Dept of Justice to Go After Fbar Criminals

There will be no letup in the federal government's ongoing campaign targeting U.S. taxpayers who hide foreign accounts and attempt to evade U.S. tax obligations, a key Justice Department (DOJ) official said on Jan. 29. In 2016, tax professionals will see "additional civil enforcement actions and ongoing and new criminal investigations and prosecutions," Caroline Ciraolo, acting assistant attorney general for DOJ's Tax Division, told participants at the American Bar Association's Tax Section midyear meeting. According to Ciraolo, taxpayers who have participated in IRS voluntary disclosure programs may be contacted and interviewed by the agency and DOJ as part of their ongoing cooperation. "Taxpayers who filed returns and FBARs [Report of Foreign Bank and Financial Accounts] pursuant to the streamlined filing procedures or the Delinquent International Information Return or FBAR submission procedures should be very concerned if they falsely claimed to have engaged in non-willful conduct or acted with reasonable cause," Ciraolo said. In addition, "financial institutions and individuals who have facilitated the concealment of offshore accounts and the evasion of U.S. tax obligations would be well advised to anticipate an investigation and consider voluntarily disclosing any criminal activity to the department before they become the subject of an investigation," she said. Ciraolo noted that over the past year, her division has bolstered its staffing with the addition of 80 attorneys who are receiving the appropriate training. Ciraolo's complete prepared remarks can be viewed atjustice.gov/opa/speech/acting-assistant-attorney-general-caroline-d-ciraolo-delivers-remarks-american-bar

DIRECTIONS FOR FILING FBAR (FORM 114) FOREIGN FINANCIAL ACCOUNT REPORT ON LINE - THIS IS DUE 6/30/15 FOR 2014

You can download step by step directions for filing the Form 114 (FBAR) to report your foreign financial accounts HERE   If you need help filing this form or want a CPA/Attorney  to file the form for you email us at ddnelson@gmail.com.   Also if you have questions on whether or not you should file the form or need to file ones for past years (the statute of limitations is six years which means if you are required to file the form you should file the past six years) please contact us. www.usexpatattorneycpa.com 

When if Failing to File an FBAR (form 114 - foreign account report) WillFul or Unwillful

The penalty for willfully failing to file the FBAR is the greater of $100,000 or 50% of the account balance at time of violation.  The penalty for a non-willful violation is up to $10,000.  The documents released in late 2014 by the IRS list some of the items that the IRS considers when determining whether an FBAR violation was willful:

Factors supporting a willful FBAR penalty:

• Opened the foreign bank account
• Owner of, or a financial interest in, the foreign account
• Tax non-compliance
• Did not seek advice, or relied upon the advice of a promoter, foreign banker, or other unqualified tax professional.
• Violations persist after notification of FBAR reporting requirements
• Foreign account not disclosed to return preparer
• No business reason for the foreign account
• No family or business connection to the foreign country
• An offshore entity owns the account
• Previously-filed FBARs do not include all foreign accounts
• Illegal income in the foreign account
• Participated in an abusive tax avoidance scheme

Factors not supporting a willful FBAR penalty:

• Inherited the foreign bank account
• Only signature authority over the foreign bank account
• Tax compliance
• Relied upon the advice of a tax return preparer, a CPA, an attorney, or another
  qualified tax professional.
• Full compliance after notification of FBAR reporting requirements
• Foreign account disclosed to return preparer
• Business reason for the foreign account
• Family or business connection to the foreign country
• Person owns the account in his name

This week a district court held that the $10,000 per year penalty was valid and did not result in excessive penalties or denial of due process when the taxpayer had originally marked the Schedule B with a NO stating he had no foreign bank accounts when he actually did and had them for some time.  The amount kept abroad  in foreign banks was approximately $300,000.  The Court apparently felt that marking the box on Schedule B with a NO  was not unwillful.

The FBAR statute does not define what constitutes a separate FBAR "violation."  See 31 U.S. Code § 5321(a)(5).  Therefore,  the IRS could impose multiple FBAR penalties per year.  The documents released by the IRS use the example of an individual who failed to file the FBAR for three years to report two foreign accounts.  The IRS examiner would have the discretion to assert either (i) 6 violations, one per account per year, (ii) 3 violations, one per FBAR, or (iii) one violation for the entire three year period. The document  does state that "assertion of multiple penalties and the assertion of separate penalties for multiple violations with respect to a single FBAR form should only be taken in the most egregious cases." 

