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bpmee31

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About bpmee31

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  1. Hi Tom and Marcia, You're exactly right regarding FBARs. My lawyer is having me file those forms, too, of course now very late and liberally fined at $10,000 a piece. He's also suggested filing for years when I didn't reach the $10,000 mark just to show full transparency with the IRS. If I opened an account in 2006, but only reported it in 2010 when an auto sale produced a larger balance, the IRS would naturally be curious as to where and when the account was opened and if I was not reporting any other assets previously. I've never received an audit letter or notice of criminal proceedings. Some of my mistakes might be excusable by statute of limitations, but my lawyer said I can't count on this. Basically my hope is to come clean voluntarily, pay the multas , and hopefully move forward with a clean slate lesson learned.
  2. bpmee31

    taxes to irs upon selling a property?

    Hi All, I can't speak to selling foreign real estate, but I can tell you that as a USA citizen, if you operate an S.A. (sociedad anonima) in Costa Rica, you may be liable to report it on Form 5471, or else face a $10,000 per year fine. There is also very little chance of getting a break on the fine unless you have an extreme circumstance. Form 5471 is for anyone who owns or holds shares in a foreign corporation. I lived in a $500/month apartment for 6 years and used a local S.A. to operate as a sole proprietor. Taxes were paid to Costa Rica Minesterio de Hacienda and to the USA IRS. Unfortunately, while I reported foreign income, I did NOT report owning a foreign corporation. I thought owning a foreign corporation meant holding stock in some enormous business, trading financial instruments, or some company with a multi-national presence. Apparently a S.A. used to earn a middle-class income is supposed to be reported or else you get fine $10,000 a year for any delinquent forms. If you're using YOUR own S.A. for your real estate transaction (meaning a Costa Rica business you own yourself or operate independently), and the purchase is significant, you should probably consult a USA Tax attorney about Form 5471. Additionally: 1. FBAR forms - Foreign Bank Accounts. If you have a signature on file with a bank in Costa Rica for personal or business banking, and the combined balances of your accounts at ANY point during the calendar year exeeds $10,000 all bank accounts must be reported. The $10,000 combined balance includes accounts in other countries not including the USA. For example, if you have accounts in Cost Rica, Europe, Hong Kong, and Panama, all must be reported if the total amount "offshore" is $10,000 or greater. Your real estate transaction would apply. 2. FATCA assets form - The USA has made an agreement with Costa Rica regarding USA citizens with substantial offshore assets. If those assets exceed $50,000 (not sure exactly on the figure, check the IRS.gov site) you must also fill out a FATCA form disclosing those numbers. So when you sell the house in 3 years for $150,000 USD and that money goes to your local Costa Rica bank account, you're on the hook to report on a third form. Talk to USA offshore tax lawyer, even if they charge a high fee for a brief consultation. My delinquent FBARs and 5471s could wipe me out completely. $300-$500 for a hour of a lawyer's time in the USA is money well spent. Do NOT use a local Costa Rica lawyer for anything but local Costa Rica business law and local taxes.
  3. Disclaimer: The following is my own experience. IRS compliance is obligatory for USA citizens living abroad, however your own situation might be different from mine. Please consult a USA lawyer if you have questions. IRS Form 5471 Interest in Foreign Corporations - Click Here Background: I lived in Costa Rica between 2004-October 2012 as a non-resident, traveling in and out of the country frequently. I typically spent 6-8 months a year in Costa Rica. In late 2004 I was hired to work for a local business as a marketing consultant. A local lawyer setup a Sociedad Anonima that I owned and operated as an entity to collect my earnings. It was the only way the company could legally hire me as a non-resident foreigner. I paid Impuestos sobre la Renta each year after September 10 in accordance with local law. I paid USA taxes each April as usual. I ceased working for the local company in late 2006. Afterwards I worked alone out of my apartment and used my own corporation to pay applicable local taxes. All taxes and Registro Nacional fees have been paid to present. Why did I pay taxes if I wasn't a resident? My general understanding is that tourists, while technically allowed to own and operate a business, aren't really supposed to live tax free coming and going every 90 days. I wasn't doing this immigration routine, but I was earning money in the country. I thought it would be better to pay Costa Rica something instead of nothing. My name was on their books and I had local bank accounts. IRS Form 5471: All USA citizens who are principal owners, shareholders, etc. of foreign companies must report to the IRS each year. I had no idea this form existed. I did my USA taxes with TurboTax each year. When they asked if I had any "interest in foreign corporations", I naively thought that meant I bought a company's stock in a foreign market, invested a significant amount of money (ie. $250,000 or more) in a local business, or operated a multi-million dollar entrepreneurial enterprise. In reality my humble S.A., which I owned and operated, is (in the opinion of my tax lawyer) required to be reported on Form 5471, now delinquent 6 years. I made a middle-class income and wasn't living a wealthy lifestyle, but the fact that the business was incorporated overseas means that I am liable to the USA government. Form 5471 is best completed by an accountant unless you have time on your hands The IRS estimates 38 hours of time required to learn Form 5471 law, complete the form accurately, and file it appropriately. Remember, this is 38 hours on top of your Foreign Bank Account Forms, Foreign Earned Income Forms, and FATCA form if applicable. It's actually advisable to have an experienced CPA do it for you. Like most people, I can't dedicate an entire workweek to doing paperwork for the government. Delinquent and/or incomplete 5471 Forms are penalized $10,000 USD per year Again, everyone's situation is different, but from casual reading online, the IRS does NOT give people a break from these penalties short of an extreme circumstance. The