- Though expats get an automatic extension to file until June 15th, 2013, for their 2012 tax return, if any taxes are owed they must pay those in by April 15th, 2013 to avoid penalties and interest.
- Expats can get a further extension of time to file their 2012 return up to October 15th, 2013 by filing form 4868 prior to 6/15.
- Your FBAR (TDF 90-22.1) for required for reporting foreign financial accounts (including bank accounts, many foreign pension accounts, foreign stock brokerage accounts, and other various foreign financial accounts) must be received by the IRS by June 30th , 2013 for the 2012 year. It cannot be extended for any reason. The penalty for late filing can be $10,000 or more.
- In most instances, if you need to amend an income tax return to report unreported income or expenses it can be done up to three years from the date it was originally filed.
- The statute of limitations never runs out on any tax year until you file a tax return for that year. Best to always file a tax return to cause this statute to run out.
- You have until 4/15 to open your IRA and fund it even though your tax return is extended for 2012. Remember you must have earned income in excess of the foreign earned income exclusion you take on Form 2555, in order to even be eligible to make a regular IRA or Roth IRA contribution. You are also limited by your total income or if covered by a US corporate pension plan.
- Penalties:
- The late filing penalty is 5 percent per month of all unpaid taxes due with the return when finally filed up to a maximum of 25 percent. If you file late, but have already paid in all taxes due, you will incur no penalty.
- The Late payment of tax penalty is 1/2 percent per month and interest that is adjusted quarterly which has been running at 2 to 3 percent per annum.
US IRS rules, regulations and laws, for US Citizens, Americans, green card holders, and nonresidents living abroad or moving to the US or out of the US.... valuable information on IRS rules concerning U.S. expatriates and their tax returns, and tax planning.... by an experienced International Tax Attorney
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Showing posts with label FBAR. Show all posts
Showing posts with label FBAR. Show all posts
April 11, 2013
Tax Extensions, Penalties and Due Dates for US Expatriates
January 29, 2013
FATCA- Using a non US passport to open your foreign bank accounts will not work!
FATCA requires foreign banks to conduct due diligence to see if there are US persons with foreign bank accounts. The fact you did not give a foreign bank your US passport still does not mean they might not report your foreign bank, financial and other accounts to the US and IRS.
FATCA was enacted to expose those US citizens and green card holders who are trying various tricks such as dual passports, etc. to avoid reporting and paying taxes on their foreign financial accounts.
Under the FATCA law in order to stay in good graces of the IRS, the foreign banks must put into place procedures to weed out account holders who are Americans and US green card holders even though the passport they opened the account with said otherwise. These are the questions you need to ask yourself before you take the HUGH risk of not reporting those accounts on form TDF 90-22.1 (FBAR form).
- Are there any US address associates with your account?
- Are there any US phone numbers with your account?
- Is your birthplace listed as somewhere in the US?
- Have you made more than one wire in or out form the US?
- Any other item that may make the bank suspicious you are a US person.
If any of the questions above you answered yes, there is a significant chance the your bank will disclose your account to the IRS. If you are detected by the IRS before you made an Offshore Voluntary Disclosure, you must expect the harshest penalties both criminal and civil. The IRS has invested everything in this program. It operates by fear and intimidation. It has the law, the political clout (in Congress, no one is standing up for international community).
This form (TDF 90-22.1) for 2012 is due on 6/30/13 (must be received by IRS as of that date). It cannot be extended. The statute of limitations for prosecution or huge monetary penalty imposition for not filing this form goes back for 6 years.
Bank accounts in the Central and South America, the Mideast and the Far East — Panama, Ecuador, Argentina, Venezuela, Taiwan, South Korean, Thailand, Dubai, Malaysia, Singapore, Hong Kong, China, India — these are the targets of FATCA. The US is signing up other countries daily to participate in the program. Remember, the US already had information sharing agreements with European banks. FATCA was put in place to find out US account holders everywhere in the world.
