Fbar relata opções de ações

Fbar que informa opções de ações
Preparação de Impostos nos EUA em todo o mundo.
James Maertin, CPA.
Formulário 114 do FinCEN, Relatório do Banco Estrangeiro e Contas Financeiras (FBAR)
Formulário 8938, Declaração de Ativos Financeiros Estrangeiros Especificados.
Essas são as duas formas que os contribuintes que têm contas ou ativos financeiros estrangeiros podem ter que enviar. A FBAR existe há muitos anos como o Form TD F 90.22.1, mas foi substituída pelo FinCen Report 114 a partir do ano fiscal de 2013. Ela é apresentada separadamente da declaração de imposto.
O formulário 8938 existe desde o ano fiscal de 2011, como parte da nova legislação FATCA e está incluído na declaração de imposto.
(Penalidades por falha intencional de arquivo são potencialmente graves).
Formulário FinCEN 114: Relatório de Contas Estrangeiras e Financeiras (FBAR)
Requisitos de apresentação: cidadãos dos EUA, residentes nos EUA, fundos fiduciários, propriedades e entidades nacionais que tenham interesse financeiro ou autoridade de assinatura sobre contas financeiras estrangeiras; e o valor agregado das contas externas excede US $ 10.000 a qualquer momento durante o ano civil.
Se você tiver filhos com mais de US $ 10.000 em contas estrangeiras, uma FBAR separada será necessária para seu filho, mesmo que você declare a conta em seu FBAR como custodiante.
Interesse financeiro: (1) você é o proprietário do registro ou detentor do título legal ou o proprietário do registro; ou (2) titular de título legal é seu agente ou representante; ou (3) você tem um interesse suficiente na entidade que é o proprietário do registro ou detentor do título legal.
Autoridade de assinatura: você tem autoridade para controlar a disposição dos ativos na conta por comunicação direta com a instituição financeira que mantém a conta.
O formulário 114 é separado da declaração de imposto e só pode ser arquivado eletronicamente. É devido 15 de abril de cada ano civil, mas você pode obter uma extensão automática para 15 de outubro. Se você e cônjuge próprios contas estrangeiras, cada um será obrigado a apresentar um FBAR. O valor de qualquer conta de propriedade conjunta será o valor total da conta no FBAR de cada cônjuge. Formulário 114 Instruções.
Formulário 8938: Declaração de ativos financeiros estrangeiros especificados.
Requisitos de apresentação: cidadãos dos EUA, residentes dos EUA e certos estrangeiros não residentes que tenham interesse em ativos financeiros estrangeiros especificados; e você atende aos requisitos de relatório de limite abaixo para enviar uma declaração de imposto. Formulário 8938 Instruções.
US $ 50.000 em 31/12/17.
US $ 75.000 a qualquer momento durante 2017.
US $ 200.000 em 31/12/17.
US $ 300.000 a qualquer momento durante 2017.
US $ 100.000 em 31/12/17.
US $ 150.000 a qualquer momento durante 2017.
US $ 400.000 em 31/12/17.
$ 600.000 a qualquer momento durante 2017.
Formulário 8938 está incluído com a declaração de imposto federal e só é necessário se você atingir o limite e uma declaração de imposto é necessário para ser arquivado.
Valor para o Relatório de Ativos de Propriedade Conjunta para o Formulário 8938:
Se você enviar uma declaração conjunta de imposto, deverá incluir o valor total de todos os ativos de sua propriedade e do cônjuge.
Se você possui ativos em conjunto com um cônjuge e cada um apresenta uma declaração de imposto de renda dos EUA como casada e separada, o valor de seus ativos de propriedade conjunta é metade de cada um.
Se você possuir conjuntamente ativos com um cônjuge que não seja residente (não é obrigado a apresentar) e arquivar como casado-separado ou chefe de família, para os requisitos de relatório, seu valor dos ativos de propriedade conjunta é o valor total dos ativos.
Se você possuir conjuntamente ativos com um não cônjuge, para os requisitos de relatório, seu valor dos ativos de propriedade conjunta é o valor total dos ativos.
Contas reportáveis ​​& amp; Ativos.
Contas e ativos estrangeiros incluem, mas não estão limitados a, as seguintes contas abertas em algum momento em 2014.
Baixe um questionário. Na planilha "Foreign Accts & amp; Ativos & quot ;, inclua-os em Contas estrangeiras.
Contas financeiras (depósito e custódia) mantidas em instituições financeiras estrangeiras. Isso inclui, mas não está limitado a economias, cheques, depósitos a prazo e contas de demanda. (FBAR e formulário 8938).
Ações em um fundo mútuo ou em um fundo comum que esteja disponível para o público em geral. (FBAR e formulário 8938).
Ações ou valores mobiliários estrangeiros mantidos em uma conta financeira em uma instituição financeira estrangeira. Isso inclui títulos e contas de corretagem (incluindo contas de futuros e opções). A conta em si está sujeita a relatórios, mas o conteúdo da conta não precisa ser informado separadamente. (FBAR e formulário 8938).
Contas estrangeiras detidas pelo fiduciário estrangeiro ou nacional do qual você é o concedente. (FBAR e formulário 8938).
Seguro de vida emitido em moeda estrangeira ou contrato de anuidade com um valor em dinheiro. (FBAR e formulário 8938).
Um interesse em um plano de aposentadoria ou plano de compensação diferido. (Se você precisar do formulário 8938, isso será listado como um ativo). (FBAR e formulário 8938).
Conta financeira mantida em uma agência estrangeira de uma instituição financeira dos EUA. (FBAR apenas).
Conta financeira estrangeira para a qual você tem autoridade de assinatura (sujeito a exceções). (FBAR apenas).
Participações indiretas em ativos financeiros estrangeiros por meio de uma entidade, se propriedade suficiente ou participação beneficiária (ou seja, participação maior que 50%) na entidade. (FBAR apenas).
Baixe um questionário. Na planilha "Foreign Accts & amp; Ativos ", inclua estes sob Ativos Estrangeiros (se você atingir o limite de arquivamento)
Ativos estrangeiros de investimento não relacionados à conta mantidos pelo fiador concedente estrangeiro ou nacional para o qual você é o concedente.
Interesses de parceria estrangeira.
Ações ou valores mobiliários estrangeiros não mantidos em uma conta financeira (emitida por uma corporação).
Fundos de hedge estrangeiros e fundos estrangeiros de private equity.
Uma nota, obrigação ou debênture emitida por uma pessoa estrangeira.
Um swap de taxa de juros, swap de moeda, swap de base, teto de taxa de juros, taxa de juros, swap de commodities, equity swap, equity index swap, credit default swap ou contrato similar com uma contraparte estrangeira.
Uma opção ou outro instrumento derivativo com relação a qualquer um desses exemplos ou com relação a qualquer moeda ou mercadoria que seja celebrada com uma contraparte ou emissor estrangeiro.
Um interesse em uma propriedade estrangeira.
Exceções ao Relatório:
Você não precisa relatar qualquer ativo no Formulário 8938 se o relatar em um ou mais dos seguintes formulários que você enviar atempadamente com o IRS para o mesmo ano fiscal.
Formulário 3520, Retorno anual para relatar transações com fideicomissos estrangeiros e recebimento de certos presentes estrangeiros.
Formulário 5471, Retorno de informações de pessoas dos EUA com respeito a certas empresas estrangeiras.
Formulário 8621, Devolução de Informações por um Acionista de uma Companhia de Investimento Estrangeiro Passivo ou um Fundo Eleitoral Qualificado.
Formulário 8865, Retorno de pessoas dos EUA com relação a determinadas parcerias estrangeiras.
Formulário 8891, Retorno de Informações dos EUA para Beneficiários de Determinados Planos de Aposentadoria Registrados do Canadá.
Conta financeira mantida em uma filial americana de uma instituição financeira estrangeira.
Imóveis estrangeiros mantidos diretamente (inclui sua residência pessoal e suas propriedades de aluguel)
Imóveis estrangeiros detidos através de uma entidade estrangeira. No entanto, para o Formulário 8938, a própria entidade estrangeira é um ativo financeiro estrangeiro especificado e seu valor máximo inclui o valor do imóvel.
Fundos mútuos nacionais que investem em ações e valores mobiliários estrangeiros.
Moeda estrangeira detida diretamente.
Metais Preciosos mantidos diretamente.
Propriedade pessoal, realizada diretamente, como arte, antiguidades, jóias, carros e outros colecionáveis.
Segurança social, seguro social ou outro programa semelhante de um governo estrangeiro.

Blog de proteção de ativos do GDB.
Gallet, Dreyer & amp; Berkey, LLP.
845 Third Avenue, 5th Floor, Nova Iorque, NY 10022.
Telefone. 212.935-3131 Fax. 212-935-4514.
2018 Tax Primer Season: IRS Reporting Requisitos para Offshore Assets e 2017 FBAR, até 17 de abril de 2018.
Estamos mais uma vez imersos na temporada anual de impostos e lembramos aos leitores que os ativos estrangeiros estão sujeitos a importantes exigências de relatórios do governo dos EUA.
Se você possui ou tem autoridade sobre uma conta financeira estrangeira (incluindo uma conta bancária, conta de títulos, conta de corretagem, etc.) a qualquer momento durante 2017, você deve “marcar a caixa” no Formulário 1040 do IRS, Anexo B, Parte III , Linha 7. Se sua (s) conta (s) estrangeira (s) foram avaliadas em mais de $ 10.000 no agregado, você também deve “marcar a caixa” na linha 7 referente ao formulário FBAR, FinCEN 114 (ver item 4, abaixo). Mesmo se você fechou uma conta durante 2017, você ainda deve “marcar a caixa” se a conta foi aberta durante qualquer parte de 2017. Se você recebeu uma distribuição ou foi o outorgante ou um cedente de um fideicomisso estrangeiro ou fundação estrangeira, você deve “marcar a caixa” na Linha 8 e também arquivar o Formulário IRS 3520.
Além de “marcar a caixa” no Formulário IRS 1040, Anexo B, os contribuintes dos EUA devem reportar toda a renda externa (incluindo juros, ganhos de capital, dividendos, distribuições de pensão, aluguel, royalties) realizados em 2017. Se você realizou investimentos em mútua estrangeira fundos ou fundos de hedge, você pode ser obrigado a apresentar formulários de impostos adicionais aplicáveis ​​a “PFICs” (Companhias de Investimento Estrangeiro Passivo) para o ano fiscal de 2017 (por exemplo, Formulário IRS 8621). Em muitos casos, se a renda estrangeira foi tributada em um país estrangeiro, você pode obter um crédito por impostos estrangeiros pagos. Mesmo assim, todas as receitas estrangeiras ainda devem ser declaradas em sua declaração de imposto de renda dos EUA, mesmo se o imposto devido for minimizado ou eliminado devido a créditos fiscais estrangeiros, créditos de residência estrangeira ou outros benefícios de tratados tributários.
O Formulário 8938 do IRS, Declaração de Ativos Financeiros Estrangeiros Especificados, é outro formulário do IRS para relatar banco estrangeiro, contas de corretagem e outros ativos financeiros estrangeiros (incluindo participações em trusts e corporações offshore, obrigações, fundos mútuos estrangeiros, anuidades estrangeiras e apólices de seguro). Este formulário é devido mesmo que você já tenha relatado os mesmos ativos estrangeiros em um formulário IRS diferente ou no FBAR (discutido abaixo). Formulário 8938 do IRS é devido com a sua declaração de imposto anual (17 de abril de 2018, a menos que você obtenha uma extensão).
A FBAR de 2017, Relatório de Contas Estrangeiras e Financeiras (Formulário 114 do FinCEN), é devida no mesmo dia da sua declaração de imposto de renda de 2017 (Formulário 1040): 17 de abril de 2018, conforme anunciado recentemente pela FinCEN. A FBAR deve ser apresentada por contribuintes norte-americanos que possuam titularidade, ou assinatura ou outra autoridade sobre contas financeiras estrangeiras, incluindo contas bancárias e de valores mobiliários, se o valor agregado dessas contas exceder US $ 10.000 a qualquer momento durante 2017. A FBAR também se aplica para apólices de seguro estrangeiras, apólices de anuidades, planos de aposentadoria e outros produtos financeiros. Autoridade recente também estende o FBAR para contas de jogo / jogos on-line. Se você possui Bitcoin ou outras moedas virtuais em uma conta estrangeira ou em uma divisa estrangeira, você deve declarar a conta. Se você participou do Programa de Divulgação Voluntária do IRS Offshore (OVDP), procedimentos simplificados ou FBARs retroativos enviados, você deve garantir a conformidade contínua enviando oportunamente a FBAR de 2017. Se as contas existirem em qualquer momento durante 2017, a FBAR deverá ser enviada até 17 de abril de 2018. Observe que a FBAR agora é conhecida como Formulário FinCEN 114 e deve ser arquivada eletronicamente no site da FinCEN. Uma extensão automática para arquivar o FBAR está disponível. A data de vencimento estendida é igual ao prazo final de imposto de renda estendido (15 de outubro de 2018).
5. Formulários Adicionais para Entidades (Trusts Estrangeiros, Corporações Estrangeiras, etc.)
Se você tem interesse em uma entidade estrangeira, como um fundo estrangeiro ou fundação estrangeira, e / ou durante 2017 você recebeu ativos da entidade estrangeira, você também pode ser solicitado a arquivar os Formulários 3520 e 3520A do IRS. Por favor, entre em contato conosco para uma cópia do nosso memorando sobre este assunto. Se você tem interesse em uma empresa estrangeira, e a empresa estrangeira é considerada uma “Corporação Estrangeira Controlada” (CFC), então o Formulário 5471 do IRS também é devido. Esses formulários normalmente são devidos com a sua declaração de imposto de renda (Formulário IRS 1040, com vencimento em 17 de abril de 2018), mas observe que a data de vencimento do Formulário 3520A pode ser mais cedo (até 15 de março de 2018).
Se você ainda não tiver preenchido um requerimento para o OVDP ou submetido um aplicativo simplificado, ou se o seu requerimento está pendente no IRS, ou se você está indeciso sobre se deve ou não fazer uma divulgação, você pode querer considerar a solicitação de uma extensão para suas declarações de impostos de 2017 e FBAR.
