It’s that time of the year again, a favorite time for any US expatriate — the time to ensure you’ve filed the absurd TD F 90-22.1 Report Of Foreign Bank And Financial Accounts form. It’s a huge waste of time, but one expats are forced to endure or face a fine of up to $500,000 and five years in prison. In addition, it’s a form technically impossible to fill out, as I’ll explain and have explained in the past to my US congressional representatives. Net neutrality? That Senator Dianne Feinstein cares to give me a reply about. But an issue that impacts plenty of Americans she represents, this stupid form? Apparently not worth the time for a response. More on that below, along with my easy advice for dealing with this dumb form, for other American expats who are sick of it.
The purpose of the form (you’ll find it here, PDF format) I assume is to help the US government track down money laundering and other financially-related crimes. The closest home the form has on the web is on the U.S. Citizens and Resident Aliens Abroad – Filing Requirements page at the Internal Revenue Service web site. It explains:
Form TD F 90-22.1 must be filed if you had any financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country. You do not have to file the report if the assets are with a U.S. military banking facility operated by a U.S. financial institution or if the combined assets in the account(s) are $10,000 or less during the entire year.
You must file this form by June 30 each year with the Department of the Treasury at the address shown on the form. Form TD F 90-22.1 is not a tax return, so do not attach it to your Form 1040.
In addition, you may be liable for filing Form 3520 or Form 3520-A if you made contributions to or received income from a foreign trust or received a gift from a foreign person.
(NOTE: As of June 30, 2009, that IRS page was still saying the form is here, http://www.fincen.gov/f9022-1.pdf, even though that’s a broken link. Nice. You’ll find it here)
The link to the form itself in the quoted text above actually takes you over to the completely different Financial Crimes Enforcement Network part of the US Treasury. That distinction will become important further down in this tale of bureaucracy.
Now some people don’t have to file this form. As explained, you only need to do if you have more than $10,000 in one or more bank accounts outside the United States. For a student working abroad briefly, as I did years and years ago, this form isn’t an issue.
For an expat living abroad for a longer period of time, it is far more likely you’ll hit the limit requiring you to file. Well, even if you have to, how bad can filing this two page form really be? After all, it tells you right at the bottom:
The estimated average burden associated with this collection of information is 10 minutes per respondent or recordkeeper, depending on individual circumstances.
Try two or three hours.
Here’s the first problem. Say you go over this limit only in one of your bank accounts. That means you have to file details on EVERY bank account you have, even if those other accounts were below the limit. For most people, that will mean you have to file details about at least two accounts — your savings account and your checking / current account.
Still not too bad? What if you have accounts at two different banks, say a regular savings and checking account in a bricks-and-mortar bank, then an online bank for saving at a higher rate? Now you’ve got three accounts.
Hey, did your online bank ask you to open a completely separate and new savings account, where you’ll get a higher rate of interest? That’s pretty common — and gives you a fourth account to file on.
Decide to open a CD / bond? You’re up to five. Doing an offset mortgage? That’s six.
For each account you have, you’ve got to file this information:
- Account Type
- Maximum Value
- Account Number
- Financial Institution
- Country Of Account
- If Filer Has A Financial Interest (duh, you wouldn’t be filing if you didn’t have an interest — but you still have to say so)
- Your Name
- Your Taxpayer ID
- Your Address
Just finding all your account numbers alone will take up a chunk of those supposed 10 minutes to fill out the form. Then there’s having to enter your address and taxpayer ID over and over again. Keep in mind that before you even get to the account data area, you already have to fill out the top of the form with your address and taxpayer ID. So why on earth do you have to keep doing that again for each and every account?
Don’t forget the fun Maximum Value part. For me, that used to mean scrolling through each account in Quicken and trying to figure out the maximum each account hit in a particular year — for each and every account I had. Fun. Fun, fun, fun.
On top of all this, the form is, as I said above, technically impossible to fill out. Here’s why. Box 14 of the top of the form, the overview section that you fill out before giving account info, asks:
Are these accounts jointly owned? a [Yes] b [No]
After you answer that, you have to say the number of joint owners.
OK, I have some accounts that are in my name plus some that are jointly held with me and my wife or me and my children (yes, that account you opened for your kids to put their birthday money from grandparents? if you oversee that account, it goes on the list as well).
Since some are joint and some are none, there’s no correct answer to Box 14. It assumes that all accounts are either one way or another, not that you have a mixture. And when you get into the account data itself, the form never provides any option to say if a particular account is joint or not. Anyone who has one joint and one sole account simply cannot fill out this form correctly, because the form can’t handle that situation.
(NOTE: The form revised at the end of 2008 now has separate sections for individually-owned and jointly owned accounts)
I actually wrote to the US Treasury about this back at the end of 2003. Not surprisingly, I got no response. As part of that letter, I also asked if there was a way to do electronic filing. After all, once you’ve dug out all these account numbers and written your address over and over again, it would be nice to just push a button next year and send that off.
Why not save the information in the PDF file? At the time, this was impossible. Instead, the IRS advised scanning the PDF into Word, then saving information that way. I’m happy to say that the form now has changed so that you can save data into it. So that’s tip number one. Fill out the PDF file, save it, print and then use the file again for next year.
