Category Archives: Form 8938

FATCA Reporting, The Banks And Their U.S. Citizen Customers: The Saga Continues

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Reposted with permission from The Isaac Brock Society.

In October I published a post about the U.K. division of Fidelity cleansing itself of U.S. citizen customers. Since the beginning, it has been clear that FATCA has made U.S. citizen customers a problems for non-U.S. banks. Today I was informed that FATCA reporting to the IRS has begun to find its way to U.S. citizens directly. As the above post from X.com indicates, some individual U.S. citizens are receiving communications from the IRS. The communication notes the existence of the “foreign financial asset” and that the asset should have been reported.

Significantly the letter notes the bank where the unreported account was located. In this case the bank was “Bank Hapoalim B.M” which is apparently one of Israel’s largest banks.

Interestingly on April 30, 2020 Bank Hapoalim admitted to helping U.S. citizen customers hide assets and avoid U.S. taxation. This resulted in a deferred prosecution agreement and a penalty. (The Department Of Justice Press Release is available online.) A reading of the press release strongly suggests that customers of this bank may be presumed to be guilty by association.

This is interesting news.

Of course:

“To be FORMwarned Is To Be Forearmed!”

John Richardson Follow me on X.com/Expatriationlaw

U.S. Citizens In Canada And Abroad: The Trauma Of Organizing Information For Your U.S. Tax Return

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Prologue

As an older post I wrote confirms, Americans abroad are subject to special provisions and those special provisions include a number of information returns!

Forms required by #Americansabroad 101 – The Explanation

My reason for writing and the purpose of this post

I am not a tax preparer. I am an expatriation lawyer. In this.capacity, I either:

– see U.S.tax returns prepared by a tax preparer; or

– discuss the necessity of U.S. tax compliance when a person wishes to become U.S. compliant through either the IRS streamlined or the IRS Relief Procedures Programs.

Americans abroad have many reasons for wishing to be U.S. tax compliant. In many cases it is associated with expatriation. In some cases it is part of estate planning (in many cases it is better to die without being a U.S. citizen). In. some cases it is to renounce and NOT create barriers to inheritance for U.S. citizen children. In some cases it is because they are likely to inherit U.S. income producing assets. In some cases it is because they fear noncompliance. In some cases (regardless of fears of penalties) they believe in. compliance with the law. The point is that U.S. tax compliance (it’s a huge industry) is an important part of people’s lives.

Regardless of one’s view of the U.S. citizenship tax regime, there are large numbers of Americans abroad who either attempt to meet their annual filing obligations or who desire to meet those obligations.

In this context I offer two important (I think) thoughts:

First, forms and tax returns are dangerous things and should be filed correctly. If you are going to file, you might as well do it correctly.

Second (and more importantly), for U.S. citizens abroad the filing of U.S. tax returns is a major cause of significant trauma in their lives. It is NOT a question of filing a. 1040 that just reports “foreign income”. It is, because of the large number of penalty-laden information returns, an accusation that is based on a presumption of “wrong doing”. (U.S. residents and their tax preparers who think this is hyperbole, just try living as a tax compliant American abroad!)

Therefore, the tax compliance question for Americans abroad is a question of how do they mange their trauma. The issue is how do they manage the tax filing issue in a way that minimizes the associated trauma. Are they likely to be audited? I don’t think so. Are they likely to think about the possibility of audit and penalties? Yes, many of them do. Furthermore, learning about previous filing mistakes is – for many people -incredibly traumatic.

The purpose of this post is to help with the management of trauma.

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The Organization Problem – How to read this post …

Identifying the information that is needed.

I have noticed that Americans abroad have difficulty organizing their information. Remember, tax preparers are not mind readers. They know very little about you. The simply process the information you provide. Sure, they have questionnaires (with varying degrees of detail). That said, I think it would be helpful to provide an overview of what it means to file a U.S. tax return, what information is relevant and how to think about retrieving that information. Those of you who wish to renounce U.S. citizenship will want to be in a position where you can certify five years of U.S. tax compliance.

I have written this post primarily from a Canadian perspective (I live in Toronto, Canada.) Although the information is generally applicable to all U.S. citizens living outside the United States, some of the information is specific ONLY to Canada. So, please don’t be lazy. Get informed! Stay informed!

While providing an overview, the information in this post cannot be complete. It is written for the average person, with a simple life and mainstream investments that are easily understood and characterized.