Você pode solicitar uma prorrogação para apresentar sua declaração de imposto de renda preenchendo o Formulário 4868 do IRS. Observe que essa é uma extensão para apresentar a declaração de imposto, e não pagar o imposto devido. Você ainda deve pagar sua obrigação fiscal até 17 de abril de 2018, embora tenha até 15 de outubro de 2018 para apresentar sua declaração de imposto e FBAR em 2017. Isso significa que sua estratégia de divulgação voluntária precisa ser formulada antes de relatar ao governo a existência de ativos estrangeiros via FBAR, Formulário 8938, etc.
Por favor, tome cuidado para que seus ativos offshore estejam em conformidade com os impostos dos EUA, cumprindo os múltiplos requisitos de relatórios e impostos. As penalidades pelo não cumprimento podem ser severas, com penalidades adicionais impostas pela lei dos EUA simplesmente porque são ativos estrangeiros. Se você tiver alguma dúvida ou se desejar nossa ajuda na formulação de uma estratégia de divulgação ou na preparação da FBAR 2017, sinta-se à vontade para entrar em contato conosco.
Cybersecurity: Protecting Yourself e Your Assets, um seminário de aprendizado no JP Morgan, Nova York, em 7 de fevereiro de 2018.
Asher Rubinstein gostaria de convidar você para um importante evento no JP Morgan em Nova York, “Cybersecurity: Protecting Yourself and Your Assets”. Asher vai sediar o evento junto com seu colega do JP Morgan, Justin Dembo.
O cibercrime e o roubo de identidade tornaram-se manchetes e custam aos consumidores e ao setor privado bilhões de dólares todos os anos. Esta conversa se concentrará nas melhores práticas e discutiremos as tendências cibernéticas e o que você pode fazer para proteger você, sua família e seu escritório contra as ameaças em constante evolução do cibercrime. Os participantes são encorajados a levar smartphones ou outros dispositivos móveis para participar plenamente dessa discussão interativa.
O evento será realizado no dia 7 de fevereiro, das 18h às 19h30, no escritório central do JP Morgan, 270 Park Avenue, 50th Floor. Por favor, veja o convite em anexo Cyber ​​Security Invite para mais detalhes. Entre em contato conosco para esclarecer dúvidas ou para o RSVP.
Requisitos de relatório de IRS para offshore trusts.
Esta postagem aborda os requisitos de relatórios do IRS aplicáveis ​​a um contribuinte dos EUA após o estabelecimento de uma relação de confiança estrangeira. Os fideicomissos estrangeiros aqui discutidos e sujeitos aos requisitos de reporte incluem fideicomissos estrangeiros nos quais uma pessoa dos EUA é o Autor / Outorgante e / ou Beneficiário do fideicomisso, incluindo muitos “Fideicomissos de Proteção de Ativos”.
Uma relação de confiança estrangeira pode ser uma excelente ferramenta para fins de proteção de ativos, mas por favor, entenda e esteja preparado para seguir todos os I. R.S. requisitos de relatórios, e pagar todos os impostos devidos aos I. R.S. embora a confiança seja domiciliada no exterior e os ativos fiduciários estejam localizados no exterior.
Visão geral dos requisitos de relatórios.
Se você é uma pessoa dos EUA e estabeleceu um Trust de Proteção de Ativos no exterior, você é o “concedente” (também conhecido como o “Settlor”) do trust e suas responsabilidades de reporting incluem:
Além disso, o administrador estrangeiro deve apresentar:
Formulário IRS 3520-A, e se o administrador não arquivar este formulário, então você deve.
Se você é um beneficiário de uma relação de confiança estrangeira e recebe uma distribuição da relação de confiança estrangeira, então as suas responsabilidades de relatório incluem:
“Marcar a caixa” no Formulário IRS 1040, Anexo B, Parte III; Formulário IRS 3520; e formulário IRS 8938.
Além disso, se você receber mais de 50% de receita ou ativos fiduciários, também deverá arquivar:
Os vários requisitos e formulários de relatórios são discutidos mais detalhadamente imediatamente abaixo.
Requisitos de Relatório & # 8211; Concedentes.
Como um assunto de limite, um contribuinte de EUA que cria ("Concedente" ou "Organizador") ou faz uma transferência para ("Transferidor") uma confiança estrangeira deve "marque a caixa" em seu próprio Formulário de IRS 1040, Horário B, Parte III, para o ano da transferência ou criação da confiança estrangeira. O item de linha do Anexo B encaminha o contribuinte ao Formulário IRS 3520 (discutido mais adiante), sobre o qual o contribuinte dos EUA relatará mais informações sobre a criação e transferência de trusts para o trust.
Um concedente dos EUA de um fideicomisso estrangeiro também deve apresentar o Formulário FinCEN 114, Relatório de Contas Estrangeiras e Financeiras (também conhecido como "FBAR"), se o concedente tiver uma participação no fideicomisso para fins de impostos federais dos EUA. 1 Como os fideicomissos de proteção de ativos estrangeiros são considerados “fideicomissos do concedente” sob o Internal Revenue Code, considera-se que o concedente de um fideicomisso estrangeiro é o proprietário dos ativos fiduciários para fins tributários dos EUA e deve arquivar anualmente o FBAR. A FBAR deve ser arquivada eletronicamente no site da FinCEN (Financial Crimes Enforcement Network, uma divisão do Departamento do Tesouro dos Estados Unidos).
Além disso, de acordo com o IRC § 6048 (a) e o Aviso 97-34 do IRS, o concedente, cedente ou executor da herança de um falecido (a “parte responsável” 2) deve apresentar o Formulário 3520, Retorno Anual para Relatar Transações com Fideicomissos Estrangeiros e Recebimento de Certos Dons Estrangeiros, mediante os seguintes “fatos reportáveis” 3: (1) a criação do truste estrangeiro, (2) quaisquer transferências para o truste estrangeiro de pessoas dos EUA, e (3) a morte de um cidadão americano que foi um dono do fideicomisso estrangeiro ou cuja propriedade incluía qualquer parte do fideicomisso estrangeiro. De acordo com o IRC § 6048 (a) (2), a quantia de dinheiro ou outros bens transferidos para a relação de confiança deve ser relatada, juntamente com a identidade de cada administrador e beneficiário (ou classe de beneficiários).
O Formulário 3520 exige o fornecimento das seguintes informações: nome, endereço e informações de identificação do fideicomisso estrangeiro, beneficiários (incluindo suas participações percentuais) e o valor em dinheiro ou outra propriedade transferida para o fideicomisso estrangeiro.
O formulário 3520 deve ser apresentado até a data de vencimento da declaração de imposto de renda anual do contribuinte, incluindo extensões. O formulário 3520 deve ser enviado para o Centro de Serviços do IRS, P. O. Caixa 409101, Ogden, Utah 84409.
Requisitos adicionais para relatórios & # 8211; Os Proprietários.
Além das exigências de relatórios impostas aos Licitantes e “partes responsáveis” discutidas acima, de acordo com o IRC § 6048 (b), o “proprietário dos Estados Unidos” 4 de qualquer porção de um fideicomisso estrangeiro deve assegurar que:
a confiança anualmente arquiva o Formulário 3520-A, Retorno Anual de Informações de Confiança Estrangeira com um Proprietário dos EUA, que estabelece uma contabilidade completa e completa de toda a confiança. A confiança fornece cópias do Formulário 3520-A que foi arquivado junto à Receita Federal. os donos dos EUA do trust estrangeiro e as pessoas dos EUA que receberam distribuições do trust estrangeiro.
Um fiduciário pode apresentar o Formulário 3520-A para o fideicomisso estrangeiro. No entanto, se o fiduciário não enviar o Formulário 3520-A, a responsabilidade do proprietário dos EUA será depositar o formulário e fornecer as declarações anuais necessárias aos proprietários e beneficiários dos EUA da entidade fiduciária estrangeira. No caso de um Trust de Proteção de Ativos, o “dono” do fiduciário estrangeiro responsável por certificar-se de que o Formulário 3520-A está arquivado é qualquer pessoa dos EUA que transfira propriedade para o fideicomisso estrangeiro, onde o fideicomisso estrangeiro tem pelo menos um US. beneficiário; ver também nota de rodapé 1, seção (f).
Em 2010, o IRS implementou exigências de relatórios adicionais para contas e ativos estrangeiros pelos contribuintes dos EUA. 7 De acordo com os requisitos adicionais do IRS, um proprietário de um fideicomisso estrangeiro também pode ser solicitado a arquivar o novo Formulário 8938, Declaração de Ativos Financeiros Externos Especificados. O formulário 8938 relata os ativos financeiros estrangeiros especificados 8 mantidos pela parte da relação de confiança estrangeira na qual o proprietário possui uma participação acionária. 9 O proprietário deve apresentar o Formulário 8938 se o valor total desses ativos exceder um valor limite aplicável. 10
No entanto, o proprietário não precisa relatar nenhum dos ativos financeiros estrangeiros especificados mantidos pelo trust se: (I) o proprietário relatou o trust estrangeiro em um Formulário 3520 que foi arquivado oportunamente junto ao IRS no mesmo ano; e (ii) os arquivos oportuna de confiança externa formam o Formulário 3520-A. Em vez disso, o proprietário deve identificar no Formulário 8938 o (s) formulário (s) no (s) qual (quais) o proprietário relatou os ativos financeiros estrangeiros especificados e quantos de cada formulário o proprietário apresentou.
O formulário 8938 é devido ao mesmo tempo que a declaração de imposto de renda anual do contribuinte, incluindo extensões. O formulário deve ser enviado ao IRS anexado à declaração de imposto de renda anual do contribuinte.
Conforme observado anteriormente, os Regulamentos do Tesouro também exigem que o proprietário arquive uma FBAR informando o interesse do proprietário na relação de confiança estrangeira 11.
Requisitos adicionais para relatórios & # 8211; Beneficiários.
De acordo com o IRC § 6048 (c), um beneficiário 12 de um fideicomisso estrangeiro que receba (direta ou indiretamente) qualquer distribuição 13 do fideicomisso estrangeiro durante o exercício tributável deve apresentar o Formulário 3520, divulgando o montante e a fonte da distribuição, pelo data de vencimento da declaração de rendimentos do beneficiário para o ano da recepção da distribuição. Além disso, um contribuinte dos EUA que tenha recebido uma distribuição como beneficiário de um fideicomisso estrangeiro também é obrigado a divulgá-lo no Formulário IRS 1040, Anexo B, Parte III.
Um requisito de relatório adicional é imposto quando um contribuinte, que não é considerado um proprietário, tem interesse em uma relação de confiança estrangeira. 14 O contribuinte é obrigado a declarar o interesse no fideicomisso estrangeiro no Formulário 8938, se o contribuinte souber ou tiver motivos para ser informado com base em informações imediatamente disponíveis sobre o interesse. Se um contribuinte receber uma distribuição do trust estrangeiro, o contribuinte será considerado como conhecedor do interesse. Observe que isso é diferente do requisito de FBAR aplicável a beneficiários que têm uma participação beneficiária em 50% dos ativos fiduciários (veja abaixo). Em outras palavras, a FBAR é exigida para os beneficiários fiduciários que têm o direito de receber uma distribuição atual, enquanto o Formulário 8938 aparentemente se aplica se o beneficiário fiduciário realmente receber uma distribuição.
Um beneficiário com mais de 50% de participação beneficiária no patrimônio ou na receita do fideicomisso estrangeiro também deve apresentar uma FBAR informando tal participação financeira. 15 Um beneficiário de um fideicomisso puramente discricionário, ou seja, quando as distribuições de fideicomisso são feitas unicamente a critério de um fideicomissário, não tem um interesse “presente”. A maioria dos trusts de proteção de ativos estrangeiros são trustes discricionários. No entanto, um beneficiário que receba mais de cinquenta por cento do rendimento anual de um trust, ou cinquenta por cento de ativos fiduciários, tem um interesse benéfico atual que é reportável ao FBAR.
Criar uma relação de confiança estrangeira e transferir ativos para a confiança estrangeira pode fornecer vantagens valiosas de proteção de ativos. Ao mesmo tempo, os contribuintes dos EUA com interesses em trusts de proteção de ativos estrangeiros devem cumprir todos os requisitos de relatório do IRS, incluindo: Formulário 1040, Anexo B, Parte III; FinCEN 114 (o "FBAR"); Form 3520; Form 3520-A; e o novo Formulário 8938. Esses requisitos de relatórios são complexos e as penalidades por não conformidade podem ser severas.
1 Um “proprietário” é definido no Internal Revenue Code (IRC) §§ 671-679 como:
(a) Quando o concedente tiver uma taxa de juros reversível superior a 5% do princípio ou rendimento do trust estrangeiro, se, no início dessa parcela, o valor desses juros exceder 5% do valor de tal porção. Isso não inclui um interesse reversível que produza efeito sobre a morte de um descendente linear que detenha os atuais interesses em uma parcela da relação de confiança antes que tal beneficiário atinja a idade de 21 anos;
(b) Quando o gozo benéfico do princípio ou rendimento do trust estiver sujeito a um poder de disposição, exercível pelo concedente ou por uma parte não adversa, ou ambos, sem a aprovação ou consentimento de qualquer parte adversa;
(c) Quando o concedente tiver o poder de comprar, vender ou, de outra forma, negociar ou alienar o princípio da fidedignidade ou renda por menos do que a devida consideração; poder de pedir emprestado da confiança sem segurança ou interesse adequado; tomou emprestado da confiança e não reembolsou completamente o empréstimo; e poderes gerais de administração (isto é, poder de votar ações / títulos de uma corporação onde as posses do trust e grantor são significativas, poder de controlar o investimento dos fundos fiduciários e um poder de exigir o trust corpus substituindo outras propriedades de um valor equivalente);
(d) Quando o outorgante ou a parte não adversa tem o poder de revogar as transferências de propriedade para o trust (mas não se a revogação afeta somente o gozo beneficiário do rendimento após a ocorrência de um evento, tal que um outorgante não seria tratado como proprietário) sob a seção 673); ou.
(e) Quando a renda fiduciária puder ser distribuída ao outorgante ou ao cônjuge do outorgante, ou mantida para distribuição futura ao cônjuge do outorgante, ou aplicada ao pagamento de prêmio sobre apólice de seguro sobre a vida do concedente ou do cônjuge do outorgante. ; exceto aqueles para uma finalidade sob a seção 170 (c), sem a aprovação ou consentimento de qualquer parte adversa ou a critério do concedente ou de uma parte não adversa.