December 7, 2012
US Expats in Mexico and Denmark on 1/1/13 Will Have Their Financial and Tax Information Disclosed to US
The United States has entered into its second and thir bilateral exchange of financial and tax information agreements regarding the implementation of FATCA with Mexico and Denmark. This new agreements target non-compliant U.S. taxpayers owning foreign accounts.The agreemenst will be become on January 1, 2013.
The reciprocal nature of the United States' agreement with Mexico and Denmark will allow the countries to use the automatic exchange of information to discover non-compliant taxpayers. The good old days of "what happens in Mexico, stays in Mexico" are almost over.
The reciprocal nature of the United States' agreement with Mexico and Denmark will allow the countries to use the automatic exchange of information to discover non-compliant taxpayers. The good old days of "what happens in Mexico, stays in Mexico" are almost over.
Now is the time to start reporting to the IRS all of your previously unreported Mexican and Denmark business and financial activities before these new programs are geared up. If in the future the IRS discovers you have unreported income or assets in Mexico or Denmark, and you have not been filing the proper reporting forms with your tax return, it most certainly will impose high monetary penalties and will most likely also seek criminal penalties. The average prison sentence for tax evasion usually runs 3-4 years.
We can help you catch up. Email us at ddnelson@gmail.com or visit our website at www.TaxMeLess.com
November 4, 2012
Chief of IRS Criminal Investigation Divisions Comes After Those No Disclosing Foreign Accounts and Assets
On October 18th, the chief of the IRS’ Criminal Investigation Division, Richard Weber, stated that his 4000 special agents will continue to focus on unreported foreign bank accounts.
You do not want to see one of these in person |
The requirement to file FBARs (Report of Foreign Bank and Financial Accounts) dates back to the Bank Secrecy Act in the 1970′s. No attempts were made to enforce this until until the last 4 to 5 years. Failure to report a foreign account is a felony punishable by up to 5 years in prison. Civil penalties can include the greater of $100,000 or 50% of the high account balance for each year an account is unreported. Even “innocent” violations can result in penalties of up to $10,000 per year.
The IRS has been looking at banks outside of Switzerland (where they originally began their enforcement efforts). Those banks includes several Israeli banks as well as financial institutions in the Bahamas, India, China, Australia, Hong Kong, Liechtenstein and others not yet announced.
Speaking before a New York CPA group, Weber said that the IRS and Department of Justice would soon be announcing a new round of indictments involving unreported accounts. These prosecutions will involve banks outside of Switzerland. The IRS has posted CID special agents around the world. One indication is that they now have a field office in Panama which was a popular place for US taxpayers to hide their money and income.
There is presently an amnesty program to help taxpayers with unreported accounts. This includes those with foreign hedge funds, investments, bank accounts, CD’s and the like. The program, called the 2012 Offshore Voluntary Disclosure Program offers greatly reduced penalties and a promise of no criminal prosecution. This program may not work for everyone. Some taxpayers may achieve lower or no penalties by negotiating directly with the IRS outside of the Disclosure program. The important part is not to wait until the IRS discovers you first because it will then be too late to avoid higher penalties and criminal prosecution.
The procedures and rules for entering the program or surfacing with the IRS outside of the program are complicated. You should speak with a tax lawyer right away if you are one of the millions with unreported accounts (and other foreign assets that require reporting on your tax return such as foreign corporations, foreign partnerships and LLCS, passive foreign investment companies, etc.)
Don D. Nelson, Attorney, CPA with over 20 years of expatriate and international tax experience has represented or advises hundreds of clients with a wide variety of offshore reporting issues. His clients include dual nationals, US permanent residents, taxpayers with offshore accounts, and expatriates who have businesses abroad or who have retired in other countries.
For more information, contact him at ddnelson@gmail.com. All inquiries are protected by the attorney – client privilege and kept in strict confidence.
October 3, 2012
GUILTY OF WILLFUL FAILING TO FILE FBAR(TDF 90-22.10)?