Finally, if you are filing U.S. taxes abroad for the first time, I suggest you should start with the following simple question:

“What would my U.S. tax tax return contain in terms of forms, schedules, etc.?”

In any case, I am writing this post because …

Yesterday I compared the U.S. tax return and the Canadian tax return of a U.S. citizen living in Canada. The Canadian return was 14 pages. The U.S. return was 59 pages. The person had a very simple life (retired and living off the usual pensions). He did NOT owe any U.S. taxes. That said, he was NOT compliant with his U.S. tax filing obligations. The reason was that his “foreign assets” were not reported properly on Form 8938. I suspect that this person had no idea how to properly identify and organize the foreign financial asset information to properly transmit it to his U.S. tax preparer. This is perfectly understandable. Assuming no Canadian Controlled Private Corporation (a presumptive instrument of tax evasion from a U.S. perspective), or other controlled foreign corporation, most tax filers will be required to file:

– FinCEN 114 AKA FBAR

– Form 8938

– Possibly Forms 3520 and 3520A (make sure that you really are dealing with a Trust or have received a foreign gift)

– and possibly more

This post is to provide very simple advice on how to organize this information to provide to your tax preparer.

U.S. tax filings are more about the disclosure of information than about the calculation of tax

Generally, you can assume that ANY and ALL financial accounts and financial assets (brokerage accounts, pensions, individual shares in non-U.S. corporations) must be reported. The reporting issue is distinct from the tax issue.

Foreign real estate owned directly by Americans abroad is NOT (at present) subject to separate reporting (although income earned from them is taxable).

Preparation for the filing of a U.S. tax return should be viewed as four categories of. tasks:

Category A – Identifying The Relevant Information

Category B – Deciding How That Information – In Terms Of The Relevant Forms – Is To Be Reported

Category C – Reporting The Information On The Relevant Forms

Category D – Deciding Whether Any Information Returns Must Be Filed Even If A Tax Return Is Not Required (For example: Form 5471, 8621 and Form 3520 and Form 3520A may have a filing requirement even if a 1040 is not required!)

Category E – Does Your Country Of Residence Have Rules Requiring The Reporting Of Foreign Assets (similar to FBAR, Form 8938, etc.)?

Be careful!!

Canada (and other countries) have very strict rules governing the reporting of foreign assets.

Once these three tasks have been. completed, one is ready to place the income on the actual tax return (1040 or 1040NR) and Schedules.

What follows are the ten steps that should prepare you to give your information to your tax preparer.

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IRS Service To Expats: Another Reason To End U.S. Citizenship Taxation

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Guest Post By Dr. Suzanne de Treville – Switzerland

Discussions about eliminating double taxation for U.S. citizens abroad often focus on reducing the significant compliance burdens these individuals face. When the U.S. taxes income or assets already taxed in a citizen’s country of residence, the resulting complexity is substantial while the extra tax revenue to the IRS that results from this double taxation by ordinary taxpayers is quite low. This complexity is particularly burdensome for the 80% of expat taxpayers with an Adjusted Gross Income of $100,000 or less.

The IRS requires expatriates to file intricate returns and is responsible for providing necessary assistance. However, while resources are available to domestic taxpayers, similar support is lacking for those abroad, despite their greater need.
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The Douglas Edelman Indictment – What Does It Mean For Americans Abroad?

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Prologue:

Mr. Adelman’s problems are caused by and only because of U.S. citizenship taxation.

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On March 18, 2025 an article by Margot Patrick appeared in the Wall Street Journal.

A direct link to the article is here.

Mr. Edelman was a U.S. citizen who had lived outside the United States since the 1990s. The case is NOT about his millions. The case is NOT about offshore companies. The case IS about whether Mr. Edelman’s shares in a foreign corporation were owned by Mr. Edelman personally or by his French citizen wife Delphine Le Dain. The subtitle to Ms. Patrick’s article is:

“Douglas Edelman’s glitzy European lifestyle came to a halt when he was charged with hiding income through companies put in his French wife’s name”

Mr. Edelman is a U.S. citizen. Delphine Le Dain is neither a U.S. citizen nor U.S. resident. The U.S. has limited taxing authority over Ms. Le Dain who is a nonresident alien. Therefore, the Edelman case has huge implications for Americans abroad!

The crux of the issue is who owns the Edelman interest in the corporations? Can the IRS recharacterize the ownership of assets in a marriage?

On March 20, 2025 I participated in a discussion on the Edelman case on the IRS Medic podcast.