Since this wasn’t an option in 2003, I did something I thought was clever. Within Word, I listed out all the numbers for each box on the page, then put the information next to the number. After all, this information might get rekeyed by someone, so putting the answers this way was easier than trying to decipher my scrawling on the form itself. This allowed me to save my account information.
When 2004 rolled around, I did the same thing again. An entire year had passed, so I assumed the US Treasury must not have had a problem with how I filed. Along with my filing, I sent another letter explaining how time consuming this form was, along with the problem of dealing with a mixture of joint and sole accounts.
Unfortunately, the second time wasn’t a charm. I received a very stern letter telling me that I’d submitted the information in a format that was unacceptable (despite the fact that even if I’d used the actual form, that was impossible to fill out given my mixture of joint and sole accounts). I had 20 days to refile. Interestingly, there was no request to refile my wife’s form, even though it also had been done using my pseudo-electronic format.
(What? Your partner has to file too? Yep. Say all your accounts were jointly held with your spouse. You have to file a form and list all the account information in your name, over and over again — then your spouse has to file their own form with the same information in their name over and over again).
I actually called the IRS department that sent me this letter, to argue the case for electronic filing plus explain the basic fault in the form. They didn’t care. After all — it’s not an IRS form. The IRS processes it, but it’s the Financial Crimes Enforcement Network that responsible for it. If you complain to the IRS, as I’ve done, they pass the buck. And the FCEN, which I’ve written to twice now, clearly doesn’t care either.
In the end, the IRS conversation ended with me being told I’d better get the form in or face going to prison or a big fine. I mentioned these up above. Those are for people who willfully try to avoid this filing burden (and burden it is). But at the end of 2004, the law was changed to try and hurt those who might file late or potentially those who failed to file out of ignorance of the law. PriceWaterhouseCoopers has a rundown on this.
I’m not surprised this was passed. When you live outside the US, you rapidly discover just how little your voice counts for anything. I’ll explain in a future post how the US census bureau doesn’t bother to count us (despite the fact the expat population exceeds that of some US states). Last month, a last minute change was introduced that retroactively raised the tax burden on expats. But why not — it’s not like the congressional reps really seem to care about us, despite the fact that we do indeed vote for them.
Let’s go back to my senior senator from the great state of California, Dianne Feinstein. I sent her office a copy of my same mailing to the US Treasury about the form burden back in 2004, along with a separate letter asking that someone look into this. Not a word back.
Perhaps it got lost in the mail. Perhaps. I’m fairly certain I did follow up So we’ll give her another chance. I’ll point her office at this post, and we’ll see if there’s any action. I’d be particularly interested because of the impressive response I got over net neutrality.
I filled out one of the online forms that promised to forward my request to the senator. Today, I got an email telling me, well, I think that she supports it. It was kind of wishy-washy (and I’m not the only one who thinks that):
I agree with the general principles of network neutrality that owners of the networks that provide access to the Internet should not control how consumers lawfully use that network and should not be able to discriminate against content provider access to that network.
As Congress debates changes to our telecommunications laws this year, many different proposals have been offered regarding network neutrality. The question arises whether or not action is needed to ensure unfettered access to the Internet. I believe any workable solution must balance the needs of the network, service and information providers. Please know that when legislation regarding network neutrality comes before the Senate I will be sure to keep your specific views in mind.
But net neutrality aside, why couldn’t I get a response like this on my earlier letter?
You can see how little expats matter by a visit to the senator’s web site, however. Want to contact her? Just out the instructions:
Due to the volume of email we receive, we are only able to respond to messages that contain a California postal address.
Um, I live outside the United States, so what California postal address am I supposed to give? But keep in mind, while I live outside the United States, California remains my legal state of residence, entitling me to vote in federal elections (such as voting for the good senator, as I have every time she’s run). So how about perhaps a nod to the Californian overseas that might want a little help from their elected official.
But enough of the overall sorry state of representation expats have. What’s the best way to deal with the ridiculous TD F 90-22.1 form that no criminal will ever fill out, making this a waste of time upon the non-criminals who are forced to do it?
It’s easy. Have more than 25 non-US bank accounts.
If you have more than 25 accounts, then when you get to Box 20, write the total amount you have. And that’s it, you’re done. You don’t have to itemize any more of the accounts. No account numbers, no writing your address out a trillion times repetitively — you’re done.
There’s a chance the US Treasury will request this information after you file. You aren’t in trouble if they do. That’s just how it works. They’ll ask for it if they want, and if they don’t, you’re fine. Last year, this is how I refiled. I realized I had more than 25 accounts, so I was done.
So go for it. Open a number of online savings and current accounts. Get above that 25 accounts mark, and maybe you’ll find this form really does only take the 10 minutes its estimated to take. And maybe one day, the form will get updated, or made electronic, or eliminated, not be required for bank accounts in certain countries (such as the UK, which requires a ton of ID to open an account) or have the limit lowered so you don’t have to itemize unless you have fewer than five accounts. Certainly something better could be done than this farce expats have to go through every year.
Next time in expat tax issues — the fun of remembering exactly where you were a year ago, including whether it was a work day, a non-work day and what country it was in. Don’t worry — I’ll have a spreadsheet to help you do it. ‘Cause as every expat knows, if you can’t remember all that information, you can’t file your taxes.