If you sign your return and check "No" on schedule B indicating you have no foreign bank accounts that need to be reported (when you actually did have accounts) the Court has held that act alone shows willful failure to file the FBAR form. The taxpayer was fined $200,000 for failing to file the FBAR for tax year 2000. READ MORE HERE
Another issue we are often asked about if how far back will the IRS go to seek information from Foreign Banks on US holders of accounts. The IRS is now asking Liechtenstein Landesbanks for records going back to 2004. This is the first announcement that clearly indicates if you have not been filing FBAR forms for past years it is best to go back and file those forms now. The statute of limitations is six years on FBAR forms for the IRS to seek civil and criminal penalties.
We recommend if you are required to file the form all taxpayers immediately file their FBARs before the IRS gets lists from foreign banks. They will be cross-checking the information on the banks lists with those who have filed FBARs. Anyone who has not filed is subject to criminal penalties and monetary penalties up to 1/2 the highest balance in each account for each year that the FBAR is not filed.
Another issue we are often asked about if how far back will the IRS go to seek information from Foreign Banks on US holders of accounts. The IRS is now asking Liechtenstein Landesbanks for records going back to 2004. This is the first announcement that clearly indicates if you have not been filing FBAR forms for past years it is best to go back and file those forms now. The statute of limitations is six years on FBAR forms for the IRS to seek civil and criminal penalties.
We recommend if you are required to file the form all taxpayers immediately file their FBARs before the IRS gets lists from foreign banks. They will be cross-checking the information on the banks lists with those who have filed FBARs. Anyone who has not filed is subject to criminal penalties and monetary penalties up to 1/2 the highest balance in each account for each year that the FBAR is not filed.
July 26, 2012
FBAR (TDF 90-22.1) - When is there willful failure to file which leads to highest penalties?
The 4th District Federal Court has just held that there is willful failure to file an FBAR (TDF 90-22.1) form when you check the box "NO" on schedule B with reference to foreign bank and finanical accounts when you know you have combined highest balances in foreign accounts of $10,000 or more during the year. They stated this is sufficient showing of willfulness whether or not you know the FBAR (TDF 90-22.1) existed or was required to be filed.
If you willfully fail to file an FBAR form the penalties can be the greater of $100,000 or 50% of the highest balance in your accounts for each year. There are also criminal penalties for willful failure to file of up to five years in Jail and a $250,000 fine.
The penalties for non-willful failure to file the Form can be $10,000 or less.
If you willfully fail to file an FBAR form the penalties can be the greater of $100,000 or 50% of the highest balance in your accounts for each year. There are also criminal penalties for willful failure to file of up to five years in Jail and a $250,000 fine.
The penalties for non-willful failure to file the Form can be $10,000 or less.
June 28, 2012
IRS releases new FAQs for Offshore Voluntary Disclosure Program, announces other rules
The IRS just revised and released new guidance on its 2012 Offshore Voluntary Disclosure Program Initiative. The revised guidance is located HERE. Read this article from the Journal of Accountancy which explains in general some of the revised guidelines for entering the program and another new program starting 9/1/12 for those who owe little taxes, live abroad, and did not know about filing US tax returns or Foreign Financial Account Reporting Forms (TDF 90-22.1)
We have advised and/or represented over one hundred clients in connection with these programs with great success.
We have advised and/or represented over one hundred clients in connection with these programs with great success.
June 20, 2012
Reporting Foreign Financial Accounts Due Date for Form TDF 90-22.1 (FBAR) is 6/29/12 or 6/30/12
Your TDF 90-22.1 (FBAR form) where you must report to the IRS your foreign bank and financial accounts must arrive at the designated address by 6/29/12 or be filed on line no later than 6/30/12. No extensions are allowed. You must report accounts owned by you or that you have signature authority or control over.
This form must be filed for your 2011 foreign financial accounts highest balances during 2011 exceed $10,000 US. Therefore, you need to combine these highest balances to determine if you need to file this form. Foreign financial accounts (but not limited to these) which must be on the form include:
- Bank and savings accounts
- Stock Brokerage Accounts
- Pension plans
- Cash surrender value in foreign life insurance and annuities
- Gold held by another company or person for safe keeping.