I prepared slides for the presentation (updated since the presentation) which may be accessed here:

A pdf version of the slides is here:

Edelman 3-1

The Edelman indictment is here:

https://www.finance.senate.gov/imo/media/doc/usa_v_edelman_et_alindictment.pdf

A summary of the facts from Tax Notes is here:

A. Edelman’s Alleged Criminal Conduct

In May 2024, a grand jury returned a thirty-count indictment charging Edelman with one count of Conspiracy to Defraud the United States, in violation of 18 U.S.C. §371; two counts of False Statements to the Internal Revenue Service (IRS), in violation of 18 U.S.C. §1001; fifteen counts of Tax Evasion, in violation of 26 U.S.C. §7201 and 18 U.S.C. §2; and twelve counts of Willful Violation of Foreign Bank Account Reporting Requirements, in violation of 31 U.S.C. §§5314, 5322(b), 18 U.S.C. §2, and associated regulations. The factual allegations supporting those charges are extensive. In short, the Government alleges that Edelman perpetrated a decades-long scheme to defraud the United States of tax revenues by concealing his earnings in an intricate web of financial entities across the globe and by lying to regulators along the way.

https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/individual-charged-tax-evasion-scheme-has-his-release-revoked/7p57j

Additional articles and commentary of interest on the Edelman case include:

Virginia La Torre Jeker

https://www.forbes.com/sites/virginialatorrejeker/2024/07/08/mr-taxman-irs-looks-like-my-money-but-it-really-isnt/

Justice Department Press Release

https://www.justice.gov/archives/opa/pr/former-defense-contractor-and-his-wife-indicted-evading-us-taxes-profits-selling-jet-fuel-us

Yaacob Jacob

https://www.linkedin.com/pulse/why-edelman-case-game-changer-us-citizens-abroad-jacob-cpa-us–btqmf/

Mystery At Manas – Page 20

“In July 2010, after Chairman Towns had issued official subpoenas for their documents and testimony, counsel for the companies and its principals disclosed that Erkin Bekbolotov and Delphine Le Dain, the wife of Douglas Edelman, were the named owners of Mina and Red Star, each with 50 percent. Ms. Le Dain has never had any active role with the companies and, for all practical purposes, it would appear that Mr. Edelman controls the shares and is the de facto beneficial owner.47 Mr. Bekbolotov and Mr. Edelman have been the 50-50 shareholders of the companies since Red Star’s founding in 2002,48 but their ownership interests are buried under several layers of straw ownership in jurisdictions known for their corporate secrecy. Though many have tried, it is virtually impossible to determine the companies’ beneficial ownership through public records.49″

https://apps.dtic.mil/sti/tr/pdf/ADA535786.pdf

PDF Version:

ADA535786

John Richardson – Follow me on X.com at @ExpatriationLaw

Is A Canadian FHSA (“First Home Savings Account”) A Reportable Account Under The Canada/US #FATCA IGA?

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August 23, 2023: An Important notice from the Canada Revenue Agency

Interim treatment of NEW First Home Savings Accounts (FHSA) under Part XVIII

The FHSAs are under consideration for being added to the list of the excluded accounts described in Annex II of the Agreement. These accounts do not need to be reviewed, identified or reported at this time.

https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997.html

What does this notice mean for U.S. citizens living in Canada?

On August 23, 2023 the Canada Revenue Agency released its latest guidelines for how financial institutions should interpret the Canada/US FATCA IGA. The guidelines are updated annually to reflect changes (which include) evolving financial products. The Canadian “FHSA” (First Home Savings Account) was introduced in 2023. My recommendation is that U.S. citizens living in Canada should have an FHSA.

The good news is that the FHSA accounts will join other accounts under Annex II which are NOT required to be reported BY FINANCIAL INSTITUTIONS under the FATCA IGAs! The FHSA should be reported by individuals on IRS Form 8938 with their tax returns when the Form 8938 is required!

In other words, U.S. citizens living in Canada can expect that FHSA accounts will NOT be reported to the Canada Revenue Agency and then the IRS.

The text from the guidelines – Section 5.6 (go directly to the bottom) – includes:
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H.R. 5799 – Is it a #FATCA Same Country Exemption For Americans Abroad? – Let’s See

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Introduction:

July 12, 2022 – Is there hope for Americans Abroad?

