Post by madhoa »

I believe OVDI is technically for "unreported income", not just for unreported tax liabilities. Thats technically, practically I can't see the IRS enforcing penalties against someone with no tax liabilities .
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