Showing posts with label FBAR. Show all posts
Showing posts with label FBAR. Show all posts
IRS: RED FLAG ALERT!!! BREAKING NEWS!
Tax Audit Red Flags
Failing to Report a Foreign Bank Account
The IRS is intensely interested in people with money stashed
outside the U.S., especially in countries with the reputation of being tax
havens, and U.S. authorities have had lots of success getting foreign banks to
disclose account information. The IRS also uses voluntary compliance programs
to encourage folks with undisclosed foreign accounts to come clean — in
exchange for reduced penalties. The IRS has learned a lot from these amnesty
programs and has been collecting a boatload of money (we’re talking billions of
dollars). It’s scrutinizing information from amnesty seekers and is targeting
the banks that they used to get names of even more U.S. owners of foreign
accounts.
Failure to report a foreign bank account can lead to
severe penalties. Make sure that if you have any such accounts, you
properly report them. This means electronically filingFinCEN Form 114 by
June 30 (April 15 for filings beginning in 2017) to report foreign accounts
that total more than $10,000 at any time during the previous year. And those
with a lot more financial assets abroad may also have to attach IRS
Form 8938 to their timely filed tax returns.
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.
IRS FBAR Voluntary Disclosure Initiative, opt out to reduce tax
by Lance Wallach
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.
The 2012 OVDI, which is still open, is patterned after the
2011 OVDI, but increases the maximum Report of Foreign Bank and Financial
Accounts (FBAR)-related penalty from 25 percent to 27.5 percent of the highest
account value at any time between 2003 and 2010. The 2012 OVDI does not have a
stated expiration date. In all, the IRS has seen 33,000 voluntary disclosures
from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last
September, hundreds of taxpayers have come forward to make voluntary
disclosures.
Under the Bank Secrecy Act, U.S. residents or a person in
and doing business in the U.S. must file a report with the government if they
have a financial account in a foreign country with a value exceeding $10,000 at
any time during the calendar year. Taxpayers comply with this law by reporting
the account on their income tax return and by filing Form 90–22.1, the FBAR.
Willfully failing to file an FBAR can be subject to both criminal sanctions
(i.e., imprisonment) and civil penalties equivalent to the greater of $100,000
or 50 percent of the balance in an unreported foreign account — for each year
since 2004 for which an FBAR wasn't filed.
The 2009 OVDP brought in at least 14,700 U.S. taxpayers
(disclosing accounts in more than 60 countries) through the front door of IRS
Criminal Investigation and untold thousands through a process of quietly
amending returns and filing delinquent FBARs with the government. For eligible
taxpayers who applied the OVDP provided the certainty of no criminal
prosecution and civil penalty relief — they were required to pay back-taxes
from 2003 to 2008, interest and a 20-25 percent penalty on the delinquent
taxes. The IRS also imposed a 20 percent FBAR-related penalty equal to the
highest aggregate value of the financial account between 2003 and 2008. In
limited situations, the FBAR-related penalty could be reduced to five percent
of the account value or $10,000 per tax year. If they got a great CPA with
experience to help them, the fine was a lot less.
The 2011 OVDI, brought in an additional 12,000 eligible
taxpayers who filed original and amended tax returns and agreed to make
payments (or good-faith arrangements to pay) for taxes, interest and
accuracy-related penalties. The 2011 OVDI FBAR-related penalty framework
required a 25 percent “FBAR-related” penalty equal to the highest value of the
financial account between 2003 and 2010. Only one 25 percent offshore penalty
is to be applied with respect to voluntary disclosures relating to the same
financial account. The penalty may be allocated among the taxpayers with
beneficial ownership making the voluntary disclosures in any way they choose. .
Participants in the 2011 OVDI also had to pay back-taxes and interest for up to
eight years as well as paying accuracy-related and/or delinquency penalties.
