Tax Questions: Schedule B, 8854 and more......

I am puzzled how you can be quite so content with your FBAR after "wrecking" (sic) your brain?  The FBAR requires you to include all foreign financial accounts.  You may want to check that you have included Nectar points, Tesco clubcard points, all foreign debit cards, Oyster cards (or local equivalents), Xmas savings clubs, paypal accounts etc.

You may want to check that you have included Nectar points, Tesco clubcard points, all foreign debit cards, Oyster cards (or local equivalents), Xmas savings clubs, paypal accounts etc.

Have these ever been demonstrated to meet the definition of foreign financial accounts? Does an Oyster card or a Tesco clubcard really meet this definition?  From the IRS website:

Q. What is a financial account?

A. A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts. The term includes any savings, demand, checking, deposit or any other account maintained with a financial institution or other person engaged in the business of a financial institution. Financial account also generally includes any accounts in which the assets are held in a commingled fund, and the account owner holds an equity interest in the fund (including mutual funds). Individual bonds, notes, or stock certificates held by the filer are not a financial account nor is an unsecured loan to a foreign trade or business that is not a financial institution.

And do you really think it's likely that AmyK would have $10,000 or more in these types of accounts?

Have these ever been demonstrated to meet the definition of foreign financial accounts? Does an Oyster card or a Tesco clubcard really meet this definition?

From a comment many, many threads ago, Sara believes not, but that's for Sara to confirm. From Guya's comment above, he believes there is just reason to be concerned, and I believe (again from many, many threads ago) he has viewed evidence to support the concern he obviously still has.

That is the problem. At this time, no one accurately knows the definitive response. In the current environment, what seems clear on paper often isn't that clear as Mr. Gaines-Cooper found out from HMRC here in the UK. In the last 12 months, Congress has passed legislation which places the IRS in a very uncomfortable position. And according to the legislation, the results of getting an FBAR wrong are truly horrific.

By the way, your quote of financial account definitions doesn't include some insurance policies, which also must be declared.  

That's just it: guya does not state that in his opinion, these need to be declared.

And the quote is directly from the IRS' website.

Have these ever been demonstrated to meet the definition of foreign financial accounts? Does an Oyster card or a Tesco clubcard really meet this definition?  From the IRS website:

Using the IRS's own language, I certainly don't believe these meet the definition.  When FBARs re-designed in 2008, there was a concern that "debit" cards like oyster, etc. would be considered, as these were similar to some deposit accounts. Because you are essentially holding money on them.  The IRS has since clarified that financial account refers to accounts held in financial institutions.  This is clearly defined and I don't know how anyone can state there isn't a definite answer.

And OAP, this is so far away from Gaines-Cooper.  That case is based on UK residency which has no statutory definition and relies largely on interpretation.  With FBARs, *this* issue is clearly defined.

Using the IRS's own language, I certainly don't believe these meet the definition.  When FBARs re-designed in 2008, there was a concern that "debit" cards like oyster, etc. would be considered, as these were similar to some deposit accounts. Because you are essentially holding money on them.  The IRS has since clarified that financial account refers to accounts held in financial institutions.  This is clearly defined and I don't know how anyone can state there isn't a definite answer.

And OAP, this is so far away from Gaines-Cooper.  That case is based on UK residency which has no statutory definition and relies largely on interpretation.  With FBARs, *this* issue is clearly defined.

Thanks, Sara.

The IRS has since clarified that financial account refers to accounts held in financial institutions.  This is clearly defined and I don't know how anyone can state there isn't a definite answer.

Consider it as a plea from the confused (and worried?) people out here, unable to access the latest IRS communiqués, and where professional advice remains inconsistent. I certainly respect your continuing wise counsel. Many thanks, Sara. 

Okay,....confused, party of 1.

SHOULD I put stuff like my Oyster, Tesco Club, and Nectar cards on an FBAR?  I only have one account in a bank or building society which is my current account.  I think I have £5.00 on my Oyster card?  Nectar, Boots, and Tesco are done with points, so that just confuses me.  If it's not a monetary amount, I just don't see how it could be included.

I mean, I'll include it all if I need to:  I have nothing to hide on my Boots card. 

Guya, I was under the impression that it was asking for accounts connected to financial institutions, not a loyalty card from a supermarket that holds no monetary value.  I wasn't even finished "wracking my brain" yet, so give me a break.  I have no other foreign debit cards or a Christmas club.  Now, my paypal account is another story, and thank you for mentioning it.  It's always a good idea to see what other people might have in case I've forgotten something.

However, should I include credit cards?  I have one.

Consider it as a plea from the confused (and worried?) people out here, unable to access the latest IRS communiqués, and where professional advice remains inconsistent. I certainly respect your continuing wise counsel. Many thanks, Sara. 

I apologise if I came off a bit harsh.  I tend to be abrupt when I am at work, which hasn't helped my posting this week!

I do think though that this was an issue that was incredibly vague but the IRS has reasonably attempted to clear up some issues.  I think people still are clinging to that "vague" state of play, which is easy to do considering some FBAR issues are still unresolved. 