Best to file the form Certified mail with return receipt so you have proof of filing or by DHL, UPS, or Fed Exp.
If you are required to file this form, you may also be obligated to file Form 8938 with your personal US tax return.
Link to download paperTDF 90.22.1(FBAR): http://www.irs.gov/pub/irs-pdf/f90221.pdf
Link to file TDF 90-22.1 on line: http://bsaefiling.fincen.treas.gov/Enroll_Individual.html
Potential Penalties for Not Filing or Filing Late:
The following chart highlights the civil and criminal penalties that may be asserted for not complying with the FBAR reporting and recordkeeping requirements.
Violation
|
Civil Penalties
|
Criminal Penalties
|
Comments
|
---|---|---|---|
Negligent Violation | Up to $500 | N/A | 31 U.S.C. § 5321(a)(6)(A) 31 C.F.R. 103.57(h) |
Non-Willful Violation | Up to $10,000 for each negligent violation | N/A | 31 U.S.C. § 5321(a)(5)(B) |
Pattern of Negligent Activity | In addition to penalty under § 5321(a)(6)(A) with respect to any such violation, not more than $50,000 | N/A | 31 U.S.C. 5321(a)(6)(B) |
Willful - Failure to File FBAR or retain records of account | Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. | Up to $250,000 or 5 years or both | 31 U.S.C. § 5321(a)(5)(C) 31 U.S.C. § 5322(a) and 31 C.F.R. § 103.59(b) for criminal. The penalty applies to all U.S. persons. |
Willful - Failure to File FBAR or retain records of account while violating certain other laws | Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. | Up to $500,000 or 10 years or both | 31 U.S.C. § 5322(b) and 31 C.F.R. § 103.59(c) for criminal The penalty applies to all U.S. persons. |
Knowingly and Willfully Filing False FBAR | Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. | $10,000 or 5 years or both | 18 U.S.C. § 1001, 31 C.F.R. § 103.59(d) for criminal. The penalty applies to all U.S. persons. |
Civil and Criminal Penalties may be imposed together. 31 U.S.C. § 5321(d). |
May 27, 2012
IRS Chart Comparing What to Include on Form 8938 and on FBAR Form (TDF 90-22.1)
The link below leads to the IRS Comparison Chart showing what types of assets to include on Form 8938 and the FBAR form (TDF 90-22.1) or on both. Both of these forms must be filed for 2011 if applicable or you risk a $10,000 penalty for each for failing to report foreign financial assets and foreign financial accounts. If you need us to fill of these forms for you or review the form you self prepared for completeness and correctness, we do provide that service.
LINK TO IRS CHART
Email US for help
LINK TO IRS CHART
Email US for help
May 11, 2012
Number of Expats Filing FBAR Forms More than Doubles Per New York Times
The increased pressure from the IRS has produced big results. The numbers of Americans filing the Report of Foreign Bank and Financial Accounts, or FBAR, soared from 276,386 in 2009 to 618,134 in 2011 (failure to file, the IRS warns, “subjects a person to a prison term of up to 10 years and criminal penalties of up to $500,000”).
Due to the increase IRS pressures, a growing number of Americans living abroad are renouncing once-valued U.S. passports and Citizenship. Some 1,780 people gave up U.S. nationality last year, eight times the 2008 level and the largest number in more than a decade.
Due to the increase IRS pressures, a growing number of Americans living abroad are renouncing once-valued U.S. passports and Citizenship. Some 1,780 people gave up U.S. nationality last year, eight times the 2008 level and the largest number in more than a decade.
In 2001, the IRS had only 13 agents in its international operations unit, and none specifically targeting what it calls “global high wealth.” By 2011, there were 71 for global high wealth — and 856 for international operations, up from 259 just a year before. The IRS in March announced it was going to hire 300 more international agents.
Read more about the IRS and the pressures it is putting on expats IN THIS ARTICLE FROM THE NEW YORK TIMES.