IRS has never sent me an audit letter, which allows me to come forward after the fact to voluntarily disclose non-compliance. That doesn't mean I get a pass on the $50,000+ fines they can assess. Does a Costa Rica S.A. really need to be reported to the IRS? This depends on your situation and the scope of your business operations. I highly advise consulting a USA tax attorney with knowledge about offshore finance. It is very common for expats in Costa Rica to use corporations to own vehicles, buy real estate, operate a small business, or for basic asset protection from any local law suits. This was the explanation I was given in 2005 when I signed for my S.A. I now get the impression it must be reported if the S.A. is used as a means to produce income or control assets. If you have any doubts, consult someone knowledgeable before you get fined $10,000 a year. I don't think Costa Rica reports who owns what S.A.s to the USA government, but as a USA citizen you must report foreign income, and if such income is derived through a local business using an S.A. you operate, you must also report your ownership in this business. I will followup at a later date once I hear back from the IRS. At this point, I am collecting old bank statements and Costa Rica tax records to complete all the paperwork before submitting it to the USA government.
  4. Thanks for your fast responses Paul and Jessica! Ultimately I'm going with whatever advice ARCR legal suggests is best. I wouldn't mind putting the money in a CD because the rates are amazing and would keep pace with USD inflation (more or less). The best CD rates in the USA require $100,000 USD and a 5 year commitment for a measly 0.84%. $100,000 is out of my league; and even if it was possible, I think that amount of money would be better invested in stocks, money market accounts, or exchange traded funds.
  5. Quick question for the $60,000 required deposit for Rentista Residency: I already have an account in good standing with Scotiabank here. I called them about the residency process and mentioned I could deposit the $60,000 to their bank to begin the Rentista process. I prefer to have the money in Costa Rica so I can access it conveniently while I'm visiting here. If an emergency arises, I need only go to a local branch opposed to flying back to the USA to visit my bank there. The representative suggested I put the money into a CD because the interest rates are decent even for non-residents (a quick review of USA Cerificates of Deposit vs. Costa Rica CDs shows that Costa Rica is definitely better if you can invest the cash). Would immigracion accept a letter stating $60,000 is in a Colones or USD CD (certificado de plazo), or do they want a liquid cash deposit? Thanks in advance.
  6. Hi All, Thanks very much for your thoughtful advice. The boarding pass record makes great sense. In previous visits to Costa Rica, immigration at SJO likes to see my boarding pass for the flight out in 1 week or 2 weeks. That's enough for them to let me in as a tourist and can be researched with the airline if necessary. I'll be contacting ARCR for further advice and an immigration attorney if required.
  7. I believe I will move forward with my Rentista Residency application. My citizenship and country of current residence is the USA. I am part of the Trusted Traveler program because I visit many different places. As a result, the USA does not stamp my Passport upon re-entry, the kiosk at the airport takes my photo, fingerprints, and Passport barcode and registers entry electronically. U.S. Customs and Border Protection Trusted Traveler Program - Info here Once I submit all the paperwork for Rentista Residency, am I still on the "90 day tourist" Visa until I get my card? If so, what proves I went back to the USA if the USA doesn't give me receipts or stamps? I anticipate travel between the USA and Costa Rica once my Rentista application is approved, therefore, I would need to prove that I was inside Costa Rica for at least 4 months and properly immigrated during USA trips. Thanks in advance for any responses, they are highly appreciated.
  8. Hi, Thanks for both responses. When I said "Dimex is in process" I didn't use the right language. I'm gathering documents from the USA, preparing for a consular visit, and then planning to submit my application in Costa Rica. I've learned from past visits that it is better to deal with government and financial institutions in person, although I've read one can apply for residency outside the country for an additional fee. I have one concern about the Rentista spending requirement. Having the necessary funds in a Costa Rica bank account ($60,000 USD) is doable, but I might not be changing $2500 to Colones each month. Rentistas must be in Costa Rica for at least 4 months, so that leaves 8 months for me to visit family and conduct business elsewhere. If you prove during the application and subsequent renewal process that the cash is available in Costa Rica, is that sufficient? Or, do they need to see Colones going out monthly for everyday purchases, bills, and business expenses? I realize they want the money circulating in their economy, but it's odd that they only require me to be physically in the country 4 months a year. The Rentista works best for me because I can't commit to 12 months of visitation, but 4-8 is more possible.
  9. Thanks for your reply! Followup: Upon receiving Residency, which in my case would most likely be Rentista, do I have access to those interest rates?
  10. I received my monthly newsletter from Scotiabank the other day, and clicked on "Certificados de Deposito" or Certificate of Deposit in English. I was surprised to see rates upwards of 2.0% for USD and 8% for CRC on a 12 month CD with a modest minimum investment amount. Are these rates for real or is there a catch I'm missing? CD rates in the USA are barely 1.0%, and you need at least $100,000 USD to get close to that rate. If for real, it would seem putting money aside in a Certificado de Deposito seems like a no-brainer. Those rates at least keep pace with USD inflation. The CRC rates are also attractive but a a bit of a gamble on the value of the Colone over the term of deposit. My only concern is that my DIMEX is in process. My account was opened a few years ago as a tourist and I submitted all the required paperwork including my CR corporation's finances. The account is in good standing. I fear jumping into a 12 month CD and then finding out in a year that I can't access the money without a cedula. Anyone have experience with Scotiabank or other bank CDs in Costa Rica?
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