(f) Uma pessoa dos EUA que direta ou indiretamente transfira propriedade para uma relação de confiança estrangeira, excluindo trusts de compensação diferida e fundos de caridade, se houver um beneficiário americano de qualquer parte de tal confiança para tal ano.
2 O IRC § 6048 (a) (1) impõe o dever de fornecer notificação por escrito de um evento relatável sobre a confiança estrangeira na “parte responsável”. Uma “parte responsável” é definida no IRC § 6048 (a) (4), como:
(a) O outorgante, no caso da criação de um fundo inter vivos;
(b) O cedente, no caso de uma transferência de dinheiro ou propriedade para um fideicomisso estrangeiro, incluindo uma transferência por motivo de morte; ou.
(c) O executor da herança de um falecido, em qualquer outro caso.
3 Um “evento reportável” é definido pelo IRC § 6048 (a) (3).
4 Ver nota de rodapé 1.
5 De acordo com o IRC § 6048 (b) (2) e Aviso 97-34 do IRS, quando um fideicomisso estrangeiro com um dono norte-americano não tiver um agente dos EUA, o Secretário do Tesouro pode determinar os valores relativos ao fideicomisso estrangeiro ser incluído pelo proprietário dos EUA sob as regras de confiança do concedente. O Secretário pode fazer a determinação com base em seu próprio conhecimento ou informação obtida por meio de testemunho ou de outra forma. Se nomeado, o agente dos EUA é responsável por responder a (1) solicitações do Secretário para examinar registros ou produzir testemunhos relacionados ao tratamento adequado dos valores a serem levados em conta em relação a tal confiança estrangeira por uma pessoa dos EUA sob as regras de confiança do concedente; e (2) qualquer convocação pelo Secretário. Um proprietário dos EUA pode atuar como agente dos EUA do trust estrangeiro.
6 Observe que, enquanto o Formulário 3520 é devido na data em que o retorno regular do contribuinte é devido, o Formulário 3520-A deve ser entregue até o décimo quinto dia do terceiro mês após o término do ano fiscal do fideicomisso. Se o ano fiscal do fiduciário terminar em 31 de dezembro, o Formulário 3520-A deve ser entregue no dia 15 de março seguinte.
7 Esses requisitos adicionais de relatórios foram implementados como parte da Lei de Conformidade Fiscal de Contas Estrangeiras (também conhecida como “FATCA”), que foi incluída na Lei de Incentivos à Contratação de Restauração de Emprego (também conhecida como a lei “HIRE”).
8 O IRC § 6038D (b) define “ativo financeiro estrangeiro especificado” como segue:
(a) Contas financeiras mantidas por uma instituição financeira estrangeira;
(b) Os seguintes ativos financeiros estrangeiros, se mantidos para investimento e não mantidos em uma conta mantida por uma instituição financeira: (i) ações ou títulos emitidos por alguém que não seja pessoa dos EUA; (ii) qualquer participação em uma entidade estrangeira; e (iii) qualquer instrumento financeiro ou contrato que tenha um emissor ou contraparte que não seja uma pessoa dos EUA.
9 Por exemplo, quando o Concedente de um Trust de Proteção de Ativos estrangeiro transferiu 100% dos ativos do trust estrangeiro para o trust estrangeiro, o Concedente será tratado como devendo 100% do trust estrangeiro para fins do Formulário 8938.
10 Os montantes limites aplicáveis, de acordo com o Regulamento do Tesouro 1.6038D-2 (a) (1) - (3), são os seguintes:
(a) Os contribuintes não casados ​​e os contribuintes casados ​​apresentados separadamente devem apresentar o Formulário 8938 se o valor dos ativos fiduciários estrangeiros que o contribuinte detém exceder US $ 50.000 no último dia do exercício fiscal ou US $ 75.000 a qualquer momento durante o ano fiscal .
(b) Os contribuintes casados ​​que apresentarem declarações conjuntas de imposto de renda e residirem nos EUA devem apresentar o Formulário 8938 se o valor total dos ativos fiduciários estrangeiros em que os contribuintes têm interesse exceder US $ 100.000 no último dia do ano fiscal ou US $ 150.000 a qualquer momento. durante o ano fiscal.
(c) Os contribuintes residentes no exterior são obrigados a apresentar o Formulário 8938 se o valor total dos ativos estrangeiros que possuem for superior a US $ 200.000 no último dia do exercício fiscal ou US $ 300.000 a qualquer momento durante o ano fiscal se forem casados ​​e exceder US $ 400.000. o último dia do ano fiscal ou US $ 600.000 a qualquer momento durante o ano fiscal, se eles forem casados, preenchendo uma declaração conjunta de imposto de renda. Os contribuintes residentes no exterior são definidos como (i) um cidadão americano que tenha sido um residente de boa fé de um país ou países estrangeiros por um período ininterrupto que inclua todo um ano fiscal; ou (ii) um cidadão ou residente dos EUA que esteja presente em um país ou países estrangeiros com pelo menos 330 dias completos durante qualquer período de 12 meses consecutivos que terminem no ano fiscal em questão.
11 Veja 31 C. F.R. § 1010.350 (e) (2) (iii).
12 O IRS define um beneficiário como “qualquer pessoa que poderia se beneficiar (direta ou indiretamente) da confiança a qualquer momento (incluindo qualquer pessoa que poderia se beneficiar se a relação de confiança fosse emendada), seja ou não a pessoa nomeada em o instrumento de confiança como beneficiário e se a pessoa pode ou não receber uma distribuição da confiança no ano em curso. Se o administrador tiver total discrição para distribuir a receita da confiança a qualquer pessoa, amigos e parceiros de negócios da família, isso seria considerado um beneficiário de tal confiança, porque poderia ser razoavelmente antecipado que a confiança poderia possivelmente beneficiar essas pessoas. & # 8221 ; Aviso 97-34; 1997-25 I. R.B. 22
13 Distribuições incluem:
Pagamentos em dinheiro Empréstimos Pagamentos em excesso do valor justo de mercado dos bens ou serviços fornecidos ao fideicomisso Distribuições construtivas (perdão de empréstimos ou dívidas, garantia de crédito, etc.)
14 De acordo com o IRC § 6038D (b), tal participação é considerada um “ativo financeiro estrangeiro especificado”. Para uma definição de “ativo financeiro estrangeiro especificado”, ver nota de rodapé 8, supra.
15 “Interesse benéfico presente” em um fideicomisso é definido como “a pessoa dos Estados Unidos com mais de 50% de participação beneficiária nos ativos ou renda do fundo durante o ano civil”. Consulte os Requisitos de Arquivamento Eletrônico da BSA para Relatório de Contas Estrangeiras e Financeiras (Formulário 114 do FinCEN).
Reforma Fiscal 2017.
Em 22 de dezembro de 2017, o presidente assinou a Lei de Cortes e Empregos de Imposto (a “Lei”) como lei. Enquanto a data de vigência da maioria das disposições do Projeto de Lei não é até 1º de janeiro de 2018, os contribuintes são aconselhados a rever imediatamente sua situação tributária de 2017 e considerar o seguinte a fim de verificar se há medidas que eles possam tomar para para reduzir seu passivo de imposto de renda para 2017.
Limitation on Deduction of State and Local Income Taxes (or Sales Tax) and Real Property Taxes that are not effectively connected to a trade or business.
Beginning January 1, 2018, taxpayers may only claim an itemized deduction for the lesser of (a) the combined amount paid for (i) State and Local Income (or Sales Tax if the amount of Sales Tax paid exceeds the amount of State and Local Income Taxes Paid) and (ii) Real Property Taxes or (b) $10,000 ($5,000 if the taxpayer is married but files a separate income tax return.)
Recommendation: Taxpayers should consider paying the balance of their 2017 State and Local Income Tax liability, including estimated tax payments normally due in January, before December 31, 2017, rather than paying them in 2018 as they may be accustomed to doing. The Conference Committee Report that accompanied the Bill makes it very clear the taxpayers will not be permitted to deduct prepayments of their 2018 State and Local Income Tax liability that are paid in 2017. Taxpayers should also consider paying their Real Property Taxes that would otherwise be due in 2018 in 2017. However, caution should be taken before doing so since the IRS has taken the position that in order for Real Property Taxes to be deductible they need to have been assessed. The burden of assessing Real Property Taxes usually falls on the taxpayer’s local municipality. To counter this position, in New York, Governor Cuomo signed an Executive Order permitting local governments to immediately issue tax warrants (in New York tax warrants are the “assessment” of Real Property Taxes) permitting the collection of real property taxes before the end of 2017. The Executive Order also suspends local tax laws through the end of 2017 which otherwise would have prevented taxpayers from making partial payments of real estate taxes.
Cautionary Note: Whether pre-paying State and Local Income or Real Property Taxes will result in an actual savings will depend in large part on whether a taxpayer is subject to the Alternative Minimum Tax in 2017.
Inability to Deduct Most Miscellaneous Deductions, Increase in Standard Deduction, Elimination of Personal Exemptions.
Beginning January 1, 2018, individual taxpayers will no longer be able to claim an itemized deduction for work related expenditures, tax preparation fees, investment advisory fees and most other miscellaneous deductions that they had been able to deduct if those expenses exceeded 2% of their adjusted gross income (“AGI”). In addition, beginning January 1, 2018, the deduction for personal exemptions has been eliminated. However, beginning January 1, 2018, the standard deduction has been increased from $6,500 for a single taxpayer, to $12,000, and from $13,000 for a married couple to $24,000.
Recommendation: Taxpayers should consider prepaying their miscellaneous deductions in 2017 to the extent these expenses are known.
Cautionary Note: Again the interplay of the Alternative Minimum Tax may reduce or eliminate any actual tax savings.
Recommendation: Those Taxpayer’s who feel the increased Standard Deduction will be applicable to them 2018 should give consideration to making charitable contributions in 2017 that they might ordinarily not make until 2018 in order to benefit from the deduction. Beginning in 2018 charitable deductions will be deductible to the extent of 60% of a taxpayer’s AGI. Currently the limitation is 50% of AGI.
Limitations on Deductibility of Mortgage Interest.
Beginning January 1, 2018, interest on a Home Equity Line of Credit (“HELOC”) will no longer be deductible. Interest on residential mortgages will be deductible only to the extent of the interest paid on the first $750,000 of indebtedness. Existing mortgages, those entered into prior to December 16, 2017, or those entered into after December 15, 2017 in connection with the purchase of a home pursuant to a contract that was entered into prior to December 16, 2017, are grandfathered. The refinance of a grandfathered mortgage will generally remain grandfathered provided the term/amount do not exceed the grandfathered mortgage’s term/amount.
Recommendation: Those taxpayers who have a HELOC should give consideration to converting their HELOC to a permanent mortgage, perhaps in conjunction with a refinance of their existing mortgage, as soon as practical.
Other Changes Not Requiring Immediate Action:
Change in tax brackets and rates.
Beginning January 1, 2018, the top marginal tax rate for tax returns filed by married couples will be 37% on taxable income in excess of $600,000 ($500,000 for single taxpayers). Previously, the top marginal rate was 39.6% on taxable income in excess of $480,050 ($426,700 for single taxpayers).
Alternative Minimum Tax (“AMT”)
The Bill increases the exemption from the current $86,200 for married taxpayers filing a joint return to $109,400, and from $55,400, for single taxpayers to $70,300. The exemption begins to phase out for married taxpayers at $1,000,000 and at $500,000 for single taxpayers. Previously, these amounts were $164,100 and $123,100, respectively. It is anticipated that these changes, coupled with the elimination of many of the deductions that often triggered the imposition of the AMT, will lessen the impact of the AMT on many Americans.
Like-Kind Exchanges.
Beginning January 1, 2018, like-kind exchanges (“§1031 exchanges”) will be limited to real property exchanges.
Section 529 Plans.
Beginning January 1, 2018, withdrawals of up to $10,000 per year from a Section 529 Plan can be used to pay for tuition at an elementary or secondary public, private or religious school.
Child Care Credit.
Beginning January 1, 2018, the credit increases from $1,000 per qualified child to $2,000 with up to $1,400 being refundable if the amount of the credit exceeds the taxpayer’s tax liability. The phase-out, which had begun at $200,000 for a married couple, and $75,000 for a single taxpayer, has been increased to $400,000 and $110,000, respectively.
Gift, Estate and Generation Skipping Tax Exemptions.
Beginning January 1, 2018, these exemptions will be $11,200,000, per U. S. domiciliary.
Recomendação. Taxpayers who may have been considering making large gifts for estate planning purposes in 2017 which may have exceeded the current exemption ($5,490,000) should consider delaying these gifts until after December 31, 2017.
Cautionary Note. As with many provisions of the Bill, these changes will “sunset” (i. e., they will end) after 2025 and will revert back to current law.
Effective for agreements entered into after 2018 – alimony is no longer deductible by the payor nor treated as income by the recipient.
Carry Forward of Net-Operating Loss Deductions.
Beginning January 1, 2018, net operating losses carried forward from a prior year cannot be used to offset more than $500,000 of non-business income on joint returns, $250,000 for other taxpayers.
20% Deduction on Certain Pass-Through Income.
Taxpayer’s receiving income from a pass-through entity (i. e., a sole proprietorship, partnership, limited liability company or Sub-S corporation) will receive a deduction equal to 20% of the income they receive. This will have the effect of reducing the marginal income tax rate on this income by 20%. The determination of the amount of the actual deduction will be depend upon a several computations which take W-2 wages paid and assets into account. In addition the amount of the available deduction will be phased out if the taxpayer’s taxable income exceeds certain threshold amounts. For those taxpayers filing joint income tax returns, the phase-out begins at $315,000 and the deduction is eliminated if taxable income exceeds $415,000. For all other taxpayers the phase-out begins at $157,500 and the deduction is eliminated if taxable income exceeds $207,500.