Subject to certain limitations, financial transactions occurring before 2003
were generally irrelevant for those participating in the OVDI. With good advice
many people paid a lot less.
There are many considerations before a taxpayer should
determine whether to pursue a voluntary disclosure of prior tax indiscretions.
When reviewing the OVDP and the OVDI, many made decisions based on whether they
could be considered a realistic candidate for a criminal prosecution referral
by the IRS or prosecution by the Department of Justice. (If so, the
determination to participate was relatively quick and easy). In other cases,
the questions included:
- Was
there a possibility of reducing that prospect by filing amended or
delinquent returns and FBARs in lieu of a direct participation in the
OVDP/OVDI?
- What
would be the potentially applicable penalties upon an examination of such
returns and FBARs?
- Could
the government actually carry their burden of demonstrating that the
taxpayer “willfully” violated the FBAR filing requirements?
- What
would be the cost to the taxpayer of voluntary disclosure through OVDI
versus remaining outside the program? Should they apply and then opt out?
Since the OVDI asserted an offshore penalty based on foreign
financial accounts and asset valuations, for many with smaller financial
account values the aggregate offshore penalty determination, even for multiple
years, was actually less outside the OVDI.
The ability of a U.S. taxpayer to maintain an undisclosed,
“secret” foreign financial account is fast becoming nonexistent. Foreign
account information is flowing into the IRS under tax treaties, through
submissions by whistle blowers, and from other taxpayers who participated in
the 2009 OVDP and the 2011 OVDI who have been required to identify their
bankers and advisers. Additional information will become available as the
Foreign Account Tax Compliance Act (FATCA) foreign financial asset reporting
(Form 8938 and new IRC § 6038D) become effective.
It is likely that the U.S. will require foreign financial
institutions doing business in the United States to disclose account holders
having relatively small accounts and earnings. There have been rumors of
discussions regarding accounts having a high balance of the equivalent of
$50,000 at any time between 2002 and 2010. U.S. persons having interests in
foreign financial accounts should not find comfort in a belief that their
foreign financial institution will somehow refrain from disclosing very small
accounts in the current enforcement environment.
Taxpayers having undisclosed interests in foreign financial
accounts must consult competent tax professionals before deciding to
participate in the 2012 OVDI. Others may decide to risk detection by the IRS
and the imposition of substantial penalties, including the civil fraud penalty,
numerous foreign information return penalties, and the potential risk of
criminal prosecution. Although the 2012 OVDI penalty regime may seem overly
harsh for many, the decision to participate should include an economic analysis
of the taxpayer's projected future earnings from funds held offshore. Some
people have left the U.S. to try to avoid the fines.
Another option is to apply for amnesty and then opt out and
go to appeals. We think that for most people this will result in paying a lot
less taxes. According to a CPA who was in management for 37 years with the IRS
international division you may want to first apply for amnesty to avoid the
criminal prosecution. Then you should compare the taxes that you owe with the
deal that you usually get in appeals. You go to appeals as a result of opting
out. In all of the situations that this ex IRS agent has seen, opting out gets
you a much better IRS deal. If you want to reduce your taxes by using this
strategy you need someone who is an expert in it with years of experience. I
suggest you use a CPA who was in the international division of the IRS. If he
also had experience with the appeals division you have the perfect professional
to help you. The person that I interviewed for this article has this
experience, and has been successful helping people.
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. He writes about 412(i), 419,
Section79, FBAR, and captive insurance plans. He speaks at more than ten
conventions annually, writes for over fifty publications, is quoted regularly
in the press and has been featured on television and radio financial talk shows
including NBC, National Public Radio’s All Things Considered, and others. Lance
has written numerous books including Protecting Clients from Fraud,
Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s
Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the
AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and
Common Abusive Small Business Hot Spots. He does expert witness testimony and
has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit http://www.taxadvisorexpert.com.
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.