If you are unclear about what the law means - and yes everyone is - you need to ask a United States court.  The IRS do not create the law, this is for the President & the Courts to interpret.

The FBAR law is unclear.  The FBAR penalties are not.  The DoJ however collect the penalties if they choose - not the IRS.  I have told Amy in this context nonetheless to remember the words of Lord Nelson. "I really do not see the signal" of any problem running Amy's direction. 

Guya, I'm sorry, but your comments are not helping me. I am TRYING to understand all this and do the right thing and was posting here to get peer advice.  Taxes have always confused me, and I need true advice, not flippant comments about asking the US courts if I'm unsure about something.

AmyK,
Yes, credit cards are included. But, if the total amount of all foreign financial accounts is less than $10,000, I can not understand why anyone would file an FBAR if they are not required to do so.

Schedule B vs FBAR – As sweetpeach has noted, there may be some who do not fully understand the difference between Schedule B and the FBAR. The following are non-professional opinions, and are therefore subject to non-professional failings. As a starter for 10:

Schedule B is filed with your Form 1040, to the address indicated for Form 1040 (currently Austin, Texas). For most on this site, it relates to gross interest earned (income received) from Bank/Building Society accounts, bonds, ordinary dividends, or the interest from a “seller-financed mortgage” from a house you’ve sold. The full list of what to report is on the back of Schedule B, under General Instructions, Purpose of Form. You must file Schedule B if you had over $1,500 of taxable interest or ordinary dividends, and you must complete Part III. Any sums arrived at on Schedule B, lines 4 and 6, should be reported on the corresponding lines 8a and 9a of Form 1040. Currency conversion must be consistent with that used on the rest of Form 1040.

Under the Purpose of Form, the last bullet point states that you must file Schedule B if you have a “foreign account”, amongst others. You should consider filing Schedule B even if the total amounts are under $1,500. The following is a quote from Sandra R. Brown, Tax Division of the United States Attorney’s Office for the Central District of California, from her paper IRS and the FBAR, (page 5):
“The FBAR reporting requirement is separate from an individual’s obligation to indicate on a Federal income tax return (Form 1040, Schedule B) whether the individual has an interest in a financial account in a foreign country by checking “Yes” or “No” in the appropriate box.” (Emphasis added)

FBAR – The FBAR (Report of Foreign Bank and Financial Accounts, or TD F 90-22.1) is an independent document apart from Schedule B. It relates to the “aggregate value” of ALL foreign financial accounts. For most, this includes all foreign financial accounts such as personal accounts, debit/prepaid credit cards, joint accounts, and any other account over which you have the authority to add/withdraw/transact funds.  If it is a joint account, the total value of that account is calculated, not just your share. The total amounts in foreign currency are converted to U.S. dollars, and if that total is greater than $10,000, you must file an FBAR. There are no options. The consequences of not filing an FBAR when required to do so are severe. You must file the FBAR on or before June 30. There are no extensions of time allowed. You file the FBAR with the Department of the Treasury, Detroit, Michigan, and NOT with your 1040 tax return. The full address is on page 1 of the form.

You must be sure to include all accounts, and the list of what to watch out for is exhaustive. For example, an account that matures midyear and is automatically reinvested (such as a fixed/variable rate bond) from some UK institutions, may have 1 digit of the account number changed for clerical reasons, but nothing else. Even if the maturity value of the account is the same as the reinvestment value, these could be interpreted as two separate accounts and may be listed on the FBAR accordingly.    

You must use the instructions and definitions as found on the form. Improved/revised instructions and definitions are due to be released soon. A “draft” version of the improved instructions contains the following link for currency conversions:   http://fms.treas.gov/intn.html#rates  
You must use the rate for 31 December. The rate on the site changes throughout the year. Since this is a draft version, you use this at your own risk. If you are 100% certain that all possible foreign accounts have an aggregate value of less than $10,000, then you are not required to file an FBAR. In my opinion, consider this as an enviable position.

New additional reporting requirements – In March, 2010, Congress passed legislation which requires further, and in addition to Schedule B and FBAR, reporting of foreign financial assets. The IRS is required to enforce the new legislation. Guidelines for reporting are unavailable at this time, but the legislation does require the reporting period for some types of foreign assets to commence March, 2010. (Note: the date is not a typing error.) The date to commence reporting of individual bank/building society accounts with a value of $50,000 or more has yet to be confirmed. An important note: the legislation requires the new/additional separate reporting to be included in/with the filing of Form 1040.

I again stress, I am not a tax professional. ALL of the above information is worthless if you are challenged. You and you alone are responsible for your 1040 and FBAR filings. If you are at all able to afford it, you should seek professional advice.

I’m sure there must be some mistakes in this. Please inform me and I will edit it accordingly. If this is unacceptable, I will gladly delete this post.  
  

I have been following this thread with a great deal of interest.  Could someone please explain how to include a credit card in the FBAR.  A credit card does not have an "amount" associated with it, or at least, the amount constantly changes from month to month.  

In the instructions, it states that you report credit cards that are "prepaid."