Corporate and Non Corporate Business Changes:
Institution of a flat 21% corporate tax which replaces the current tiered rate structure where rates ranged from 15% to 39% Elimination of the corporate Alternative Minimum Tax Reduction of dividend received deductions Limitation of deductibility of interest expense to 30% of AGI, as adjusted Ability to expense 100% of certain newly acquired business property placed in service after September 27, 2017, subject to certain reductions and adjustments Increase of Section 179 deduction to $1,000,000, subject to a phase-out threshold of $2,500,000 Carried interest provision requiring assets to be held for 3 years in order to receive capital gain treatment Net operating losses incurred after 2017 will be allowable only to the extent of 80% of taxable income, will not be available for carryback and will no longer be carried forward indefinitely.
In addition to the changes discussed in this Update, there are many other provisions of the Bill which impact those engaged in international commerce as well as provisions impacting targeted taxpayers. We are happy to meet with you to discuss those provisions as well as to discuss how the changes mentioned in this Update may affect you and your business. We look forward to your questions.
Asset Protection: FLSA and Other Labor Laws Threaten Personal Assets of Business Owners.
It seems that in each passing year, business owners face increasing challenges from constricting labor laws:
The Fair Labor Standards Act (FLSA), a federal law, has for years been a threat to business owners due to rampant litigation by workers who allege improper wage and hourly compensation. Business owners should be aware that the FLSA threat exists on multiple levels, not merely employee wage lawsuits, but also federal and state labor audits and investigations. Recent changes to the FLSA law by the federal government came into effect in December 2016 and heightened the risk of non-compliance and lawsuits. In addition, owners and investors are personally liable for FLSA violations, which means that even if a business is owned in an LLC or corporation, the owner’s personal assets are vulnerable. Two New York appellate court decisions in 2017 have now increased the potential liability of owners of home healthcare and home health aide businesses. A proposed new New York State law (known as the “SWEAT” law, for Securing Wages Earned Against Theft) would allow a lien against a business accused of improperly withholding wages from its workers, even when the withholding issues are merely alleged, not proven. A recent New York law, the Wage Theft Prevention Act (WTPA), imposes additional requirements on employers. In 2015, New York passed a law imposing personal liability on the ten largest shareholders of any company (including foreign companies doing business in New York) that does not pay its liabilities for labor law violations. Our clients in the restaurant and hospitality industries are particular (but not the only) targets of aggressive labor lawyers. The media reported multiple new lawsuits in 2017 against prominent restaurants in New York City and nationwide, including the Batali group which had already settled a prior FLSA claim in 2012.
Business owners and investors must take appropriate steps to contain the multiple FLSA threats and protect their business and personal assets from FLSA and other labor law attacks. We advise business owners from restaurateurs to construction contractors on how to protect their assets. The asset protection acts as a preventative, discouraging the plaintiffs from proceeding with litigation and providing our clients with tremendous leverage to force a settlement on favorable terms.
We recently represented the owner of a major construction company who was a defendant in an FLSA lawsuit brought by a group of former employees. We protected his personal and business assets by transferring them to a network of family limited partnerships (FLPs) as part of a comprehensive estate plan. Although he lost the FLSA case and had a $4 million judgment entered against him, the protection afforded by the FLPs provided sufficient leverage to force a negotiated settlement for significantly less than half of the judgment.
Contact us to discuss labor law issues, and how to protect assets from threats arising from labor and employment lawsuits.
IRS Advances Against Bitcoin Tax Evasion.
We have previously written about the IRS efforts to curtail the use of bitcoin for tax evasion (please see our posts here and here). In late November, a federal court ordered Coinbase, the largest public digital currency exchange, to comply with an IRS summons and to produce records of clients’ names and transactions. Once the IRS receives these records, it will begin auditing taxpayers who did not declare and pay tax on their bitcoin (and other virtual currency) gains. The IRS has declared that bitcoin and other virtual currencies are considered property and are subject to capital gains tax, and the IRS believes that many owners of virtual currencies are not properly reporting gains and paying tax.
The IRS summons against Coinbase is reminiscent of its “John Doe” summons against Swiss bank UBS which sought identifying information on Americans who owned “secret” Swiss bank accounts that were hidden from the IRS. A “John Doe” summons seeks information from a financial institution (which would include a virtual currency exchange) regarding a broad class of U. S. taxpayers who are not individually named but whom the IRS has reason to believe may have utilized the financial institution to improperly evade tax. Courts regularly approve such summonses, whereby the IRS obtains information such as the identities of account owners (or, in the case of virtual currencies, wallet owners). The John Doe summons against UBS was approved by a federal court, which was the first step in the dismantling of Swiss banking secrecy and IRS enforcement against Americans who hid money in Swiss accounts away from the IRS. The IRS pursued similar summonses against other offshore banks, including in Belize, India, Bahamas, Barbados and the Cayman Islands.
We expect Coinbase to comply with the federal court order and turn over the documents requested in the IRS summons. This would negate the very anonymity championed by the proponents of bitcoin. In addition to the John Doe summons against Coinbase, reports have emerged that the IRS is utilizing Chainanalysis, a blockchain forensics firm based in New York, to study bitcoin transactions for tax evasion. Coinbase also offers “The Shift Card”, which is a debit card that allows a user to spend bitcoin wherever Visa is accepted. This too can result in tax non-compliance, because if you exchange your bitcoin for goods or services, that too is a taxable event, as the IRS considers you to have earned income on the value of the good or service, less your cost basis in the bitcoin (i. e., your bitcoin purchase price).
When the IRS proceeded against Americans who hid money in Swiss accounts, the IRS at the same time also encouraged the account owners to come forward and declare their foreign accounts and foreign income, in exchange for lower penalties and no criminal prosecution. This is known as a “voluntary disclosure” by the taxpayer, and it only works if the IRS doesn’t already have the name of the taxpayer. The IRS may already have the name of the taxpayer from a John Doe Summons, a Swiss bank, an audit, an investigation, the Foreign Account Tax Compliance Act (FATCA) or other ways. The Offshore Voluntary Disclosure Program (OVDP) resulted in thousands of American taxpayers declaring their foreign assets, paying tax due and avoiding much harsher penalties (and jail time) than if the IRS discovered the foreign assets first.
There is speculation that, like the voluntary disclosure program for foreign assets (which remains ongoing but may be terminated by the IRS at any time), the IRS may offer a voluntary disclosure opportunity for people to come into tax compliance with their virtual currency transactions. The danger, however, is that the IRS obtains information from Coinbase (or other sources) before the taxpayer comes forward to correct his or her tax noncompliance. In that case, the IRS will deny the taxpayer’s voluntary disclosure, begin an audit or examination, and assess the full range of penalties rather than the reduced penalties that may apply in a voluntary disclosure. Timing, as they say, is everything. Please contact us regarding tax compliance issues for bitcoin or any other assets – & # 8211; offshore, onshore, or virtual.
2017 – The Offshore Year in Review.
The year 2017 was another epic year in the offshore world due to the leaks of confidential offshore financial information known as the “Paradise Papers” and the fallout from the 2016 leak of offshore data known as the “Panama Papers”. In addition, in 2017, more countries began to report offshore financial information to the IRS under FACTA (the Foreign Account Tax Compliance Act). Also in 2017, the IRS and U. S. Department of Justice (DOJ) continued to successfully attack offshore banking “secrecy”, moving beyond Switzerland to other foreign jurisdictions. “Going offshore” for the purposes of hiding money from the IRS is now impossible. Going offshore for asset protection from civil creditors and for tax minimization is still viable and effective, but must be tax-compliant.
A. Further Erosion of Offshore Bank Secrecy and Encouraging Tax Compliance.
& # 8211; In 2017, the “Paradise Papers” were leaked, exposing the financial affairs of people and corporations around the world. This followed a similar leak in 2016 known as the “Panama Papers”. Recent fallout from the Panama Papers has included resignations of the leaders of Pakistan and Iceland and the conviction of international soccer star Lionel Messi for tax fraud.
& # 8211; The lesson, once again, is that hacking, leaks and whistle blowers are as significant a threat to banking secrecy as laws such as FATCA (the Foreign Account Tax Compliance Act) and inter-governmental cooperation and exchange of information. Another lesson is that offshore asset protection should not — indeed, cannot — be dependent upon “confidentiality” and “secrecy”, simply because offshore “secrecy” no longer exists.
& # 8211; During 2017, the IRS and DOJ continued to investigate and prosecute many U. S. taxpayers with undeclared offshore assets. S. taxpayers with undeclared foreign accounts in Switzerland, Cayman, Belize, India, Israel, Singapore, Panama and even Canada have been targeted.
& # 8211; During 2017, multiple federal court decisions examined whether taxpayers “willfully” (i. e., intentionally) failed to report their foreign assets. In general, courts have sided with the government against the taxpayers. The lesson is to properly report all foreign assets that are subject to reporting, including even foreign assets that did not generate income.
& # 8211; In 2017, most Swiss banks continued to provide account information to the IRS. In return for deferred prosecution, these Swiss banks paid fines to the U. S. and revealed the identities of their American account owners. Clients of these banks who have not already come into IRS compliance can make a voluntary disclosure of these accounts, but will pay increased penalties in return for no criminal exposure (but not if the IRS already has their names!). Swiss banking secrecy, seriously weakened since DOJ forced UBS to disclose its U. S. clients in 2009, is now extinct. Moreover, now the Swiss banks report to the U. S. without advance warning to their U. S. clients.
& # 8211; All reputable countries are agreeing to the exchange of tax information and banking transparency. In 2017, Greece and Kuwait joined over one hundred other countries agreeing to report foreign assets to the IRS, including Singapore, Luxembourg, Austria, India, Cyprus, Singapore, Liechtenstein, Switzerland, Barbados, Bahamas, Hong Kong, Brazil, Jersey, Guernsey, Cayman, etc. If you have financial ties to foreign countries, you must address IRS compliance for foreign accounts and assets. The fact that a foreign bank has no branches in the U. S. is now irrelevant.
& # 8211; In 2017, Israeli banks continued to freeze many accounts of U. S. persons, until the account owners signed IRS Forms W-9 disclosing their social security numbers and provided evidence of U. S. tax compliance. S. persons with Israeli accounts now face two challenges: access to their money, and IRS compliance. Israel has become amongst the most vigilant of foreign countries in enforcing FATCA, to the extent that an Israeli banker may face criminal liability under Israeli domestic criminal law, for failing to abide by FATCA, a U. S. law.
& # 8211; Following Credit Suisse’s 2014 guilty plea for facilitating tax fraud via “secret” Swiss accounts (like UBS) and payment of a $2.6 billion fine, in 2017 Credit Suisse was hit with new allegations, this time for the bank’s “Israel desk” facilitating tax fraud by Israeli-Americans.
& # 8211; In light of the above events, many clients have retained us to make their foreign accounts and other assets tax-compliant. The Offshore Voluntary Disclosure Program (OVDP) and “Streamlined” procedures are still in effect (although the IRS warns that it may close the programs at any time). We have represented clients with accounts and assets on every continent (except Antarctica), brought them into IRS compliance and avoided prosecution. The Streamlined procedures have greatly reduced penalties (5% for U. S. residents; 0% for non-residents). We can advise you on which program is best for you. The penalties within the OVDP are usually less than if the IRS discovers the foreign account via audit, investigation or information the IRS receives from a bank or foreign government.
& # 8211; Clients should bring their accounts into tax compliance on the state level as well. Some states, such as New York and New Jersey, have formal programs for offshore accounts. The IRS shares information with state governments, including that a federal tax return was amended to report foreign income.
B. What If You Still Have an Undisclosed Foreign Account?
If you are the owner of a foreign account or other foreign financial asset that has not been properly reported to the IRS, what are your options now?
Option One : come forward now. The IRS Offshore Voluntary Disclosure Program (OVDP), still remains open. Criminal prosecution is avoided and penalties are lower than if the IRS gets your name from FATCA, an investigation, an audit, an information request to a foreign bank, a subpoena upon a foreign bank, or another person’s disclosure of account info. In some cases, the penalties may be as little as 5% or even zero, provided that the IRS doesn’t already know about your offshore assets.
Option Two : convert your account to a tax-compliant structure. We have long counseled the use of tax-compliant strategies to minimize U. S. taxation. We counsel clients regarding the proper steps to transform a non-compliant offshore account into one that complies with current U. S. laws. Although we cannot erase a non-compliant past, we can counsel on full compliance going forward. Such steps may significantly reduce the risk of detection and prosecution.
Option Three : do nothing and hope that the IRS does not discover your account. You would be relying on past promises of banking secrecy as a means of future protection. However, as the events of recent years have proven, foreign banking secrecy no longer exists. Even if you somehow remain “under the radar”, any attempts to access the foreign funds could raise “red flags” and thus your foreign assets are essentially inaccessible.
Please contact us to discuss offshore tax compliance issues.
Year-End 2017 Tax Planning, Part 2: The Tax Code is Being Re-Written; Plan Now to Preserve Tax Benefits.
There are competing “tax reform” proposals in Washington, all subject to debate, lobbying, revision and legislative vote. The final outcome is still undetermined and these proposals are not yet law. We can assist you in anticipating the coming tax changes and planning ahead.
Many clients are asking us: if the estate tax threshold is increasing to $11 million per person, and income taxes may be reduced, why should they care about tax minimization techniques? We offer the following answers:
Just as the laws are changing now, the laws could change again (as soon as 2018, after mid-term elections, and if a new president is elected in 2020). Proper planning now preserves current tax benefits and provides certainty in uncertain political times. Proper tax planning also provides for: Family governance and centralization of family assets Legacy and succession planning (including family business and personal assets) Income to beneficiaries Specific family concerns and special needs children Charitable considerations Locking in “basis” for appreciated assets (from real estate to virtual currencies) in uncertain fiscal and political times Gift tax planning. Under the current House of Representatives tax reform plan, while estate and generation-skipping taxes may be repealed or curtailed, gift tax would remain. This presents a favorable opportunity to fund trusts. Asset protection and wealth preservation Privacy Estate tax minimization on the state level. While Congress debates repealing the estate tax or increasing its threshold to $11 million, state estate taxes are still law in many states, including New York. Preserve portability of one spouse’s estate tax exemption. While Congress allowed for portability on the federal level (back in 2012), in many states (including New York) there is no portability unless through proper estate and trust documents.
