Schedule B and FBAR requirements

Last year I filed an FBAR because my UK accounts were over the $10,000 threshold briefly in 2008 due to the exchange rate. In 2009 they were not over the threshold, but I did have a very small amount of interest (less than $200). I know I report this on Part I of Schedule B, but when I get to Part III I'm a bit confused. The instructions say to put no in 7a if you don't pass the $10,000 threshold and thus don't file the TD F 90-22.1, but if I report interest income from a foreign account I'm afraid it will look like I'm lying. However, I also don't particularly want to fill out the FBAR if I don't have to. Can I put a note somewhere to explain the apparent paradox, or will they understand that I'm putting no because I fall under one of the exceptions?

First, the standard disclaimer. I am not a tax professional, only a punter. Seek advice from a professional tax person or the IRS.

If it's only us two over a pint, I think the instructions are pretty clear. Having said that, I fully understand your angst. By ticking the no box, you have indicated to the IRS that you have evaluated your accounts and declare that you do not achieve the $10,000 threshold. If there's ever an audit, you'll have your records to back up that claim. But since you filed an FBAR last year, it could be a good idea to state that on a cover letter just to drive the point home. I understand that from your point of view, the problem is the Treasury in Detroit. If it were me, and I'm sure there will be disagreement from others on this, I'd go ahead and complete a 2009 FBAR and explain on a cover letter the situation. The continuity of FBAR filing and recognition of the account, I believe, is of importance. Think of it positively, if you ever send $8,000 or so to an account in the states and it's questioned for some reason, then you have proof that the Treasury knew you had it in a declared foreign account. In the current (and future) climate, it's probably the safest way to protect yourself. Again, that's only my unprofessional thoughts. FBAR fear and confusion reigns.

I've actually just realised re-reading the Schedule B instructions that I only need to file it if I have over $1500 interest or dividends. I have neither, so I don't even need to fill in Schedule B. 
I'm not really worried about the continuity, if they wanted to check they could, and my accounts were only very slightly over the threshold last time anyway. In 2009 I had less money in them and the exchange rate was lower, so it's easily explained.

So we only need to file if we have over 1500 in interest?  Well I don't have that. 

On a related question, how do people send in their FBAR? By regular post, with a first-class or airmail stamp?  Registered & return-receipt-requested? By trackable service like FEDEX or similar?  Because if you don't spend a significant amount of money to track it and/or get a receipt to confirm that it was received, who's to say they have it?  Of course, they could lose it in house even if they received it OK. 

On a related question, how do people send in their FBAR? By regular post, with a first-class or airmail stamp?  Registered & return-receipt-requested? By trackable service like FEDEX or similar?  Because if you don't spend a significant amount of money to track it and/or get a receipt to confirm that it was received, who's to say they have it?  Of course, they could lose it in house even if they received it OK.  

However you send it in, be certain you have some evidence of posting. In the UK, we can send it Airsure and track it over the internet, or hand carry it to the Embassy for a stamp. I don't know what the equivalent is inside the US. Any form of posting that requires a signature on delivery doesn't seem to work (my opinion), since the destination is simply a post office box, without a specified individual. This information is no longer valid. See later posts in this thread for clarificationWhy worry, it's only all your bank account info and all the info on you personally. Couldn't possibly be an ID theft problem, could it? I once did see on some Treasury FBAR site a phone number you can call to check they have it. I'll have a look around and see if I can find it again.

So we only need to file if we have over 1500 in interest?

Depends if you feel the less than $1500 over-rides the following:
1040, line 8a: Taxable interest. Attach Schedule B if required
1040 Instructions for line 8a: you must fill in and attach Schedule B if the total
is over $1,500 or any of the other conditions listed at the beginning of the Schedule B instructions apply to you.
General Instructions for Sch. B: Use Schedule B if any of the following applies.....You had a foreign account...Part III of the schedule has
questions about foreign accounts...

......... I once did see on some Treasury FBAR site a phone number you can call to check they have it. I'll have a look around and see if I can find it again.