April 7, 2012
Latest IRS Guidance on When to File Forms 8938 and TDF 90-22.1 (FBAR)
The IRS has just published further information on when to file forms 8938 (to report foreign financial assets) and TDF 90-22.1 (FBAR) to report foreign financial accounts. Their guidance clarifies when foreign currency and precious metals located in foreign countries must be reported. The Chart is easy to understand and can be read HERE.
If you wish assistance in preparing these forms or wish to have your own self prepared forms reviewed by an expert contact us.
If you wish assistance in preparing these forms or wish to have your own self prepared forms reviewed by an expert contact us.
March 7, 2012
US EXPATRIATE TAX RETURN DUE DATES FOR 2011
Expatriates who live and work abroad on April 16th, 2012, receive an automatic extension of time to file their US income tax returns until June 15th, 2012. They do not need to even file an extension request. If additional time is required after that date they can obtain a further extension by filing form 4868 by June 15th, which will extend their return until 10/15/12. Therefore, it may be be possible to get a further extension until 12/15/12 by filing a letter request with the IRS.
Regardless of any extensions you receive or apply for as an expat, any taxes that are due for 2011 must be paid by 4/16/12 in order to avoid interest and penalty assessments for paying any taxes due at a later date. It is important (if you return is not completed yet) to file your expat extension by 6/15/12 since that will stop the IRS of assessing the largest penalty which is 5% (of the tax due with the return) per month up to a maximum of 25% (of the tax due with the return) for filing your return late.
Your FBAR form TDF 90-22.1 (filed to report foreign bank and financial accounts) must be filed no later than June 30, 2012 for the 2011 Calendar year. That form is filed separately from your tax return and cannot be extended beyond that date.
Most of the other special forms filed to report your offshore activities such as 8938, 5471, 3520, 8865, etc., due on the extended due date of your personal tax return. The one exception is Form 3520A( filed for foreign trusts and Mexican Fideicomisos) is due 3/15/12 for 2011, but can be extended with Form 7004 to September 15, 2012.
Regardless of any extensions you receive or apply for as an expat, any taxes that are due for 2011 must be paid by 4/16/12 in order to avoid interest and penalty assessments for paying any taxes due at a later date. It is important (if you return is not completed yet) to file your expat extension by 6/15/12 since that will stop the IRS of assessing the largest penalty which is 5% (of the tax due with the return) per month up to a maximum of 25% (of the tax due with the return) for filing your return late.
Your FBAR form TDF 90-22.1 (filed to report foreign bank and financial accounts) must be filed no later than June 30, 2012 for the 2011 Calendar year. That form is filed separately from your tax return and cannot be extended beyond that date.
Most of the other special forms filed to report your offshore activities such as 8938, 5471, 3520, 8865, etc., due on the extended due date of your personal tax return. The one exception is Form 3520A( filed for foreign trusts and Mexican Fideicomisos) is due 3/15/12 for 2011, but can be extended with Form 7004 to September 15, 2012.
February 13, 2012
IRS KNOWN TO BE INVESTIGATING BANK AND FINANCIAL ACCOUNTS IN THE FOLLOWING NAMED COUNTRIES
Though the IRS tries to keep their investigation into offshore financial accounts held by US taxpayers confidential, it is known that they are investigating bank accounts and other financial accounts owned by US taxpayers, Citizens and Permanent Residents in the following countries:
1. Switzerland
2. Liechtenstein
3. Israel
4. India
5. Singapore
6. Hong Kong
2. Liechtenstein
3. Israel
4. India
5. Singapore
6. Hong Kong
The risk of criminal and/or substantial civil penalties grows greater as the US Internal Revenue Service (IRS) and Department of Justice (DoJ) complete more bank-investigations and as foreign banks continue to co-operate with US government officials.
