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What US Expats Can Learn From the Paul Manafort Indictment



President Trump’s former campaign manager Paul Manafort, along with his associate Richard Gates, were indicted last week, with a long list of criminal charges filed against them.

The charges include engaging in conspiracies against the United States and to launder money, making false statements, acting as an unregistered foreign agent, and failing to report foreign bank and financial accounts.

While the charges are as yet unproven (pending trial), the fundamental basis of the accusations is financial, rather than political. Instead, they are alleged to have received large payments while acting for the Ukrainian government, and hidden these payments from the IRS in various nefarious ways by channeling them through multiple unreported foreign accounts. They also lied when questioned.

The indictment is probably the most high profile example to date of the IRS’ ability to enforce US tax rules globally. As US expats still have to file US taxes from abroad, declaring their worldwide income, there are some important lessons that all US expats can take from the Paul Manafort indictment.

File Your US Taxes

Since FATCA (the 2010 Foreign Account Tax Compliance Act), nearly 300,000 foreign banks and other financial firms are now providing Uncle Sam with their American account holder’s account details. This means that the IRS knows how much money expats have, and where they have it.

Previously, the IRS couldn’t enforce the requirement for Americans who live abroad to file US taxes, declaring their worldwide income, but now that they can, it’s no longer worth putting off filing.

Thanks to a set of exclusions available for US expats, such as the Foreign Tax Credit and the Foreign Earned Income Exclusion, most American expats won’t have to pay any US taxes, however they still have to file to claim them.

Report Your Foreign Accounts and Assets

The requirement for Americans to report their foreign bank and investment accounts if the total, combined balance of all their foreign accounts is over $10,000 at any time during a tax year, is a filing obligation millions of expats have in common with Manafort!

Any account that an expat has signatory authority or any kind of control over or interest in (even if it’s not in the expat’s name), qualifies.

Expats with qualifying accounts should report all their foreign accounts by filing an FBAR online. Bear in mind that penalties for not filing foreign accounts are steep (even when if the expat hasn’t intentionally avoiding filing), and that foreign banks and other financial firms are reporting the same information directly to the IRS.

FATCA also requires expats with foreign financial assets with a total value of at least $200,000 at any time during the year to report them on form 8938 when they file their US return.

Be Honest and Transparent

While penalties for not filing US tax returns and FBARs are in all cases steep, they’re substantially steeper if the IRS thinks that the failure to file was willful evasion, such as in the case of Manafort and Gates.

As such, it’s important for all expats to be open, honest, transparent and willing in all their dealings with the US tax system to avoid negative possible future repercussions.

Catch Up Now Using an IRS Amnesty Program

Expats who are behind with their US tax filing are well advised to make use of an IRS amnesty program to catch up before the IRS catches up with them!

The most common amnesty program for expats who are behind because they weren’t aware of their requirement to file (ie they haven’t been willfully avoiding filing, as Manafort has been accused of) is called the Streamlined Procedure.

The Streamlined Procedure allows expats to catch up without facing penalties (and while claiming the exemptions that mean most won’t owe any US taxes) by filing their last 3 tax returns and last 5 FBARs, while self-certifying that their previous failure to file wasn’t willful avoidance.

Have a question? Contact Katelynn Minott 

Your comments are welcome!

Hugo Lesser

With clients in over 150 countries, Bright!Tax is a leading provider of US tax services to the estimated 9 million Americans living abroad. I’m responsible for client experience, communications, and branding. Since I joined, turnover has been growing at a rate of 80% per annum.

I excel at surpassing competition by disrupting and transforming the playing field through innovation.

6 thoughts on “What US Expats Can Learn From the Paul Manafort Indictment

  1. The Streamlined Filing Compliance Procedures are not an amnesty program. There is no protection under the Streamlined procedures against criminal prosecution. The IRS views the Streamlined program as simply a normal filing process with penalty relief. The caveat for Streamlined Filings is that the taxpayer, having no guarantee he or she will not be charged with a crime, must employ an experienced offshore tax attorney to assist with the preparation of the non-willful certification, particularly with the statement of facts supporting a conclusion that the taxpayer’s conduct was non-willful. This is a legal conclusion.

