FBAR/OVDI LANCE WALLACH: The IRS has kicked out an undisclosed number of ta...

FBAR/OVDI LANCE WALLACH: The IRS has kicked out an undisclosed number of ta...: Lance Wallach We have written at least 75 posts about the Offshore Voluntary Disclosure Program (called OVDI or OVDP) and the need t...

esday, March 12, 2013

Lance Wallach

IRS Reporting Rules for Foreign Bank Accounts (FBAR)

Don't miss the annual FBAR deadline for reporting foreign bank accounts for the IRS--the penalties can be severe.

An annual FBAR must be filed with the IRS whenever a taxpayer has an interest in, or signature authority over, a foreign financial account with a value over $10,000 any time during the calendar year. It makes no difference if the average amount in the account during the year is less than $10,000 or all the money is withdrawn by the end of the year. If the account held more than $10,000 any time during the year, the FBAR must be filed.

Moreover, the FBAR filing requirement is not limited to foreign accounts containing cash. You’re also supposed to file a FBAR if a foreign account has non-monetary assets of more than $10,000. For example, the cash surrender value of a life insurance policy is such a non-monetary asset.

There is a minimum $10,000 penalty if your failure to file was inadvertent. However, if you are found guilty of willfully not filing a FBAR, the minimum fine is $100,000 or half the value of the account, whichever is greater.

Lance Wallach, National Society of Accountants Speaker of the Year and Member of the AICPA faculty of teaching professionals, is a frequent Speaker on retirement plans, abusive tax shelters, financial, international tax and estate planning.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice. 

Indian Business Man Prosecuted For Unreported HSBC India Account (FBAR Post)

by Brian M

Although all the media attention on unreported foreign accounts appears to focused on Switzerland, the Justice Department and IRS continue to look worldwide for U.S. taxpayers with undeclared offshore accounts. According to a press release from the United States Attorney’s Office, Sameer Gupta pleaded guilty last week to one count of tax evasion after the IRS discovered he had an unreported bank account at HSBC India. He faces 5 years in prison.

Possessing or having signature authority over an account in India is entirely legal if the account is reported annually to the IRS. Foreign bank and investment accounts must be reported each year on a Report of Foreign Bank and Financial Accounts, also known as an FBAR or form TD 90-22.1. Failure to file an FBAR is a felony.

Prosecutors say that in an effort to conceal his identity, Gupta had some 17 different bank accounts, several in nominee format. Opening an account in a false name or deliberately concealing one’s identity by opening an account in a third party name is considered an affirmative act of tax evasion.

Prosecutors say the tax loss caused by Gupta’s activities was somewhere between $200,000 and $400,000. As part of his plea deal, Gupta agreed to pay the IRS a $259,000 penalty. The judge can impose an additional fine of $250,000 or an amount of his twice the gain from his illegal activity at the time of sentencing.

There is no word on how Gupta was caught.

In recent years, the IRS has been targeting foreign banks and bankers to get the names of U.S. clients. As Gupta discovered, opening an account in a fake name doesn’t always work. Beginning next year, the new FATCA law will require foreign banks to investigate and report any account holder with ties to the United States.

The IRS’ whistleblower program has also resulted in many people getting caught. Disgruntled employees, unhappy vendors and often jilted lovers provide the information which leads to the discovery of unreported foreign accounts.

There is an amnesty that allows those with unreported accounts to come into compliance and avoid audit and criminal prosecution. (The Offshore Voluntary Disclosure Program often called “OVDI”) The program does have a catch; there are some fairly steep penalties and also the need to come into compliance beforegetting caught. If the IRS finds you first or gets your name from a foreign bank, amnesty is off the table.

For those whose noncompliance is truly one of mistake or ignorance of the law, other options may reduce or eliminate all penalties. Do nothing, however, and you could face criminal prosecution or civil penalties that are the greater of $100,000 per year or 50% of the highest account balance for each year the account was unreported.

That was a well written article. I do not agree with all of it. We have had hundreds of people from India phone us. We have never had a problem. We usually suggest that they file and then opt out. In that way they usually reduce the money that they owe to the IRS. They also have amnesty and have come forth into compliance and have avoided criminal prosecution. If you need help Google Lance Wallach or contact him. His associates have been with the IRS for years in the international division. They are also CPAs etc.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

Friday, March 1, 2013

Failure to file an FBAR carries the potential for huge civil penalties

There are tens of thousands of Americans with offshore accounts, many of them in Singapore. As the 4th largest banking center, Singapore has become a popular tax haven for people trying to hide money from the government. That is about to change. If you have a bank or other financial account there and haven’t been filing FBARs with the IRS, watch out!

According to a Reuters article, banks in Singapore face an internal deadline of July 1st to identify and report accounts where there is a strong suspicion of tax evasion. Singapore is taking this action in anticipation of new U.S. and European reporting measures.

Owning a foreign account is not illegal under U.S. law as long as the account is properly reported. The Bank Secrecy Act requires American taxpayers (including dual nationals and resident alien “green card” holders) to annually file a Report of Foreign Bank and Financial Accounts (or FBAR for short.) Failure to file an FBAR carries the potential for huge civil penalties and even a chance of criminal prosecution and prison.

Although taxpayers are required to file FBARs annually, many do not. Sometimes, it is simply ignorance of the law. That often happens with immigrants and dual nationals who think they do not need to report if simply sending money “home.” Other times, taxpayers intentionally use offshore accounts as a way of evading taxes or dodging creditors.

Beginning next year, the new Foreign Account Tax Compliance Act (FATCA) requires foreign banks to identify accounts with ties to the United States. While the new FATCA requirements are more onerous and comprehensive than Singapore’s internal examination for suspected tax evaders, the handwriting is on the wall. Foreign bankers are being pushed hard to clean up their acts.

So what is Singapore doing to identify accounts that may be tied to tax evasion? While every bank will develop its own review process, common identifiers include the existence of nominee accounts and people holding large sums of money in Singapore without any business purpose for doing so.

Nominee accounts are on everyone’s radar screen these days. In order to conceal one’s identity, some taxpayers create a foreign trust or international business companies so that the money is held in a third party name. Unless there is a valid purpose for doing so, the IRS considers nominee accounts to be an affirmative act of evasion. Particularly if no FBARs have been filed.

While some Singapore banks may lose a few high net worth clients as a result of the review, most banks are expected to comply. The new guidelines from the Monetary Authority of Singapore carry criminal penalties and the loss of banking licenses for banks that don’t comply. By targeting the banks themselves, Singapore is showing it is serious about not becoming a haven for laundered money and tax evasion.

If you have an account at Bank of Singapore, DBS Bank, Singapore Island Bank, Far Eastern Bank, Oversea Chinese Banking Corporation (OCBC), United Overseas Bank, Islamic Bank of Asia or one of dozens of foreign banks with branches in Singapore, time is running out. While the first phase of review doesn’t require the banks to notify the IRS, Singapore is in negotiations with the IRS concerning FATCA implementation. Beginning in 2014, foreign banks will be required to share information with the IRS.

As several Americans have recently learned, moving money from one tax haven to another is also considered an affirmative act of tax evasion. Trying to stay ahead of authorities by moving an account from Singapore to some other country may buy some time but ultimately, its a ticket to prison.

We suggest you file and then opt out to go to appeals and lower the tax.