July 14, 2022 – An update

H.R. 5799 has been exciting news indeed! The purpose of this post is to see how H.R. 5799 actually changes the existing legislation. Does it actually deliver “Overseas Financial Access” for Americans Abroad? On June 21, 2022 this issue was considered in an IRS Medic video. The purpose of this post is to understand how H.R. 5799 would change IRC sections 1471(d) and 6038D. In order to understand this, I will take the amendments proposed in H.R. 5799, modify the text of those IRC sections and then analyze their impact. The new sections mandated by H.R. 5799 will appear in italics.

The Bottom Line (For Those Who Don’t Want To Read The Post)

With respect to Foreign Financial Institutions – When must FFIs harass suspected Americans?

JR Commentary: It appears that a Foreign Financial Institution has been given the authorization to opt to NOT report the “depository accounts” of certain Americans abroad without regard to the balance in the account. The $50,000 limit has been removed. The Foreign Financial Institution would have to be satisfied that the individual meets the residency requirement for the 911 Foreign Earned Income Exclusion. Notably this could apply only to “depository accounts” and would not apply to “custodial accounts”. The benefits to Americans abroad are minor. The administrative work required from the bank would likely be considered to be burdensome. The FFIs are still required to report custodial accounts.

This does not provide any assistance to the “Accidental Americans” who cannot comply with the demands for a U.S. Social Security Number or are unwilling to submit a W9.

With Respect to individuals – Reporting Requirements, Form 8938

JR Commentary: This section would relax the FATCA reporting requirements and could significantly water down the requirement to file Form 8938. What it seems to say is:

1. If the individual meets the requirements to use the 911 Foreign Earned Income Exclusion then with respect to BOTH depository and custodial accounts held by Foreign Financial Institutions in that same country … the obligation to File Form 8938 is considered without regard to the depository and custodial accounts held in that country. The way that “account” is defined in this section is:

“Except as otherwise provided by the Secretary, the term “financial account” means, with respect to any financial institution-

(A) any depository account maintained by such financial institution,

(B) any custodial account maintained by such financial institution, and

(C) any equity or debt interest in such financial institution (other than interests which are regularly traded on an established securities market).”

This could completely eliminate the Form 8938 requirement for many Americans who meet either the “bona fide residence” or physical presence tests in 911(d).

It is possible that this could provide some relief for those Americans abroad who are already filing Form 8938.

Now on to the post …

About FATCA

FATCA was a collection of amendments to the Internal Revenue Code. Generally, FATCA imposes requirements on both (1) Foreign Financial Institutions and (2) Individuals. H.R. 5799 contains provisions which affect both. The post is for the purpose of seeing exactly what the relevant statutes look like after the changes.

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Part 2 – The Warren “Ultra-Millionaire Tax Act of 2021” and The Wealth Of Other Nations

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The fact that …

Leads to the obvious question of …

Hmm…

The fact is that Senator Warren is proposing to impose her wealth tax on property located outside the United States, purchased by individuals who live outside the United States, who have no connection to the United States other than (perhaps) the circumstance of having been born in the United States. Yup, it’s true.

On March 18, 2021, FATCA will turn on 11. The Senator’s proposed wealth tax explicitly states that FATCA is to be used to enforce this tax! Finally an (il)legitimate use for FATCA.

In the 18th Century Adam Smith wrote “The Wealth Of Nations”. In the 21st Century Senator Warren is proposing to impose a wealth tax on “The Wealth Of OTHER Nations”.

Discussion And Analysis

This is the second of what I expect to be a multi-part series on Senator Warren’s proposed wealth tax of 2021. As the above tweet makes clear, the practical utility of the tax depends on US citizenship-based taxation (to whom it applies) and FATCA (how are non-US assets located). In my first post, I referenced Senator Warren’s statement that:

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Changes to the filing threshold for "Married Filing Separately" filing category likely to pressure more Americans abroad to renounce US citizenship

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This post is a continuation of my post (referenced in the above tweet) which describes the reduction of the threshold for Married Filing Separately from $4050 to $5. In this post I describe why I believe that this change will result in further renunciations of U.S. citizenship. The primary incentive to renouncing citizenship is that: by requiring married low income Americans abroad to file U.S. tax returns, more financial information about their nonresident alien spouses will be reported to the IRS. On the most basic level, a Form 8938 is required only if a U.S. tax return is also required. The requirement to file a tax return increases the chances of a requirement to file Form 8938 (and others). Form 8938 does require the disclosure of some jointly owned assets. If you were a nonresident alien, would you want your financial information to be transferred to the IRS?
On December 19, 2018 Dr. Karen Alpert commenting on changes to the 2017 TCJA that would affect Americans abroad noted that:
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