February 11, 2012
The Offshore Tax Evasion Crackdown Spreads to Other Countries
5 Nations Join US In Tax Evasion Crackdown Forbes The law has rankled many in the international community, reaching the long arm of theIRS into foreign countries. In effect, it orders foreign banks how to behave, forcingforeign institutions to do the IRS's dirty work. See Expats Call For FATCA .... If the IRS determines you have income and you have not filed one, they can file a Ghost Return making tax assessments you may not even be aware of until years later. That may be after they have already attached your bank account or levied other assets. The only way to stop this from happening is to file a tax return before they file one for you. You can download our expat tax return questionnaire for 2011 here (msword format) and send it to us for a fee quote subject to your approval. Do not wait until it is too late. Also, keep in mind, the statue of limitations which allows the IRS to assess taxes against you never runs out if you fail to file a tax return for any particular tax year. |
February 4, 2012
Reporting Foreign Financial Assets
For your 2011 Tax Year you may be required to File Form 8938 to Report your foreign financial assets with your tax return. You may also be required to File Form TDF 90-22.1 to report your foreign bank and financial accounts. Sometimes you may be required to file both forms!
CHART SETTING FOR REQUIREMENTS FOR FILING ONE FORM OR IF YOU ARE REQUIRED TO FILE BOTH FORMS FOR 2011
DOWNLOAD FORM 8938
DOWNLOAD INSTRUCTIONS TO FORM 8938
DOWNLOAD FORM TDF 90-22.1 AND INSTRUCTIONS
If you need help with these forms, filing them out, preparation of the forms, or review of the forms you self prepared contact us at ddnelson@taxmeless.com. We have 30 plus years experience preparing these and other complex international tax forms. Download our 2011 expatriate tax questionnaire HERE and send it to us by email or fax for a fee quote.
CHART SETTING FOR REQUIREMENTS FOR FILING ONE FORM OR IF YOU ARE REQUIRED TO FILE BOTH FORMS FOR 2011
DOWNLOAD FORM 8938
DOWNLOAD INSTRUCTIONS TO FORM 8938
DOWNLOAD FORM TDF 90-22.1 AND INSTRUCTIONS
If you need help with these forms, filing them out, preparation of the forms, or review of the forms you self prepared contact us at ddnelson@taxmeless.com. We have 30 plus years experience preparing these and other complex international tax forms. Download our 2011 expatriate tax questionnaire HERE and send it to us by email or fax for a fee quote.
January 22, 2012
US Treasury Issues New FBAR instructons In January 2012
The new instructions to Form TDF 90-22.1 (FBAR) instructs taxpayers to direct questions to 866-270-0733 (within the US) and 313-234-6146 for international callers.
The new instructions also include an email address for questions: FBARquestions@irs.gov.
DOWNLOAD THE LATEST FORM AND INSTRUCTIONS HERE.
DOWNLOAD THE LATEST FORM AND INSTRUCTIONS HERE.
December 9, 2011
IRS announces more information on "reasonable cause" excuse and elimination or reduction of FBAR (TDF 90-22.1) late filing penalties.
The IRS has issued a Fact Sheet for U.S. citizens or dual citizens residing outside the U.S. who may have been unaware of their U.S. tax and information filing obligations and are now seeking to come into compliance. The Fact Sheet outlines information about the delinquent filing of federal income tax returns and Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBARs).
Background. U.S. citizens must file a federal income tax return for any tax year in which their gross income is equal to or greater than the applicable exemption amount and standard deduction. A U.S. citizen is required to report his worldwide income on his federal income tax return—that is, all income, regardless of which country is the source of the income. Generally, a taxpayer only need to file returns going back six years.
Under Code Sec. 6651(a)(1), a taxpayer who fails to timely file their tax return is subject to a penalty equal to 5% of the unpaid tax, plus an additional 5% for each month (or fraction thereof), up to 25%. No penalty is due if no tax is due. Code Sec. 6651(a)(2) generally provides for an addition to tax in the case of any failure to pay the tax shown on any return required to be filed on its due date, unless it is shown that the failure is due to reasonable cause and not willful neglect.