If You Have or Had Money Overseas You Better File for Amnesty ASAP
by Lance Wallach
According to various reports the IRS is investigating the
Israeli banks Bank Leumi, Bank Hapoalim and Mizrahi Tefahot Bank for conspiring
with individuals to enter into a loan scheme intended to evade taxes on funds
brought to the U.S. from undisclosed foreign bank accounts. The focus on the
banks themselves is a notable departure from similar investigations in the
past. In prior investigations, the bank or bankers had a passive relationship,
whereas Bank Leumi allegedly took an active role in setting up the scheme to
evade taxes. Bank Leumi has sent letters to various account holders suggesting
clients enter into the IRS voluntary disclosure program otherwis
If You Have or Had Money Overseas You Better File for Amnesty ASAP
Known as the
Offshore Voluntary Disclosure Program/Initiative (OVDP or OVDI).
To try to reduce the fines we suggest that you then opt
out and take your case to the IRS appeals division. Our former IRS appeals
officer has lots of experience in this. He was also a manager in the IRS
international division. With large fines at stake you probably want the best.
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. He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit http://www.taxadvisorexpert.com.
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.
FBAR/OVDI LANCE WALLACH: As an expert witness Lance Wallach side has never ...
FBAR/OVDI LANCE WALLACH: As an expert witness Lance Wallach side has never ...: As an expert witness Lance Wallach side has never lost a case: 419 Plan : 419 Plan
FBAR/OVDI LANCE WALLACH: 419 412i plans IRS audits lawsuits | LinkedIn
FBAR/OVDI LANCE WALLACH: 419 412i plans IRS audits lawsuits | LinkedIn: 419 412i plans IRS audits lawsuits | LinkedIn
FBAR/OVDI LANCE WALLACH: FBAR/OVDI LANCE WALLACH: How to Market Your Busine...
FBAR/OVDI LANCE WALLACH: FBAR/OVDI LANCE WALLACH: How to Market Your Busine...: FBAR/OVDI LANCE WALLACH: How to Market Your Business: Avoid IRS FINES, 8886... : How to Market Your Business: Avoid IRS FINES, 8886 Forms Li...
FBAR/OVDI LANCE WALLACH: How to Market Your Business: Avoid IRS FINES, 8886...
FBAR/OVDI LANCE WALLACH: How to Market Your Business: Avoid IRS FINES, 8886...: How to Market Your Business: Avoid IRS FINES, 8886 Forms Listed Reportable Tran...
FBAR/OVDI LANCE WALLACH: May 2013
FBAR/OVDI LANCE WALLACH: May 2013
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.
Wednesday, May 8, 2013
FBAR QUESTIONS
Acquired or inherited foreign stock or securities, such as bonds.
Do I need to report these on Form 8938?
Foreign stock or securities, if you hold them outside of a financial account, must be reported on Form 8938, provided the value of your specified foreign financial assets is greater than the reporting threshold that applies to you. If you hold foreign stock or securities inside of a financial account, you do not report the stock or securities on Form 8938. For more information regarding the reporting of the holdings of financial accounts, see FAQs 8 and 9.
I directly hold shares of a U.S. mutual fund that owns foreign stocks and securities.
Do I need to report the shares of the U.S. mutual fund or the stocks and securities held by the mutual fund on Form 8938?
If you directly hold shares of a U.S. mutual fund you do not need to report the mutual fund or the holdings of the mutual fund.
I have a financial account maintained by a U.S. financial institution (including U.S. mutual funds, IRAs and 401(K) Plans) that holds foreign stock and securities.
Do I need to report the financial account or its holdings?
You do not need to report a financial account maintained by a U.S. financial institution or its holdings. Examples of financial accounts maintained by U.S. financial institutions include:
- U.S. Mutual fund accounts
- IRAs (traditional or Roth)
- 401 (k) retirement plans
- Qualified U.S. retirement plans
- Brokerage accounts maintained by U.S. financial institutions
Subscribe to:
Posts (Atom)