Here are a few suggestions for effective end-of-year tax planning, even while the federal tax laws continue to change:
If we can expect reductions in income tax rates next year, consider whether to utilize tax deductions and losses in 2017 and postpone or defer gains and income until 2018. Take charitable deductions now, rather than in 2018, when tax changes could make deductions less valuable. Consider an enhanced role for life insurance and an Irrevocable Life Insurance Trust (ILIT). Insurance proceeds are not taxable as income to the beneficiary. Growth within an insurance policy is not subject to capital gains tax nor other income tax. If the estate tax will be repealed (or the estate tax threshold doubled to $11 million per person), insurance could still be completely tax-free. Insurance could thus play an enhanced roll in family planning, legacy planning, liquidity and tax-minimization. An ILIT would add further benefits, including asset protection, creditor protection and extended wealth management for child beneficiaries. Pay mortgage interest and state and local taxes in 2017. In 2018, these payments may not be deductible.
Please contact us to discuss strategies to lower your tax liability and preserve current tax benefits.
Year-End 2017 Tax Planning, Part 1: Leveraged Gifting to Get Assets to Your Heirs Rather Than the IRS.
A method to reduce estate taxes, which had been limited by the IRS in recent years, is now safe. This method utilizes discounting of transfers of interests in closely held entities (Family Limited Partnerships, Limited Liability Companies, family corporations) to family members. Such “leveraged gifting” has been an extremely important, effective and common method used to eliminate estate taxes.
Partners in Family Limited Partnerships (FLPs) should consider gifting limited partnership interests in order to decrease the value of their estate for tax purposes. As long as they retain their General Partner (GP) interests, they will continue to control all assets within their partnership. Yes, you can escape the estate tax and still control the assets.
You can lower the value of your taxable estate, and pass up to $5,490,000 ($10,980,000 for a married couple) to your heirs, tax free. In 2018, the exclusions go up: $5,600,000 for individuals and $11,200,000 for married couples. If you own an FLP, you can gift Limited Partnership (LP) interests to your heirs, and take advantage of discounting, to get even more out of your estate, tax-free. As much as $22,000,000 worth of FLP assets can be conveyed to your heirs and escape the estate tax. You can keep your General Partner (GP) interests and still control the FLP and its assets, even if you gift all of the Limited Partnership (LP) interests.
Also, don’t forget about the annual gift exclusion, which allows you to gift up to $14,000 ($28,000 for a married couple) by the end of 2017 to as many people as you choose. In 2018, this amount will increase to $15,000 per person, $30,000 per married couple.
We can advise you as to appropriate FLP discounts, prepare memoranda of gift for you, as well as the partnership valuation and gift valuation calculation letters (necessary for the IRS). A recent tax court case has made it imperative that the documents transferring the LP interests be worded very carefully. These documents should be prepared by qualified tax counsel. Please contact us with any questions regarding your year-end tax planning.
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Tópicos quentes.
How and Why to Bring a Foreign Bank Account into Tax Compliance Now.
The IRS Offensive Against Offshore Accounts: New Attacks and New Relief.
Do You Have a Foreign Bank Account?
Offshore Asset Protection.
The Next Wave of IRS Offshore Account Enforcement: Israeli Banks Under Scrutiny.
Israeli Accounts on the IRS Radar: More Offshore Prosecutions.
Offshore Trusts Survive Threats from the IRS, Repatriation and Contempt.
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FBAR OVDI OVDP.
FBAR & FATCA INFORMATION.
New rules on financial reporting from the FACTA will affect U. S. expats. FBAR apply to all U. S. tax payers with a foreign account amounting over $10,000. If you’re an expat who hasn’t been filing returns and FBARs, this could affect you. Find out what the rules are, and how they may impact your taxes. FBAR Filing deadline – June 30.
Form 8938 (file with your tax return) – April 18, 2016; June 15, 2016 for expats; or October 17, 2016 if you file an additional extension.
FBAR – Report of Foreign Bank and Financial Accounts.
You must file an FBAR if both of these are true:
You’re a U. S. taxpayer. You own or control foreign bank and financial accounts with a combined value over $10,000.
File the FBAR separately from your tax return . The United States must receive it by June 30. The reporting requirement covers many types of foreign accounts maintained outside of the United States, including:
Bank accounts Securities accounts Certain foreign retirement arrangements.
You’re probably required to file a FBAR if you’re:
A U. S. citizen or resident living abroad Using foreign accounts for everyday activities.
While this requirement isn’t new, expats and their tax advisors often overlooked it in the past. Recent international enforcement efforts have raised awareness of the requirement. Now, all expats should be certain they’re compliant.
This is only an informational document. No additional tax is going to be added. However, severe penalties can be levied against taxpayers who fail to file or file late. So, it’s important to work with an expat tax advisor who understands your obligations.
A $10,000-per-year penalty can apply even if your failure to file a FBAR is an oversight. If the IRS can show you purposely avoided the FBAR reporting obligations, the penalties can be as high as:
$100,000, or 50% of the greatest value of the account.
Taxpayers who intentionally avoid FBAR reporting can face criminal charges.
FBAR penalties can only be waived if the taxpayer shows reasonable cause for failing to file. Reasonable cause findings rely on a great number of facts. The IRS decides reasonable cause. So, even expats living abroad who’ve been compliant with local tax obligations can be out of compliance with the FBAR requirements. These factors are taken into account by the IRS when analyzing whether a taxpayer acted reasonably:
Background and education Whether there was a tax deficiency related to the unreported foreign account Failure to disclose the existence of the account to tax professionals.
If you haven’t filed required FBAR reports in prior years, you should act quickly. Consult an H&R Block expat tax advisor to discuss your compliance options.
FATCA – Foreign Account Tax Compliance Act.
Foreign Account Tax Compliance Act (FATCA) is a product of United States’ efforts to combat offshore tax evasion. U. S. expats of all income levels with foreign accounts and assets need to be conscious of its impact. FATCA brings about two notable changes that affect all expats:
U. S. taxpayers with foreign accounts and assets might need to file Form 8938: Statement of Specified Foreign Financial Assets with their returns. Financial institutions must report information about U. S. citizens who have accounts with the institutions.
File Form 8938 with your return. It was first required in 2011. You must file Form 8938 each year it applies to you. Form 8938 is the same as an FBAR in many ways. However, it requires you to disclose certain “non-account” assets like:
Business and trust ownership Certain contractual investments with foreign parties.
You must file form 8938 if the value of your reportable foreign assets exceeds either of these levels:
More than $50,000 — $100,000 if married filing jointly — at the end of the year $75,000 — $150,000 if married filing jointly — at any time in the year.
Expats living abroad all year have an increased reporting threshold. They don’t need to complete this form unless their foreign assets are valued in excess of either:
$200,000 — $400,000 if married filing jointly — at the end of the year $300,000 — $600,000 if married filing jointly — at any time during the year.
Financial institution reporting.
New rules on financial reporting will affect expats. However, the effects will be indirect. Some foreign financial institutions must report on U. S. citizen and resident clients who have accounts worth more than $50,000. If you’re an expat who hasn’t been filing returns and FBARs, this could affect you. Ex: The foreign banks you use might be required to obtain additional information about you. They would report this information to the U. S. government. The IRS could figure out you’re not in compliance before you report yourself. In that case, many of the preferential disclosure options will be unavailable to you. You might face additional tax, penalties, and interest.
The Bank Secrecy Act (BSA)
The Bank Secrecy Act (BSA), P. L. 91-508, requires certain U. S. persons who have a financial interest in or signature authority over a foreign financial account to report the account annually to the Department of Treasury by electronically filing Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts(commonly called FBAR), through FinCEN’s BSA E-Filing System. Financial accounts that must be reported include bank accounts, brokerage accounts, mutual funds, trusts, or other types of foreign financial accounts with balances that exceed certain thresholds.
Individuals who are required to file FBARs need expert advice to ensure proper compliance not only with the FBAR filing requirements, but possibly with other reporting requirements such as the Foreign Account Tax Compliance Act (FATCA), P. L. 111-147. FATCA requires filing Form 8938, Statement of Specified Foreign Financial Assets, with the federal income tax return, a separate requirement from the FBAR filing.
FBAR is not a tax return and it isn’t filed with the IRS, unlike Form 8938. It is an information report. It was designed, along with other reporting requirements such as FATCA, to deter tax evasion.
As discussed below, to assist U. S. taxpayers, the IRS has implemented streamlined filing compliance procedures to help those who have unreported foreign financial accounts to come into compliance.
A U. S. person is required to file an FBAR if:
The person had a financial interest in or signature authority over (or any other authority over) at least one financial account located outside of the United States; and The aggregate value of all foreign financial accounts exceeded $10,000 at any time during a calendar year.
For these purposes, U. S. persons include 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. A child who falls under the FBAR filing criteria is not exempt from filing. If a child cannot file his or her own FBAR, a parent or guardian must file for him or her.
A person with “signature authority” is a person who can control the disbursement of money or other property in the account using his or her signature.
A person with “other authority over an account” is a person who can exercise power over an account by communicating directly, orally or otherwise, to the financial institution or other person maintaining the account.
A U. S. person has a financial interest in an account for which the U. S. person is the owner of record or has legal title, whether the account is maintained for his or her own benefit or the benefit of others, including non-U. S. persons.
A U. S. person also has a financial interest where the owner of record or holder of legal title of the account is any of the following:
A person acting on behalf of a U. S. person with respect to the account, including agents, nominees, and attorneys; A corporation, foreign or domestic, in which the U. S. person owns (directly or indirectly) more than 50% of the total value or more than 50% of the voting power of all shares of stock; A partnership, foreign or domestic, in which the U. S. person owns (directly or indirectly) an interest in more than 50% of the partnership’s profits or capital; A trust in which the U. S. person is the grantor and has an ownership interest in the trust for U. S. federal tax purposes; A trust, foreign or domestic, in which the U. S. person has a greater than 50% direct or indirect present beneficial interest in the trust’s assets or receives 50% of the trust’s income; Any other entity in which the U. S. person owns (directly or indirectly) more than 50% of the voting power, total value of equity or assets, or profits interest.
EXCEPTIONS TO THE FILIING REQUIREMENTS.
Certain U. S persons or foreign financial accounts are excluded from the FBAR reporting requirements. Esses incluem:
The spouse of an individual who files an FBAR is not required to file a separate FBAR if (1) all the financial accounts that the non-filing spouse is required to report are jointly owned with the filing spouse; (2) the filing spouse reports the jointly owned accounts on a timely filed, electronically signed FBAR; and (3) the filers have completed and signed Form 114a, Record of Authorization to Electronically File FBARs (see discussion below); U. S. persons that are entities included in a consolidated FBAR filed by a greater-than-50% owner; Correspondent accounts (bank accounts established by banks solely for bank-to-bank settlements); Foreign financial accounts owned by a U. S. governmental entity; Foreign financial accounts owned by an international financial institution (if the U. S. government is a member); Owners and beneficiaries of IRAs do not have to report foreign financial accounts held in an IRA; Participants in and beneficiaries of tax-qualified retirement plans are not required to report a foreign financial account held by or on behalf of the retirement plan; Individuals with signature authority over, but no financial interest in, a foreign financial account if the individual is an officer or employee of the entity that owns or maintains the account in certain situations (e. g., an officer or employee with signature authority over an account of a financial institution that is registered with and examined by the SEC or Commodity Futures Trading Commission); Trust beneficiaries (but only if a U. S. person reports the account on an FBAR filed on behalf of the trust); Financial accounts maintained on a U. S. military installation.
PENALTIES FOR NONCOMPLIANCE.
Persons required by law to file an FBAR, and who fail to properly file a complete and correct one, may be subject to civil penalties for negligence, a pattern of negligence, non-willful violations, and willful violations. When there is a violation, the IRS examiner will either issue Letter 3800, Warning Letter for Apparent Foreign Bank and Financial Accounts Report Violations, or determine a penalty based on the violation. The purpose of imposing penalties for violations is to encourage filing compliance. Each IRS examiner has discretion in determining the amount of the penalty, if any, taking into account the facts and circumstances of each case. FBAR penalties are determined per account, for each person required to file.
Two negligence penalties apply generally to all BSA provisions:
A negligence penalty up to $500 may be assessed against a business for any negligent violation of the BSA, including FBAR violations. An additional penalty up to $50,000 may be assessed against a business for a pattern of negligent violations.
Generally, these two negligence penalties apply only to trades or businesses, not to individuals.
Non-willful violations. A penalty, not to exceed $10,000, may be imposed on any person who violates or causes any violation of the FBAR filing and recordkeeping requirements that are not due to reasonable cause (Internal Revenue Manual (IRM) §4.26.16.6.4).
Willful violations. Persons who willfully fail to report an account may be subject to a penalty equal to the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation, under 31 U. S.C. Section 5321(a)(5) (IRM §4.26.16.6.5). Willful violations may also be subject to criminal penalties under 31 U. S.C. Section 5322(b) or 18 U. S.C. Section 1001.
Mitigating factors such as natural disasters, emergencies, or other systemic issues may prevent a U. S. person from filing a timely FBAR. Financial institutions and individuals filing FBARs affected by these circumstances should contact FinCEN’s Regulatory Helpline at 800-949-2732 (703-905-3975 from outside the United States) to make FinCEN aware of their compliance concerns and to determine possible alternatives for timely reporting. FinCEN will work with financial institutions to develop necessary alternatives and to ensure that their primary federal regulator is informed of the situation and potential remedies.
The statute of limitation for FBAR civil penalties is six years from the date of the transaction with respect to which the penalty is assessed (31 U. S.C. §5321(b)). For purposes of the penalty for failing to file an FBAR, the IRS interprets “transaction” as the due date of the report. For a penalty for failing to maintain required records, it is the date the IRS first asks for the records.
REPORTING AND FILING INFORMATION.
A U. S. person who holds a foreign financial account may have a reporting obligation, even if the account is not producing taxable income. The taxpayer’s reporting obligation would be met by filing an FBAR and answering the questions about foreign accounts on Form 1040, U. S. Individual Income Tax Return, Schedule B, Interest and Ordinary Dividends.
On Sept. 30, 2013, FinCEN announced that FBAR Form FinCEN 114 replaced Form TD 90-22.1 and could no longer be filed using a paper form, but only online using FinCEN’s BSA E-Filing System. The system allows the filer to enter the calendar year reported, including past years, on the online report. Taxpayers who are unable to file electronically should call FinCEN’s help line for alternative filing methods.