The Code Sec. 6651(a)(2) penalty commences on the due date of the return, determined without regard to filing extensions and is 1/2% of the amount of tax shown on the return, plus an additional 1/2% for each month (or fraction thereof), up to 25%.
Code Sec. 6651(c)(1) provides that the failure to file penalty is reduced by the failure to pay penalty for any month where both apply.
Background on FBARs. Each U.S. person who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing an FBAR with the Department of the Treasury on or before June 30th of the succeeding year.
Potential penalties for failure to file/pay. The fact sheet provided guidance on reasonable cause with respect to the reasonable cause for the failure to file or pay penalties. Generally, reasonable cause relief is granted when the taxpayer can demonstrate to the IRS that he/she exercised ordinary business care and prudence but nevertheless failed to meet the tax burden. Factors demonstrating whether or not ordinary business care and prudence were exercised include: the reasons provided for failing to meet the tax obligations; the taxpayer's compliance history; the length of time between the taxpayer's failure to meet the tax obligation and the subsequent compliance; circumstances beyond the taxpayer's control.
The facts and circumstances that the IRS considers in determining whether reasonable cause exists are: the taxpayer's education; whether the taxpayer has been previously subject to the tax; whether the taxpayer has been penalized before; whether there were recent changes in the tax forms or law that the taxpayer could not reasonably be expected to know; and the level of complexity of a tax or compliance issue.
Depending on facts and circumstances of a particular case, taxpayers may be able to establish reasonable cause if they can demonstrate that they were not aware of specific obligations to file returns or pay taxes. In addition to the failure to file and failure to pay penalties, the IRS said that other civil penalties may arise, including the accuracy-related penalty, fraud penalty and the other information reporting penalties.
Potential FBAR penalties. A taxpayer that fails to file a FBAR may be subject to either a willful or non-willful civil penalty, in the absence of reasonable cause. Generally, the civil penalty for willfully failing to file an FBAR can be up to the greater of $100,000 or 50% of the total balance of the foreign account at the time of the violation. Alternatively, non-willful violations that the IRS concludes are not due to reasonable cause are subject to a penalty of up to $10,000 per violation. No penalties are imposed if the IRS determines the violation was due to reasonable cause.
Factors weighing in favor of a determination that an FBAR violation was due to reasonable cause include reliance upon the advice of a professional tax advisor who was informed of the existence of the foreign financial account, that the unreported account was established for a legitimate purpose and there were no indications of efforts taken to intentionally conceal the reporting of income or assets, and that there was no tax deficiency (or there was a tax deficiency but the amount was de minimis) related to the unreported foreign account. Factors weighing against such a determination include whether the taxpayer's background and education indicate that he should have known of the FBAR reporting requirements, whether there was a tax deficiency related to the unreported foreign account, and whether the taxpayer failed to disclose the existence of the account to the person preparing his tax return. No single factor is determinative, the Fact Sheet said.
Although the IRS has established penalty mitigation guidelines, examiners may nevertheless determine that a penalty is not appropriate or that a lesser (or greater) penalty amount than the guidelines would otherwise provide is appropriate. In some instances, examiners may issue a warning letter rather than impose a penalty.
The Fact Sheet advises that if a taxpayer learns that he was required to file FBARs for earlier years, he should file the delinquent FBARs and attach a statement explaining why they were filed late. A taxpayer need not file FBARs that were due more than six years ago, since the statute of limitations for assessing FBAR penalties is six years from the due date of the FBAR. No penalty will be asserted if the IRS determines that the late filings were due to reasonable cause.
In addition, the Fact Sheet notes that beginning in 2012, U.S. taxpayers who have an interest in certain specified foreign financial assets with an aggregate value exceeding $50,000 must report those assets to the IRS on Form 8938 (Statement of Specified Foreign Financial Assets) with their tax return.
The Fact Sheet can be viewed on the IRS website athttp://www.irs.gov/newsroom/ article/0,,id=250788,00.html.