Examples of Willful and Nonwillful FBAR (form 114) Excuses for Streamlined Program and Other Purposes

Following article gives excellent FBAR unwillful excuse guidance for the streamlined program and filing foreign reporting forms outside of the streamlined program from the International Tax Blog.

http://intltax.typepad.com/intltax_blog/2014/11/willful-vs-non-willful-fbar-violations.html

If you need help with drafting your unwillful failure to file or report income excuse or a review of what you have written, we can provide that service.

Foreign Bank and Financial Account Forms Must Be Filed On Line by 6/30/14

Who Must File an FBAR by 6/30/14

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts (this includes banks, stock brokerage accounts, cash surrender value of foreign life insurance, foreign pension plans in most situations) exceeded $10,000 US dollars at any time during the 2013 calendar year to be reported.

United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Exceptions to the Reporting Requirement

Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:

• Certain foreign financial accounts jointly owned by spouses;
• United States persons included in a consolidated FBAR;
• Correspondent/nostro accounts;
• Foreign financial accounts owned by a governmental entity;
• Foreign financial accounts owned by an international financial institution;
• IRA owners and beneficiaries;
• Participants in and beneficiaries of tax-qualified retirement plans;
• Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
• Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust); and
• Foreign financial accounts maintained on a United States military banking facility.

Review the FBAR instructions for more information on the reporting requirement and on the exceptions to the reporting requirement.

Reporting and Filing Information

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.

The FBAR is a calendar year report and must be filed on or before June 30, 2014 for the calendar year 2013 foreign bank and financial account balances. Effective July 1, 2013, the FBAR must be filed electronically through FinCEN’s  BSA E-Filing System. The FBAR is not filed with a federal tax return. A filing extension, granted by the IRS to file an income tax return, does not extend the time to file an FBAR. There is no provision to request an extension of time to file an FBAR.

A person required to file an FBAR who fails to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed $10,000 per violation for nonwillful violations that are not due to reasonable cause. For willful violations, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation.  For guidance when circumstances such as natural disasters prevent the timely filing of an FBAR, see FinCEN guidance,FIN-2013-G002 (June 24, 2013).

U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. A chart providing a comparison of Form 8938 and FBAR requirements may be accessed on the IRS Foreign Account Tax Compliance Act web page.

IRS FBAR 114 REFERENCE GUIDE FOR TAXPAYERS

Download this excellent PDF reference guide to FBAR filing with answers to most questions. Need help or have further FBAR for Form 114 questions, write us at ddnelson@gmail.com. Remember FBARS now must be filed on line at   FBAR FILING SITE   and are due 6/30/14 for 2013 and cannot be extended.

FBAR and Form 8938 Presentation in Puerto Vallarta & Melaque Mexico

US Expat Foreign Bank, Financial & Asset Reporting Guidance from dondnelson

What To Do When Your Foreign Banks Asks Questions

What To Say When (Not If) Your Offshore Bank Asks, 'Are You Compliant With IRS?' http://www.forbes.com/sites/robertwood/2013/12/04/what-to-say-when-not-if-your-offshore-bank-asks-are-you-compliant-with-irs/

FBAR form TDF 90-22.1 replaced by FinCen Report 114

The FBAR form TDF 90-22.1 that US taxpayers must use to report their foreign bank and other financial accounts (usually including foreign stock brokerage accounts and pension plans) has been renamed as FinCen Report 114.  It now must be filed on line and cannot be filed on paper.  The renumbering of the form will only ad to the confusion many taxpayers have concerning the filing requirements for this form and when they must file it.

DOWNLOAD THE INSTRUCTIONS ON HOW TO USE THE NEW ON LINE FORM HERE

In June, the AICPA reported that Financial Crimes Enforcement Network (FinCEN) took a big step forward and began allowing third-party preparers of FBARs to e-file on behalf of account holders.  To facilitate the e-filing of FBARs, FinCEN has released a new FBAR e-filing authorization form.  The new form, FinCEN Form 114a, Record of Authorization to Electronically File FBARs, is to be used by filers who submit FBARs jointly with their spouses, or through third-party preparers.  The form should not be filed with the FBAR but copies of it must be maintained by both the filer and the account holder and made available upon request by FinCEN or the IRS. 

FinCEN is also making technical adjustments to ease FBAR filing and allow for enhancements such as introducing new space on the form for filers to provide reasons for late filing as well as the addition of third party preparer information. In addition, an FBAR batch filing capability is now available for testing. These new capabilities and the ability for filers to test their batch files are available on the BSA E-Filing Test site. Updated FBAR Batch Filing Specifications are also located on the BSA E-Filing Test site. FinCEN anticipates the revised electronic FBAR and batch capability will be available for general use by September 30, 2013.

If you need assistance filing late FBARs (now FINCEN Form 114) please email us at ddnelson@gmail.com or visit our website at www.TaxMeLess.com