Ah, that would be useful.  The first year I had to do it, I sent it registered & return receipt requested, I got the green postcard back with no signature or other mark on it.  It cost $24 to send, I think.  Subsequent years I've simply mailed it, but now I've started to obsess about what I'd do if they claimed they'd never received it.  Thanks for the tip about being able to phone in!!

OK, so let me get this straight.  

I need to fill out the the 1040 and the 2555.  I need to do schedule B, is there anything else a person needs to fill out?  

I have a job that pays way under, no capital gains or losses, no account that had more than 10,000.  

According to the instructions on the 1040 Schedule B Part III. Foreign Accounts and
Trusts
Line 7a. Check the “Yes” box on line 7a if either (1)
or (2) below applies.
1. You own more than 50% of the stock in any
corporation that owns one or more foreign bank
accounts.
2. At any time during 2009 you had an interest in
or signature or other authority over a financial
account in a foreign country (such as a bank account,
securities account, or other financial account).
For line 7a, item (2) does not apply to
foreign securities held in a U.S.
securities account.
Exceptions. Check the “No” box if any of the
following applies to you.
• The combined value of the accounts was $10,000
or less during the whole year.

http://www.irs.gov/pub/irs-pdf/f1040sb.pdf

So, if it is 10,000 or less you don't need to do schedule B Part III according to their own instructions.  Unless I am reading it incorrectly.  

But I still need to put interest into Schedule B Part I and as long as that is under 1,500 then that is fine.

Depends if you feel the less than $1500 over-rides the following:
1040, line 8a: Taxable interest. Attach Schedule B if required
1040 Instructions for line 8a: you must fill in and attach Schedule B if the total
is over $1,500 or any of the other conditions listed at the beginning of the Schedule B instructions apply to you.
General Instructions for Sch. B: Use Schedule B if any of the following applies.....You had a foreign account...Part III of the schedule has
questions about foreign accounts...

But it also says that you put 'no' for having a foreign account if you're under the $10,000 threshold, so they don't consider you as having one for Schedule B purposes in that situation. I interpret that as meaning a Schedule B is not required.

Bookgrl,
It sounds to me as if you've done everything the IRS has asked of you concerning this. Be sure to put the total interest from Part I on 1040, line 8a, and you're there.

But it also says that you put 'no' for having a foreign account if you're under the $10,000 threshold, so they don't consider you as having one for Schedule B purposes in that situation. I interpret that as meaning a Schedule B is not required.

Thanks to the brilliance of IRS clarity, we could go on all night! Simple question: How do they know, and you declare, that you don't have more than $10,000 unless you tick the no box? As I said above, it all depends on how you want to read the instructions. I don't know if there is a correct answer to this, only a safe answer. I interpret this as the IRS's way of tracking everyone who has a foreign account, which may be their goal under the increased FBAR enforcement. They can't get the big fish unless they apply the rules to all, equally. As crazy as it sounds, you're filing FBAR information that says you don't have to file an FBAR. If we all follow their rules to the letter, maybe the next time they'll do a better job defining exactly what they want.

Oh my poor head.  But thanks for more information I didn't know that I needed to know. 

Ah, that would be useful.  The first year I had to do it, I sent it registered & return receipt requested, I got the green postcard back with no signature or other mark on it.  It cost $24 to send, I think.  Subsequent years I've simply mailed it, but now I've started to obsess about what I'd do if they claimed they'd never received it.  Thanks for the tip about being able to phone in!!

On the following link, there is more information about courier services. http://www.irs.gov/businesses/small/article/0,,id=148849,00.html
"If an express delivery service is used, file by mailing to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
Delivery messenger service contact telephone number: 313-234-1062"
I'm still looking for that phone number.

Found it. It's on a DRAFT proposal from the IRS site. It's at the bottom of page 4. A good deal of new information is being made available, probably as a result of the Taxpayers Advocate report,

http://www.irs.gov/pub/irs-utl/draft_fbar_instructions.pdf