On July 29, 2013, FinCEN posted a notice on its website introducing a new report for filers who submit FBARs jointly with spouses or who wish to have a third-party preparer file on their behalf. The new Form 114a, Record of Authorization to Electronically File FBARs, is not submitted when filing an FBAR but instead is kept by the filer and the account owner, and must be made available to FinCEN or the IRS upon request.
For 2015 and earlier years, FBARs are or were due on or before June 30 following the calendar year reported, with no filing extensions allowed. Thus, the due date for an individual’s 2015 FBAR is June 30, 2016. However, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L.114-41, changed the standard FBAR due date to April 15 beginning with the 2016 calendar year report. In addition, for 2016 and later years, a six-month extension for filing FBARs is allowed.
A limited filing extension has also been granted to certain individuals who have filing obligations because they have signature authority over, but no financial interest in, foreign financial accounts of their employer or a closely related entity, through April 15, 2017 (FinCEN Notice 2015-1). This extension applies to the reporting of signature authority held during the 2015 calendar year, as well as all reporting deadlines extended by previous FinCEN Notices 2014-1, 2013-1, 2012-1, 2012-2, 2011-1, and 2011-2. For all other individuals with an FBAR filing obligation, the filing due date remains unchanged.
Those required to file an FBAR must retain financial records for five years, from the due date for filing the FBAR for the calendar year. These records must be available for inspection upon request. Records maintained should contain:
Name on each account; Number or other account designation; Name and address of the foreign bank or other person with whom the account is maintained; Type of account; and Maximum value of each account during the reporting period.
Valuation for reporting purposes.
For reporting purposes, the U. S. person must disclose the maximum value of financial accounts maintained in a financial institution located in a foreign country. Valuation of these accounts can be determined using periodic account statements, which should be converted to U. S. dollars at the end of the calendar year, applying the official exchange rate for the last day of the calendar year. Filers can find the Treasury Reporting Rates of Exchange at fiscal. treasury. gov.
The maximum value of a financial account is the highest balance of both currency and nonmonetary assets that appear on any quarterly or more frequent account statement issued for the reporting year. For example, if the Dec. 31 balance is $15,500 but the July 31 ending balance in the same calendar year was $25,200, the maximum reportable value is $25,200. In the absence of periodic financial statements, the maximum value will be the largest amount of currency and nonmonetary assets in the account at any time during the year. For reporting purposes, all amounts are rounded up to the nearest whole dollar.
Persons who have financial interests in multiple foreign accounts (but fewer than 25 accounts) and who are unable to determine if the filing threshold has been met anytime during the year, should complete the appropriate Part II, III, IV, or V section for each of these accounts and check the “amount unknown” box, item 15a. Guidelines for persons with financial interests in 25 or more accounts are in the IRM (see IRM §§4.26.16.4.6 and 4.26.16.5.1). Filers with multiple reportable accounts must value each account separately.
Types of reportable foreign assets.
Financial accounts include, but are not limited to:
Securities, brokerage, savings, demand, checking, deposit, time deposit, and other accounts maintained with a financial institution; Commodity futures and options accounts; Insurance policies with a cash value; Annuity policies with a cash value; and Shares in a mutual fund or similar pooled fund.
OFFSHORE VOLUNTARY DISCLOSURE PROGRAM.
Effective July 1, 2014, the IRS modified the Offshore Voluntary Disclosure Program (OVDP) to make additional options available to U. S. taxpayers with undisclosed foreign financial assets. Since the launch of the first OVDP program, more than 45,000 taxpayers have come into voluntary compliance, paying an estimated $6.5 billion in taxes and penalties.
Modifications to the OVDP included:
Requiring additional information from taxpayers in their applications. Eliminating penalties for certain taxpayers who committed non-willful violations. Requiring taxpayers to submit all account statements and pay the offshore penalty at the time they applied for the OVDP. Requiring supporting information to be submitted electronically rather than by paper. Increasing the offshore penalty percentage from 27.5% to 50%, if, before the taxpayer’s OVDP preclearance request is submitted, it becomes public that a financial institution where the taxpayer holds an account or another party facilitating the taxpayer’s offshore arrangement is under investigation by the IRS or U. S. Department of Justice.
Streamlined filing compliance procedures.
The IRS announced on June 18, 2014, that streamlined filing compliance procedures would be changed to allow a wider population of U. S. taxpayers with unreported foreign accounts to qualify. Taxpayers living outside the United States continue to qualify, and, for the first time, some U. S. taxpayers residing in the United States qualify as well (see irs. gov).
Originally, the streamlined filing compliance procedures introduced on Sept. 1, 2012, were available only to nonresident U. S. taxpayers who failed to file required income tax returns. These taxpayers were subject to different degrees of review based on current tax liability and their response to a risk questionnaire.
The changes introduced in the streamlined procedures include:
Eliminating a requirement that the taxpayer have $1,500 or less of unpaid tax per year; Eliminating the required risk questionnaire; and Requiring the taxpayer to certify that previous failures to comply were due to non-willful conduct.
All penalties will be waived for eligible U. S. taxpayers residing outside the United States. For eligible U. S. taxpayers residing in the United States, the only penalty will be a miscellaneous offshore penalty equal to 5% of the foreign financial assets that gave rise to the tax compliance issue.
FBAR relief separate from the streamlined procedures.
Taxpayers who were required to file FBARs but failed to do so, and who are not under IRS civil examination or criminal investigation, should file the delinquent FBARs electronically through the BSA E-Filing System and include a statement explaining why the filings are late.
A penalty will not be imposed for failure to file delinquent FBARs if income from the foreign financial accounts reported on the delinquent FBARs is properly reported and taxes are paid, and the taxpayer has not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted.
Eligibility criteria for the streamlined procedures.
The new modified compliance procedures are designed only for individual taxpayers, which includes the taxpayer’s estate. Não-U. S. residents are subject to procedures referred to as “Streamlined Foreign Offshore Procedures,” while U. S. residents are subject to “Streamlined Domestic Offshore Procedures.” The criteria are:
Taxpayers must certify that their conduct was not willful. Both the foreign and domestic procedures require taxpayers to certify that the failure to report all income, pay all taxes, and submit all required returns, including the FBAR, was due to non-willful conduct. The IRS has not initiated a civil examination of the taxpayers’ returns for any tax year, and the taxpayers are not under IRS criminal investigation. Taxpayers eligible to use streamlined procedures who have previously filed delinquent or amended returns (so-called quiet disclosures) must pay any penalties assessed on those filings. Taxpayers who want to participate in the streamlined procedures need a valid taxpayer identification number (TIN). For U. S. citizens, resident aliens, and certain other individuals, the proper TIN is a valid Social Security number. Others need an individual taxpayer identification number, which, for taxpayers who do not have one, can be applied for when submitting the request to participate in the streamlined program.
Swiss-Banking Lawsuit Against IRS Could Have Wide Impact.
ZURICH—Bernhard Gubser was among thousands of clients outed five years ago by Swiss bank UBS Group AG to U. S. officials on the hunt for tax evaders.
Now, the 66-year-old Swiss citizen, who moved to the U. S. decades ago, picked up an American passport and nonetheless continued sending money back to Switzerland, is suing the Internal Revenue Service.
His case shines a light on U. S. rules designed to determine if a failure to declare an offshore bank account is willful wrongdoing, or a simple mistake.
Mr. Gubser’s lawsuit could help set a precedent for Americans seeking to challenge aspects of the U. S. bid to clamp down on offshore tax evasion—an effort that has focused heavily on Switzerland.
In a complaint filed on Tuesday in federal court in Texas, Mr. Gubser says his failure to declare assets that were in his UBS account for U. S. tax purposes in 2008 was an innocent error. The IRS disagrees, and deems it to be willful. The stakes are significant: a penalty of $10,000, versus a requirement to pay $1.35 million.
In his complaint, Mr. Gubser says IRS rules for determining if his mistake was willful—or, done with the knowledge that an omission would violate the law—are unclear. He has asked the Texas court to declare that the IRS’s standard of proof must be “clear and convincing evidence.”
An IRS spokesman didn’t respond to a request for comment. An attorney representing Mr. Gubser declined to comment.
Mr. Gubser was born in Tübach, a village in northeastern Switzerland. He didn’t attend college, and instead apprenticed with the Swiss railway system. He later went to work abroad in the logistics business, and in 1982 moved to the U. S. to work at the firm Transmaritime Inc. in Texas.
In 1992, Mr. Gubser became a U. S. citizen, though he retained Swiss citizenship and says he always intended to retire in Switzerland.
Man Wages $1.3 Million Fight With the IRS.
LAREDO, Texas (CN) – A businessman sued the IRS for demanding half of his life’s savings – $1.3 million – for a mistake he says his accountant made by checking the wrong box.
The IRS must prove he “willfully failed” to report his Swiss bank account to take the $1.3 million penalty from it, Bernhard Gubser says in his Dec. 15 federal lawsuit – and he didn’t willfully fail to do anything.
Bernhard Gubser is a Swiss national whose apprenticeship with the Swiss railroad system led to an import-export career in the United States, where he naturalized in 1992.
He has been president of Transmaritime Inc., a Laredo freight logistics firm, for 33 years, according to his LinkedIn page.
Gubser says his work often took him back to Switzerland, so he opened a bank account there to cover his living expenses.
“Gubser always intended to return to Switzerland upon retirement,” the complaint states.
In 2008 his Swiss account held his $2.8 million life savings, “from lawful sources … after-tax compensation and inheritances,” he says in the complaint.
Gubser says his Texas CPA Ernesto Dominguez, who had done his taxes for 20 years, made an unwitting mistake in his 2008 tax filing.
Dominguez checked “No” on the “Foreign Accounts and Trusts” section of Gubser’s tax return and no one from the accounting firm asked Gubser until 2010 if he had any foreign accounts, according to the complaint.
Dominguez is not a defendant in the lawsuit. The defendants are the Internal Revenue Service and its Commissioner John Koskinen.
Gubser says that when he learned about the so-called “FBAR” requirement, he filed it for 2009 and in every year since. (The acronym stands for Report of Foreign Bank and Financial Accounts.)
IRS auditors did not catch the mistake for six years.
But in 2014 the IRS told him his failure to file an FBAR in 2008 was a “willful violation,” and that “the amount of the asserted penalty would be 50 percent of the balance in the unreported foreign account at the time of the violation.”
The IRS assesses drastically different penalties for “willful” and “non-willful” FBAR violations.
“The civil penalty for a non-willful failure to file an FBAR is $10,000. The penalty for a willful failure to file is the greater of $100,000 or one-half the value of the undisclosed account,” de acordo com a queixa.
Gubser says he never willfully concealed his Swiss account. He says an IRS appeals officer admitted to his attorney on Sept. 10 that it cannot prove he acted willfully, but that it “can meet its burden by a mere preponderance of the evidence,” and the IRS has not backed down from its demand for $1.3 million.
Gubser says the IRS is misreading the statute and its burden of proof is much higher.
He seeks declaratory judgment that “the IRS must prove willful violations of the FBAR filing requirement by clear and convincing evidence,” rather than a preponderance of the evidence.
He is represented by Mackenzie Martin with Baker McKenzie in Dallas.
OVDI, FBAR International Tax. Opt out for better results?
The IRS 2011 Offshore Voluntary Disclosure Initiative (OVDI) program gave conditional amnesty allowing taxpayers with foreign accounts to come clean and get into compliance with the IRS. The program ran through Sept. 9, 2011.There’s been discussion of “opting out” of the program to take your chances in audit, but it’s a topic fraught with danger. Now, however, there is guidance about opting out of the program that makes much of it transparent. IF you properly filed FBARs and the 90-day request for amnesty extension, this is the first important step. If the forms are not done properly, you will have extensive problems and will not have to think about opting out. If your forms are properly done and filed, then your situation should be discussed with someone who is experienced in these matters.
Under the OVDI, taxpayers are subject to a penalty of 25 percent of the highest aggregate account balance on their undisclosed account(s) between 2003 and 2010. If the value was less than $75,000 at all times during those years, the penalty is only 12.5 percent.
These account balance penalties are in lieu of all other penalties that may apply, including FBAR and offshore-related information return penalties. Plus, participants are required to pay taxes and interest on any monies (such as interest income on foreign accounts) they previously failed to report. Finally, they must pay an accuracy-related penalty equal to 20 percent of the underpayment of tax, plus interest.
Opting out of the program can make sense for some, though it involves taking your chances with an IRS examination. Someone should represent you with extensive experience in this. We always suggest they should at least be a CPA with years of experience in international tax. It’s even better if you use one that was with the international tax division of the IRS for a number of years. The IRS has published a separate guide detailing the rules and procedures for opting out.
Here are some of the rules:
1. IRS Summary . The IRS employee who has been handling your case summarizes it, agreeing or disagreeing with your view of penalties, and listing how extensive an audit he or she recommends.
2. Program Status Report . Before you can opt out, the IRS sends a letter reporting on the status of your disclosure and what you still must submit. If you’ve given enough data, the IRS will calculate what you would owe under the OVDI. You should provide any missing items within 30 days.
3. Taxpayer Submission . Within 20 days, the taxpayer opts out in writing and makes a written case what penalties should apply and why.
4. Central Committee . A Committee of IRS Managers reviews the summary and decides how extensive an audit to conduct. The IRS says “the taxpayer is not to be punished (or rewarded) for opting out.” The Committee also decides whether to assign your case for a normal civil audit or to assign it for a criminal exam.
5. Written Warning . The IRS sends another letter explaining that opting out must be in writing and is irrevocable. You have 20 days thereafter to opt out in writing.
6. Interview? Some audits will include taxpayer interviews.
The “opt out” procedure is helpful but still a bit daunting. If you are considering it, make sure you get some solid advice from an experienced person who, in my opinion, should have worked for the IRS who is also a CPA or Public Accountant, about the nature of your case. This is just one of the many options that should be discussed with your advisor. There are many other strategies that you may want to utilize. Your advisor should be aware of all your options, and should explain them. If not, consider engaging someone else. Remember, the penalties can be very large, especially if your advisor is not skilled at this. There is even the potential for criminal prosecution.
IRS DEADLINE OF OCTOBER 15TH TO DECLARE FOREIGN SWISS ACCOUNTS.
The Internal Revenue Service will extend until October 15 th its limited amnesty program for U. S. taxpayers with undeclared income on foreign accounts, according to government officials.