  2. Avatar Nononymous says:

    This is certainly of interest to US residents who are hiding vast sums of money abroad, and also to US expats with financial and other ties to the US who are not currently filing US taxes.

    However, please make it clear that the advice concerning amnesty programs and compliance does not apply to most US citizens overseas with a second citizenship. Those “accidental Americans” who have US citizenship due to parentage or birth, but who are citizens of the countries in which they live and work, are generally protected from any attempt at US collection. Therefore unless they have financial ties to the US or some other reason for being in compliance, the best thing they can do is to stay as far away from the IRS as possible.

    Yes it is US law that such dual citizens must file US tax returns and FBARs, and in certain cases actually pay US taxes despite never living in the US. But in addition to being stupid, these laws are not enforceable – the IRS cannot collect against foreign citizens without US assets, who are protected by the collection-assistance provisions of the tax treaties (as well as plain common sense).

    The best thing such dual citizens can do is to remain non-compliant, and if possible to ensure that their banks are not aware of US citizenship or birthplace so that they are not denied services or subject to FATCA reporting. But they generally need not fear any penalties.

  3. The suggestion that the IRS’ power to go after non-compliance as evidenced by Mr. Manafort is something expats should fear, is ridiculous.

    There is NO comparison between the average US expat and the alleged behaviour of Mr. Manafort. Failing to file an FBAR by an otherwise law-abiding citizen is in no way similar to engaging in conspiracies against the United States, laundering money, making false statements, or acting as an unregistered foreign agent. I suspect those charges have a lot more to do with the indictment than failure to file an FBAR. Particularly in the context of Mr. Mueller’s investigation. Your use of this to introduce the basics of expat compliance would be offensive were it not so absurd.

    The other very important difference is that Mr. Manafort resides in the U.S. It is virtually impossible for the IRS to enforce anything outside of American boundaries. Until a foreign court agrees to allow such an intrusion, a barrier will remain, in spite of US law.

    I cannot help but wonder what tax compliance professional would call the Streamlined Program an “amnesty program.” Are you actually a practicing CPA, EA or some other equivalent professional designation?

  4. Your post includes:

    “The requirement for Americans to report their foreign bank and investment accounts if the total, combined balance of all their foreign accounts is over $10,000 at any time during a tax year, is a filing obligation millions of expats have in common with Manafort!”

    Consider this:

    1. Cats have fur.

    2. Dogs have fur.

    Therefore, you would agree that cats are dogs, right?

  5. How funny that we both posted articles with the same title within 20 minutes of each other! Your article is well expressed, and should be an encouragement for compliance.

    I am astonished that people still advocate hiding. When hiding, they are behaving in an identical manner as criminals, money launders, and terrorists. Further, by choosing to hide, they are engaging in willful tax evasion which only compounds their plight.

    • Avatar Nononymous says:

      @Clinton Donnelly

      Non-compliance is scarcely “hiding” nor are you akin to “criminals, money launderers, and terrorists” when you are an honest, law-abiding taxpayer in your home country, and your only connection to the US is your or a parent’s birthplace. Why should such a person be required to file US tax returns and FBARs, possibly needing expensive assistance to do so, possibly paying US taxes in the process (e.g. Boris Johnson after selling his London home)? Why, even, should such a person be forced to pay US$2350 to be rid of US citizenship? This is of course absurd.

      Tax professionals need to understand that non-compliance IS a viable option for “accidental” US citizens with no US ties, for two simple reasons: (1) it is still difficult for the IRS to find such people, particularly in countries such as Canada or Australia where banks and financial institutions are making little meaningful effort to enforce FATCA rules by identifying US persons; (2) beyond US borders, the IRS has near-zero ability to collect or enforce any penalties against foreign citizens resident in their own countries, who have no US assets or other financial interests.

      For “accidental” US citizens, it is generally in their best interests to remain non-compliant. It’s time that tax professionals here and elsewhere start looking beyond their own bottom line and offer this advice. Bullying US persons abroad into compliance borders on malfeasance. (Using your language, who are the real “criminals” in this situation?)

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