About one million US citizens, considered also as US Persons, are living in Canada. Many more live abroad in other countries but some still have debt owing in the US. Others are living independently of America, but all very likely keep taxable income in bank accounts outside of the country. No matter where they live, US Persons are required to file a federal US income tax return and an FBAR (Report of Foreign Bank and Financial Accounts) since the United States taxes on citizenship, not on residency as most other countries do. Citizens have tax credit based taxes paid to the resident country, but if the US taxes are higher than that, they are eligible for the difference. There will be fines imposed on late reporting of the FBAR, fines of at least $10,000 per violation. These fines are not dischargeable under bankruptcy protection although, if necessary, it is possible to find yourself needing to declare bankruptcy in America. If you are in this situation, consult a Pasadena Bankruptcy Attorney to help you manage your debts to the United States government.
Many US Citizens living in Canada were surprised to find that they were in breach of their obligation to file a tax return or an FBAR, as they were not living or earning money in America. The FBAR must be filed by every citizen with an international account that has over $10,000 at any one time during the year. If the citizen has more than one account with balances adding up to more than $10,000, the FBAR must be filed also. Those people who must file the FBAR are all US Citizens, US residents and legal entities. This affects any account you have any kind of stake in. If you are a US citizen with undisclosed foreign income from 2003 – 2011, file an FBAR immediately before the amnesty period ends in January 2013. These regulations came about because it is estimated that the US loses an estimated $100 billion in revenues from citizens hiding money in accounts abroad. It is meant to punish people willfully hiding money from the government (tax evaders) but is having the effect of punishing the innocent also. People not living or working here may suddenly find themselves faced with American debt that a Pasadena Bankruptcy Attorney can help them manage.
If you live outside of the United States and need to file bankruptcy here, it is legal to do so. Any person may file for bankruptcy in the United States if they have a residence or any kind of assets in this country. If you no longer live here, you must have some kind of asset to qualify. Any kind of asset is adequate, even a bank account. However, it may not be necessary to do so. A Pasadena Bankruptcy Attorney will have the experience to advise you. Bankruptcy will only clear your US debt and may not protect the assets you hold overseas. Note as well that the tax courts do not have jurisdiction over the FBAR penalties and therefore they cannot be discharged in bankruptcy. It is very important that if you find yourself in a difficult situation with money held in overseas banks that you make moves to resolve the issues.
This guest post was written by Mai Merfeld, on behalf of DCDM Law group, helping individuals and organizations come out of the debt trap. To know why you should look for a bankruptcy attorney, you may also visit About.com.