The special voluntary disclosure program was begun in March after UBS AG turned over the names of more than 250 account holders as part of a criminal settlement. The IRS said the extension comes after “repeated requests” from tax professionals who need more time to help taxpayers enter the program. More than 3,000 taxpayers had come forward so far for all of last year. The program has received undue attention due to a dispute between the U. S. and Swiss governments over the identities of U. S. taxpayers holding $10 billion in 52,000 secret accounts at UBS. In August, the Swiss government agreed to identify at least 4,450 more UBS account holders and possibly many from other accounts.
I have been inundated with calls from people needing help and advise. Taxpayers are stepping forward due to deadline pressure. Another reason is that UBS recently sent the first round of letters to some account holders informing them that their information is about to be revealed. There has been no discernible pattern as to which customers were selected, ruining the hopes of those who might have thought they could escape scrutiny because their accounts were too small or were devoid of potential evidence of intent to evade taxes.
Tax payers are deciding to confess for many reasons including they want to sleep at night. Another is that they do not have access to the money anyway. Many of those accepted into the IRS’s disclosure program will owe back taxes, interest and a special penalty that will work out to 40% to 60% of the account balance, plus legal and accounting fees. It is unlikely they will bring criminal charges against anyone who steps forward.
Those who have been notified that their identity is about to be revealed to the IRS can appeal release of the information in Swiss courts. U. S. law requires any taxpayer who does so to notify the Justice Department. Failing to do so will make any criminal case worse. If you are in this type of situation do something NOW.
Offshore Voluntary Disclosure Initiative Program is Welcome but Conditional.
Announced February 8, 2011, the IRS 2011 Offshore Voluntary Disclosure Initiative (OVDI) program is a welcome but conditional amnesty allowing taxpayers with foreign accounts to come clean and get into compliance with the IRS. The program ran through Sept. 9, 2011.
There’s been discussion of “opting out” of the program to take your chances in audit, but it’s a topic fraught with danger. Now, however, there is guidance about opting out of the program that makes much of it transparent. Because of this late date it was recommended that you properly file FBARs and the 90-day request for amnesty extension. This is the first important step. If the forms are not done properly, you will have extensive problems and will not have to think about opting out. If your forms are properly done and filed, then your situation should be discussed with someone who is experienced in these matters. Under the OVDI, taxpayers are subject to a penalty of 25 percent of the highest aggregate account balance on their undisclosed account(s) between 2003 and 2010. If the value was less than $75,000 at all times during those years, the penalty is only 12.5 percent.
These account balance penalties are in lieu of all other penalties that may apply, including FBAR and offshore-related information return penalties. Plus, participants are required to pay taxes and interest on any monies (such as interest income on foreign accounts) they previously failed to report. Finally, they must pay an accuracy-related penalty equal to 20 percent of the underpayment of tax, plus interest.
Opting out of the program can make sense for some, though it involves taking your chances with an IRS examination. Someone should represent you with extensive experience in this. We always suggest they should at least be a CPA with years of experience in international tax. It’s even better if you use one that was with the international tax division of the IRS for a number of years. The IRS has published a separate guide detailing the rules and procedures for opting out.
Here are some of the rules:
1. IRS Summary. The IRS employee who has been handling your case summarizes it, agreeing or disagreeing with your view of penalties, and listing how extensive an audit he or she recommends.
2. Program Status Report. Before you can opt out, the IRS sends a letter reporting on the status of your disclosure and what you still must submit. If you’ve given enough data, the IRS will calculate what you would owe under the OVDI. You should provide any missing items within 30 days.
3. Taxpayer Submission. Within 20 days, the taxpayer opts out in writing and makes a written case what penalties should apply and why.
4. Central Committee. A Committee of IRS Managers reviews the summary and decides how extensive an audit to conduct. The IRS says “the taxpayer is not to be punished (or rewarded) for opting out.” The Committee also decides whether to assign your case for a normal civil audit or to assign it for a criminal exam.
5. Written Warning. The IRS sends another letter explaining that opting out must be in writing and is irrevocable. You have 20 days thereafter to opt out in writing.
6. Interview? Some audits will include taxpayer interviews.
Bottom Line? The “opt out” procedure is helpful but still a bit daunting. If you are considering it, make sure you get some solid advice from an experienced person who, in my opinion, should have worked for the IRS and is a CPA about the nature of your case. This is just one of the many options that should be discussed with your advisor. There are many other strategies that you may want to utilize. Your advisor should be aware of all your options, and should explain them. If not, consider engaging someone else. Remember, the penalties can be very large, especially if your advisor is not skilled at this. There is even the potential for criminal prosecution.
FBAR OVDI Offshore Tax Issues.
In 2012 the IRS announced another offshore voluntary disclosure program (the 2012 OVDI). These programs offer reduced penalties in exchange for taxpayers’ voluntarily coming into compliance before the IRS is aware of their prior tax indiscretions.
The 2012 OVDI 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 IRS can terminate it at any time as to specific classes of taxpayers or as to all taxpayers. 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. Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new OVDI program.
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. Potentially applicable penalties are identified in a series of Frequently Asked Questions available at irs. gov. 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.
Under the 2011 OVDI, taxpayers who are foreign residents and who were unaware they were U. S. citizens may qualified for a reduced five percent FBAR-related penalty (FAQ 52). Others qualified for the five percent penalty if they:
uma. Did not open or cause the account to be opened (unless the bank required that a new account be opened, rather than allowing a change in ownership of an existing account, upon the death of the owner of the account);
b. Have exercised minimal, infrequent contact with the account, for example, to request the account balance, or update account-holder information such as a change in address, contact person, or email address;
c. Have, except for a withdrawal closing the account and transferring the funds to an account in the United States not withdrawn more than $1,000 from the account in any year covered by the voluntary disclosure; e.
d. Can establish that all applicable U. S. taxes have been paid on funds deposited to the account (only account earnings have escaped U. S. taxation). For funds deposited before January 1, 1991, if no information is available to establish whether such funds were appropriately taxed, it is presumed that they were.
Taxpayers whose highest aggregate account balance (including the fair market value of assets in undisclosed offshore entities and the fair market value of any foreign assets that were either acquired with improperly untaxed funds or produced improperly untaxed income) in each of the years covered by the 2011 OVDI is less than $75,000 qualified for a 12.5 percent FBAR-related penalty (FAQ 53). IRS examiners have no authority to negotiate a different FBAR-related penalty.
FBARs for 2011 were due on June 30, 2012, without extension. Taxpayers, who reported and paid tax on all their taxable income but did not file FBARs, should not participate in the 2012 OVDI but should merely file the delinquent FBARs with the Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621 (and attach a statement explaining why the reports are filed late). Under the 2011 OVDI, the IRS agreed not to impose a penalty for the failure to file the delinquent FBARs if there were no underreported tax liabilities and taxpayers filed the FBARs by September 9, 2011 (FAQ 17). Presumably, the IRS will follow the same course under the 2012 OVDI since those with no underreported tax liabilities are not truly within the range of taxpayers the IRS is trying to identify.
Under the 2011 OVDI, taxpayers were not to be required to pay a penalty greater than what they would otherwise be liable for under the maximum penalties imposed under existing statutes (FAQ 50). A similar provision in the 2009 OVDP has caused considerable frustration among taxpayers and their representatives. The understanding of potentially applicable penalties may differ greatly in the eyes of a taxpayer as compared to an examiner. Anyone considering an offshore voluntary disclosure submission must carefully examine all potential civil penalties and evaluate the risk of criminal prosecution.
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?
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 whistleblowers, 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.
Those who think too long may be sorely surprised at the high level of ultimate cooperation of their institution with the U. S. government.
Taxpayers having undisclosed interests in foreign financial accounts must consult competent tax professionals before deciding to participate in the 2012 OVDI. I suggest using an ex IRS agent who worked in the section of the IRS that worked with international tax. He should also be a CPA. I get lots of phone calls from people who have been helped by their own accountants. Most of the help got the taxpayers into trouble. 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.
Participating taxpayers may well benefit by repatriating foreign funds with limited earning potential into a depressed U. S. economy and many business opportunities. If discovered before any voluntary disclosure submission, the results can be devastating. Waiting is not a viable option.
Another option is applying to join the program and then opting out. You then have the advantage of taking your case to appeals. In that way you may end up paying a lot less in taxes. If you do this make certain that the CPA that helps you also had appeals experience. If that CPA was with the IRS in the international division and also was with the IRS in the appeals division that would be the man to use. I happen to know such a CPA and he has been very successful for his clients.
FBAR OVDI Cause Americans Problems Over IRS Reporting Requirements.
Aggressive enforcement of tax rules for American expatriates and their families has prompted some middle-income earners to renounce their U. S. citizenship rather than risk sizable taxes and penalties. WSJ’s Liam Pleven reports on Lunch Break with Tanya Rivero.
Since 2009, the government campaign has collected more than $6 billion in taxes, interest and penalties from more than 43,000 U. S. taxpayers who did not file FBAR returns. Federal prosecutors have filed more than 100 criminal indictments.
The tax dragnet has also swept up many middle-income Americans living abroad, prompting some to give up their U. S. citizenship. While people who renounce aren’t freed of taxes due for past years, they don’t want to risk sizable taxes and penalties for them and their children in the years ahead, experts say.
The U. S. campaign to fine people who did not report on overseas income could affect millions of Americans — people, who aren’t wealthy, pay taxes in their host country, and who say they weren’t trying to dodge U. S. taxes.
“We have reached the point where middle-class American citizens abroad are being forced to renounce—especially if they have assets and are moving toward retirement—because of taxes, paperwork and huge potential penalties.
As word spreads, more Americans are likely to consider surrendering their citizenship. The State Department estimates that 7.6 million American citizens live outside the U. S., but only a fraction file required financial disclosure forms.
Mark Mazur, the Treasury Department’s assistant secretary for tax policy, said the government’s new enforcement was intended to help make sure all taxpayers pay what they owe “regardless of where they live.”
Mr. Mazur said Treasury was looking into how best to work with Congress and the IRS to fine-tune the system: “You can always improve.” The first step is using an accountant with OVDI and FBAR skills. He should be a CPA and even better should have been an ex IRS agent in the international division of the IRS.
U. S. officials launched their campaign after Swiss banking giant UBS AGUBSN. VX -0.06% admitted in 2009 that it helped wealthy American taxpayers hide money overseas. To avoid criminal charges, the bank paid $780 million to the U. S. and turned over information on more than 4,400 accounts, ending decades of Swiss bank secrecy.
In May, Credit Suisse Group CSGN. VX -0.26% pleaded guilty to similar charges and agreed to pay $2.6 billion. Dozens of other Swiss banks are currently negotiating penalties with the U. S. Department of Justice, officials said.
Following the UBS revelations, U. S. officials announced they would begin vigorously enforcing both new and long-dormant tax rules.
Unlike other developed nations, the U. S. government taxes citizens on income they earn anywhere in the world.
U. S. tax liabilities also cover children born to Americans abroad, extending the reach of the IRS across generations, as well as oceans.
For decades, wealthy taxpayers were able to hide foreign assets in countries where bank-secrecy laws fostered attractive tax havens, including Switzerland, the Cayman Islands and Panama. You can still see promoters touting offshore trusts and bank accounts as a way to avoid taxes. Many do it for asset protection and then run into FBAR and OVDI problems because their accountants are ignorant.
The UBS case signaled the beginning of the end for such havens. Armed with information from the Swiss bank, U. S. authorities pursued individuals for back taxes, and pressured the tax professionals who helped them.
The violations often don’t involve unpaid U. S. taxes on wages: The law currently exempts about $100,000 of income earned abroad each year. The most common mistakes usually involved Americans failing to submit a form called the Foreign Bank Account Report, or Fbar. Since 1970, U. S. taxpayers have been required to file if they held one or more foreign accounts totaling more than $10,000 over the course of a year. Until the enforcement push, many Americans never filed an Fbar.
The law is more than 40 years old, but “no one ever heard of it” before the crackdown Fbar penalties are as steep as 50% of the highest value of the account for each year no report was filed. The IRS fined one taxpayer for Fbar violations in four separate years, and a settlement reached this month in the case yielded $1.7 million in penalties, which was more than the account held at the time. Experts say the stiff penalties were originally enacted to discourage wealthy tycoons from hiding assets abroad.
Penalties and other costs can amount to a third of the balance in an account or more.
“The programs are best for people who have done things serious enough to land them in prison and are willing to pay huge penalties to stay out,” Americans with smaller offshore accounts who entered the first IRS limited amnesty program paid proportionately higher penalties than taxpayers with larger accounts, according to Nina Olson, the National Taxpayer Advocate, an IRS ombudsman.
The typical taxpayer with less than $45,000 in undeclared accounts paid nearly six times the back taxes owed, while the typical taxpayer with more than $7 million in such accounts paid closer to three times their back taxes, Ms. Olson found.
IRS officials “didn’t think about the demographics of the population” of overseas Americans, Ms. Olson said, often treating middle-class taxpayers the same as “bad actors.”
“There’s an awful lot of minnows caught up in this,” said Marvin Van Horn, a 66-year-old retired financial controller for Alaska Airlines. He said he entered an IRS limited-amnesty program in 2009: “I assumed it would be very clear I was not one of those quote-unquote offshore tax cheats, those big whales they were looking for.”
In prior U. S. tax filings, Mr. Van Horn said he hadn’t declared rental income from a house he and his Australian wife own in New Zealand, as well as interest income. He said he didn’t know such declarations were required.
“I have to take some responsibility,” Mr. Van Horn said. “It was stupidity and not paying attention on my part.”
The IRS fined him more than $172,000, roughly eight times his back taxes, which amounted to about $21,000 over six years, Mr. Van Horn, said. With help office,, the fine was reduced to about $25,000. Spokesmen for the IRS and Ms. Olson said they couldn’t comment on individual cases.
We get hundreds of phone calls from people who will be affected by FBAR and OVDI. Most were not advised of the problems by their so called accountants. Most are now being told that they will owe a large amount of money. Most are not told how to properly file for amnesty and then opt out to reduce their taxes.