December 2, 2011
US IRS to go easy on American residents in Canada Per the Globe & Mail
The U.S. Internal Revenue Service is poised to waive potentially massive penalties for Americans who agree to come clean and don't owe any taxes, The Globe and Mail has learned.
The new rules will be announced within weeks by the IRS, according to David Jacobson, the U.S. Ambassador to Canada, who has been swamped with complaints from anxious Canadians.
"What the IRS is saying here is that if ... you don't owe taxes to the U.S., and you file your return and they show you don't owe taxes, there aren't going to be any penalties for having filed late," Mr. Jacobson said in an interview Thursday.
Fears of a looming U.S. tax crackdown has caused a wave of angst among the roughly one million Americans living in Canada. Many of them long ago stopped filing, assuming they owed no tax.
READ MORE IN THE GLOBE & MAIL ARTICLE HERE
The new rules will be announced within weeks by the IRS, according to David Jacobson, the U.S. Ambassador to Canada, who has been swamped with complaints from anxious Canadians.
"What the IRS is saying here is that if ... you don't owe taxes to the U.S., and you file your return and they show you don't owe taxes, there aren't going to be any penalties for having filed late," Mr. Jacobson said in an interview Thursday.
Fears of a looming U.S. tax crackdown has caused a wave of angst among the roughly one million Americans living in Canada. Many of them long ago stopped filing, assuming they owed no tax.
READ MORE IN THE GLOBE & MAIL ARTICLE HERE
November 30, 2011
New FBAR form with Revised Instructions Just Released by IRS
The IRS just release in November a new FBAR (TDF 90-22.1) form with revised instructions which clarify some of the filing requirements and resolve some of the open issues concerning when to file that form.
If you are filing it late (after June 30th following the end of a calendar year) the instructions still advise you to attach a reasonable late filing excuse, but fail to state whether or not attaching that excuse will reduce the potential late filing penalty of up to $10,000 for "unwillfully" filing the form late.
SEE THE FORM AND READ THE NEW INSTRUCTIONS HERE
If you are filing it late (after June 30th following the end of a calendar year) the instructions still advise you to attach a reasonable late filing excuse, but fail to state whether or not attaching that excuse will reduce the potential late filing penalty of up to $10,000 for "unwillfully" filing the form late.
SEE THE FORM AND READ THE NEW INSTRUCTIONS HERE
November 16, 2011
INVESTMENTS IN FOREIGN MUTUAL FUNDS AND OTHER INVESTMENTS REQUIRE MANY SPECIAL IRS FORMS
Investments in foreign stocks, investment companies, foreign corporations that hold investements, etc. from a U.S. tax point of view a could be for a U.S. individual, pension fund, or trust a paperwork nightmare . If you are thinking of investing in Foreign stocks, please remember your friends at the IRS. Any investment gains you make will be offset by IRS penalties if you do not do the proper paperwork. To comply with the rules and keep the the US taxes down you should be filing form 8621 each year with your tax return.
Do not buy foreign mutual funds (funds not sold in the US). These are PFICs (“Passive Foreign Investment Companies”) and they create a metric ton of complexity and accounting expense for your U.S. income tax returns. (This, by the way, is one of the U.S. government’s little non-tariff trade barriers, designed to discourage U.S. capital being deployed into foreign capital markets).
Remember your FBAR. The account you open that will buy the stock will need to be reported on Form TD F 90-22.1.
Remember Form 8938. This is the new reporting form for foreign financial assets, largely duplicating the FBAR reporting requirements.
Foreign tax credit. Undoubtedly a tax of some kind will be imposed for the foreign country where the investment is located. This will end up on an individual return on Form 1116. This form will allow you to take a foreign tax credit against your US income tax paid on the investment income.
What if you die while owning foreign investments? Be sure you have a plan for simple transfer of your accounts to your heirs if you die. The cost of probate procedures in many foreign countries could eliminate any stock market profits you make. If you set up a foreign trust to try to reduce those foreign estate costs, you will then have to file forms 3520 and 3520A each year to report that trust.
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