Facta - Streamline - lost SSN - how to help my friend

Hi I'd be so grateful if anyone could advise.

A friend of mine was born in the US but left before the age of 18 and has lived in the UK for nearly 40 years.

A week ago my friend received a FACTA letter from their UK bank which requires a reply within 30 days. Before this my friend was completely unaware that they had to file tax returns as my friend is a UK tax payer (and has UK citizenship but also have a current US passport - so dual national?) and left the states as a young person and was unaware of this bizarre tax rule (I read only Eritraea and the US do this kind of double taxing).

Having received this letter, my friend spent the past week trying to get up to speed with what is required and has signed up with a Streamline (?) provider that offers online help from a US accountant to file 6 years of accounts and some FBARS(?). However in order to file these and do the Streamline process, it is necessary to have a SSN  and my friend has no idea what their SSN is. They were issued one as a child but have lost the little card that it was written on.

My friend has now found out that it can take upwards of 45 days to have a new SSN card issued from the US, but the Facta letter from the bank needs to be replied to within the next 21 days.  My friend is so stressed, I am worried that they are going to have a stroke/nervous breakdown.

My friend's concern is, they run a small business with their UK spouse and are concerned that their account will be shut down if: they don't respond in 21 days/don't complete the Streamline process within 21 days. My friend thinks that no tax will be owed due to low earnings but that they might need to report something as for some years the balance of an account might be over $10,000 (I'm not entirely sure on this as it is second hand information so I might not have understood).

As it will take upwards of 45 days for the SSN to be sent, they don't know whether to delay responding to the bank (and risk being reported to the IRS and having their account shut down) or to call the bank and say they are waiting for the SSN or to fill out the form without the SSN. Also they can't file the Streamline reports without the SSN.

Basically I wonder if anyone could give advice about this situation. I keep trying to console my friend and say don't worry but my friend is now on the verge of having a stroke because they think if they don't get this all done in 21 days they will be hit with $100000s of penalties for not filing returns/ or their UK account will shut down which could affect their business.

TLDR: friend has 21 days to reply to FACTA but has lost their SSN. They want to comply and do the Streamline but can't do the Streamline without an SSN. The SSN takes upwards of 45 days but the FACTA and Streamline need to be done within 21 days.

* I may not have all the terminology right but I'm sure you might know about this FBAR and streamline business as I saw that other posters on here are writing about this. I am so worried about my friend I paid to sign up to this forum so I hope someone can give advice. Anything you could say would be appreciated. I don't want my friend to die over this silly rule/law.

My immediate advice would be to not panic and try not to stress out too much. I would contact the bank and let them know the situation, and if they have proof that they have applied for a SSN, even better. The bank must have other folks in a similar situation who are missing their SSN either because they never had one, or have forgotten what it was.

The dual taxation issue catches out many US citizens living abroad. Since your friend has a US passport the IRS can point out that his passport details the requirement to file and pay taxes while residing abroad and even gives the IRS reference to look this up (Publication 54). In my US passport this is shown on the last page, paragraph D. "US TAXES."

A lot of folks don't know about FBAR, and many 'accidental Americans' who don't have a passport are also unaware of their tax obligations.

BUT - durhamlad is correct - anyone who DOES have a US passport should actually read it, because it does spell out the obligation to file a US tax return and report worldwide income.

I will also add that your friend shouldn't stress. The bank certainly isn't likely to close the account or do anything sinister in the short term.

Replying to the bank will make not a jot of difference. Your friend will be reported on (and may already have been reported on) if he replies. He will also be reported on if he does not reply. There is no obligation under UK law to reply to a FATCA letter.

The more important question is whether the UK business is suitable from a US tax perspective. Has your friend discussed the structure with their US accountant?  If not, why not?

May I echo the sentiments above; please tell your friend NOT TO PANIC. Their situation is the same as tens of thousands of other 'Accidental Americans' around the world going through the exact same experience at this time.

I'll also echo, to some degree, Guya's comment; the bank has discovered your friends tie to the US. Whether your friend replies or not, the bank will report an American tie to the IRS. There is now nothing that can be done on that front as your friend does not have a CLN, or a relinquishment argument(?). But, your friend does maintain control as to how they will respond from here forwards to the situation they now find themselves in.

The bank forwards that information to the IRS once yearly. They will forward it whether they have a US SSN or not.

Now, not is all as bad as the above would indicate.

Assuming your friend does not wish to simply ignore the situation (some do), the bank account is the first issue. There's nothing your friend or the bank can do if there is an unknown SSN. Simply tell the bank they are willing to sign a W-9 form (and NOT a W-8) admitting the US tie and once the SSN is rediscovered, they will supply it. The bank is only interested in identifying Americans. Once identified, the bank has no other interest other than the yearly reporting. The bank always retains the W-9 form in their records and it is not sent to the IRS.

The bank should be satisfied with this and should take no further action towards any account if it is the UK account of a UK resident. In some countries, the reaction might be different, and it is those situations which one often hears about; but in the UK, actual account closures are unusual (but, unfortunately, some do happen).

Be wary of the US accountant. You have mentioned your friend has joined a "Streamlined" programme,  but for 5 years. The only streamlined programme your friend should contemplate is the Streamlined Foreign Offshore Procedures. This procedure only requires 3 years of past returns, and 6 years of past FBARS. There are other methods of coming into compliance, but those are for the professional advisor to discuss.

The US tax situation does not, usually, involve paying tax to the US. 82% of filers do not pay US tax. The difficulty, as Guya is identifying, is staying in compliance. Anything to do with the UK is 'foreign' to the US, and the US treats any foreign asset punitively. Once your friend enters the US tax system, they will have to carry on, each and every year until they die, and then some(!). There can be no further slip-ups. This leads many Accidental Americans to renounce their US citizenship (which DOES require 5 years of past filings). IMPORTANT QUESTION: Does your friend ever intend to return to the US to live? Do they wish to retain a US passport given their (business and other) circumstances and the requirement for accurate yearly US reporting?

EDIT TO ADD: There is no need for streamlined to be completed by any certain time. It will take as long as it takes, and it is unlikely the IRS will be taking any immediate action, even with the bank notification. They are now receiving millions(?) of these account reports from around the world. The only time constraint is the 31 days by the bank, and even that is questionable. DON'T PANIC, and don't allow others to attempt to panic your friend, even some tax advisors. The IRS is aware these unfortunate situations exist, although prolonged inaction (years) could have unpleasant consequences.   

 

Thank you for all these replies - it was helpful for my friend to see what you wrote. The streamline process is being undertaken and the SSN has been sent off for. Fingers crossed it comes as soon as possible. 

It might be easier for your friend to meet with the tax adviser in person - there are several excellent such tax advisers right here in the UK who deal with these kind of issues every day. Indeed if nothing has been completed and filed your friend may want to meet someone here as early as next week; and possibly change tax adviser.