In a June 3 speech, IRS Commissioner John Koskinen said the agency may not have been accommodating enough to U. S. citizens who have lived abroad for years. “We have been considering whether these individuals should have an opportunity to come into compliance that doesn’t involve the type of penalties that are appropriate for U. S.-resident taxpayers who were willfully hiding their investments overseas,” ele disse.
Scrutiny of Americans abroad will intensify, however, under the Foreign Account Tax Compliance Act, or Fatca, which Congress passed in 2010. The law’s main provisions, which take effect in July, will require foreign financial institutions to report income of their U. S. customers to the IRS, much as U. S. banks and brokers file 1099 forms.
Middle-class Americans “face overwhelming problems when they try to engage in standard financial practices, such as having a small business, saving for retirement, investing, buying life insurance, and making wills and trusts,” because of the laws governing assets abroad.
The penalty for failing to file can be as much as 35% of both contributions and withdrawals each year, plus 5% of the assets.
Don’t Give the IRS Every Last Drop.
The chances of an individual being audited have approximately doubled since 2000. So you need to be careful with your tax return. Have you seen the commercials where certain companies advertise that they can settle an IRS debt for “pennies on the dollar?” Usually the offer is too good to be true. Besides, you never want to have the problem in the first place.
The chances of an individual being audited have approximately doubled since 2000. So you need to be careful with your tax return.
IRS officials say research has shown that tax “noncompliance” typically is highest among people who work for themselves, who deal in large amounts of cash, who don’t have taxes withheld from their pay and whose income isn’t reported separately to the IRS, such as by their employer.
Another area that IRS has been focusing on for noncompliance is S corporations. With a typical S corporation, profits or losses flow through to the individual owners, who in turn are supposed to report those items on their individual returns.
Another are that could command attention is capital gains taxes. The reason: IRS officials suspect the government is losing billions of dollars in tax revenue because many investors inflate the cost basis, or the price they originally paid for stocks and other securities, in order to report lower capital gains when the securities are sold.
There have been some significant changes in the way the IRS targets businesses for audits and how it conducts them. Audits are up this year and will continue to increase. But the numbers are very misleading, because the IRS is getting much smarter about how it chooses returns for audit and how its examiners conduct their audits.
Over the past few years, the IRS has dramatically stepped up efforts to study specific industries, and to educate examiners about business practices, terminology, accounting methods and common industry practices. It has also identified areas of inquiry that produce audit results.
Examiners are told specifically to look for certain red flags to get at what is really going on in a business or transaction. The result: examinations are more sharply focused on potential areas that will generate increased taxes, penalties and interest. Fortunately, there is a positive side to all of this; it’s very easy to obtain a free copy of this information from the IRS.
When you have a certain medical problem, you go to a specialist. The same rule should be applied to financial problems. Always engage an accountant who specializes in your type of business. One of our long-term retirement plan clients recently retained our firm to perform a self-audit. The client, a successful businessman, was concerned when one of his colleagues was found liable for back taxes and penalties because of some mistakes by his accounting firm. Nervous that he might become an IRS target as well. Our client hired us to do an audit of his income taxes for the last three years, both personally and for his various businesses. What we found was shocking. Even though this client had used an accounting firm for his various returns, the taxes he had paid were far from what he owed. Luckily for him, it was an overpayment. This client will get a refund of almost $200,000.
Now let us turn to more positive alternatives, things that you can take the initiative on.
• Cash balance plan: A cash balance plan is a retirement plan that allows large contributions for owners. The deduction for owner sometimes can exceed salary. It can be combined with a 401(k) plan.
• SEP-IRA or basic profit-sharing plan? Think K instead. Many small business owners have used a SEP-IRA or basic profit sharing plan for their retirement needs due to the simplicity and low cost of these designs.
However, recent changes to the Internal Revenue Code have made these designs virtually obsolete. The K is a retirement plan for the small business owner that allows him or her to achieve: greater potential contributions; “catch up” deferrals at age 50+; increased current tax savings; plan loans up to $50,000; expand survivor benefits; complete flexibility; and low costs. Unlike SEP-IRA, a K will allow you to borrow up to 50 percent of your account balance (not to exceed $50,000) as long as you pay yourself back. And whereas a typical 401(k) plan may cost $1,000 or more to establish and perhaps more to administer each year, a K can be established and administered for a fraction of that cost.
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FBAR filings exceeded 1 million for the first time in 2014 and rose 9 of the last 10 years from about 280,000 in 2005.
Postagens recentes.
FBAR & FATCA INFORMATION April 18, 2016 The Bank Secrecy Act (BSA) April 18, 2016 Swiss-Banking Lawsuit Against IRS Could Have Wide Impact December 21, 2015 Man Wages $1.3 Million Fight With the IRS December 21, 2015 OVDI, FBAR International Tax. Opt out for better results? September 9, 2015 IRS DEADLINE OF OCTOBER 15TH TO DECLARE FOREIGN SWISS ACCOUNTS September 9, 2015 Offshore Voluntary Disclosure Initiative Program is Welcome but Conditional September 9, 2015 FBAR OVDI Offshore Tax Issues August 18, 2015 FBAR OVDI Cause Americans Problems Over IRS Reporting Requirements August 18, 2015 Don’t Give the IRS Every Last Drop August 18, 2015 FBAR Offshore Bank Accounts and Foreign Income Attacked by IRS July 23, 2015 FBAR Information July 23, 2015 FBAR Amnesty Quiet Disclosures of Offshore Foreign Accounts July 23, 2015 FBAR and FATCA Filings Due June 30 for Taxpayers with Overseas Assets June 19, 2015 IRS Reminds Taxpayers with Foreign Assets May Have FBAR and FATCA Filing Requirements in June June 12, 2015.
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Who needs to file an FBAR?
FBAR refers to Form 114.
The FBAR filing requirement is not part of filing a tax return.
The FBAR is a disclosure form, not a tax form.
Top mistakes people make when it comes to the FBAR.

Fbar reporting stock options

Heroes Earnings Assistance e Relief Tax Act of 2008 (Lei do Coração) (PL 110-245)
Veja também a Lei de Socorro Civil dos Servicemembers (PL 108-189) acima. Revisa a SSCRA.
Renda de permuta.
IRS Bartering Tax Centre IRS Tax Dica 2009-58 Renda Propriedade ou Serviços .. IRS Pub 334 Como funciona Bartering ..Howstuffworks IRS Formulário 1099-B IRS Form 1099-B Instruções.
Lei tributária básica.
Aviso: Sempre verifique as datas em cada publicação. Visão Geral do Sistema Tributário Federal como em vigor para 2017 .. A Lei Atual do JCT e a Visão Histórica do Sistema Tributário Federal. A Tributação de Indivíduos e Famílias. JCT Jul. 2017 Tratamento Tributário Federal de Indivíduos ..JCT 09/11 Lei e antecedentes atuais sobre a tributação de renda federal de pequenas empresas. JCT julho de 2017 Law & amp; Informações de Apoio Relacionadas com Tributação Federal & amp; Estado & amp; Finanças do Governo Local .. JCT 03/13 Visão Geral do Sistema Tributário Federal. Relatório do CRS Constitucionalidade da Legislação Tributária Retroativa ..Relatório de IRS Publicações do Imposto de Renda Indexado ao Índice de Publicações e Formulários do IRS aos Tópicos do Imposto do IRS.
Princípios Básicos do Direito Tributário ..Guia Tributária das Forças Armadas da Wikipédia: IRS Pub 3 (Pdf) ou (Texto) Circular E: Guia do Imposto do Empregador: IRS Pub 15 (Pdf) ou (Texto) Guia do Imposto Suplementar ao Empregador: IRS Pub 15-A ( Pdf) ou (Texto) Guia Fiscal do Empregador para Benefícios Fringe: IRS Pub 15-B (Pdf) ou (Texto) Guia Fiscal para Pessoas Físicas: IRS Pub 17 (Pdf) ou (Texto) Circular A: Guia de Impostos do Empregador Agrícola: IRS Pub 51 (Pdf) ou (Texto) Guia de Impostos para Agricultores: IRS Pub 225 (Pdf) ou (Texto) Guia Fiscal para Pequenas Empresas: IRS Pub 334 (Pdf) ou (Texto) Guia Fiscal para Seniores: IRS Pub 554 (Pdf) ou (Texto) Guia fiscal para o aposentado: IRS Pub 4190 (Pdf) regras fiscais para crianças & amp; Dependentes: IRS Pub 929 (Pdf) ou (Texto) Contas Individuais de Aposentadoria - Contribuições: IRS Pub 590-A (Pdf) ou (Texto) Contas Individuais de Aposentadoria - Distribuições: IRS Pub 590-B (Pdf) ou (Texto) Planos de Aposentadoria para Pequenas Empresas: IRS Pub 560 (Pdf) ou (Texto) Pension & amp; Renda de anuidade: IRS Pub 575 (Pdf) ou (texto) Guia fiscal para benefícios de aposentadoria do Serviço Civil dos EUA: IRS Pub 721 (Pdf) ou (texto) Guia de imposto sobre empregadores domésticos: IRS Pub 926 (Pdf) ou (texto) Educação: IRS Pub 970 (Pdf) ou (texto) Informações fiscais para os compradores iniciais da First Time: IRS Pub 530 (Pdf) ou (texto) Sobreviventes, Executores e Administradores: IRS Pub 559 (Pdf) ou (Texto) Guia Fiscal para Cidadãos dos EUA & amp; Estrangeiros Residentes no Exterior: IRS Pub 54 (Pdf) ou (Texto) Guia Fiscal para Indivíduos com Rendimento de Possessões dos EUA: IRS Pub 570 (Pdf) ou (Texto) Guia de Imposto dos EUA para Estrangeiros: IRS Pub 519 (Pdf) ou (Texto) Guia de Impostos do Empregador - Territórios dos EUA: IRS Pub 80 (Pdf) ou (Texto) Parcerias: IRS Pub 541 (Pdf) ou (Texto) Empresas: IRS Pub 542 (Pdf) ou (Texto)
Tributação de Investidores.
Guia Fiscal para Ganhos e Perdas de Capital ..Fairmark Pressa Lei Atual Relativa à Tributação de Ganhos de Capital..JCT 09/2012 Vendas e outras Disposições de Ativos ..IRS Pub 544 Base de Ativos ..IRS Pub 551 Regulamento Final: Relatórios de Custos Basis Cost Basis Reporting Centro de Recursos ..Wolters Kluwer.
Imposto sobre o rendimento líquido de investimentos, ou seja, 3,8% de imposto de contribuição do Medicare.
IRS FAQs Análise do Rendimento Líquido de Investimento pós-2012 e Impostos adicionais do Medicare ..CCH Visão Geral do Imposto de Renda de Investimento de 3,8%, Parte 1 .. Visão Geral do Novo Imposto de Renda de Investimento de 3,8%, Parte 2: Atividades Passivas ..Forbes Visão geral do novo Imposto de Renda de Investimento de 3,8%, Parte 3: Ganhos de Propriedade .. Visão Geral do Novo Imposto de Renda de Investimento de 3,8%, Parte 4: Renda de Aluguel e Profissional Imobiliário ..Forbes que é um Profissional Imobiliário ..Forbes The New Medicare Tax ..Fidelity The 3.8% Medicare Surtax on Investment Income ..US Trust Treasury Final Regulamentos TD 9644 CCH Briefing On Regulamento Final Treasury propôs regulamentos (dois itens em aberto)
Vendendo sua casa.
Vendendo sua casa ..IRS Pub 523 Aspectos fiscais de vender uma casa ..TurboTax.
Veja meu resumo da lei fiscal para membros das forças armadas. Final do IRS & amp; Regulamentos Temporários de Venda de Casa.

Part 4. Examining Process.
Section 16. Report of Foreign Bank and Financial Accounts (FBAR)
4.26.16 Report of Foreign Bank and Financial Accounts (FBAR)
Manual Transmittal.
November 06, 2015.
(1) This transmits revised text of IRM 4.26.16, Bank Secrecy Act, Report of Foreign Bank and Financial Accounts (FBAR) .
Material Changes.
(1) Terms and acronyms were revised to reflect current usage. This includes replacing "TD F 90-22.1" with "FinCEN Report 114" and replacing "Detroit Computing Center" with "Detroit Federal Building."
(2) The text was revised to incorporate the regulatory changes made by a revision to 31 CFR 1010.350, published February 24, 2011.
(3) Citations were renumbered from 31 CFR Part 103 to 31 CFR Chapter X, effective March 1, 2011.
(4) Style and punctuation was updated to conform to the IRM Style Guide and the Plain Writing Act of 2010.
(5) The text incorporates recent Notices issued by FinCEN and IRS to clarify provisions of the regulations, which are also provided as Exhibits 4.26.16-3 through -10.
(6) References to the penalty provisions applicable prior to October 23, 2004, were deleted.
(7) The text of Interim Guidance Memorandum SBSE-04-0607-024, as reissued on June 18, 2008, was incorporated as new Exhibit 4.26.16-2.
(8) Interim Guidance Memorandum SBSE-04-0515-0025, as issued on May 13, 2015, was incorporated into the text.
Effect on Other Documents.
Effective Date.
Barbara J. Fiebich.
Director, Specialty Examination Policy.
FBAR Overview.
The Report of Foreign Bank and Financial Accounts (FBAR) , Financial Crimes Enforcement Network (FinCEN) Report 114, is required when a U. S. person has a financial interest in, or signature authority over, one or more foreign financial accounts with an aggregate value greater than $10,000 at any time during the reporting period (calendar year). If a report is required, certain records must also be kept.
In April 2003, the IRS was delegated civil enforcement authority for the FBAR.
IRM 4.26.16 covers FBAR law. FBAR examination procedures are covered in IRM 4.26.17.
FBAR Authorities.
The requirement to report foreign bank and financial accounts was added to the United States Code (USC) in 1970 as part of the "Currency and Foreign Transactions Reporting Act of 1970" , which came to be known as the "Bank Secrecy Act" or "BSA." These anti-money laundering provisions, as amended, were codified at 31 USC 5311 - 5332, excluding section 5315.
The Secretary of the Treasury delegated the authority to administer civil compliance with Title II of the BSA to the Director, FinCEN. IRS Criminal Investigation (CI) has authority to enforce the criminal provisions of the BSA.
While FinCEN retains its rule-making authority for FBAR, it redelegated civil FBAR enforcement authority to the IRS. See IRM 4.26.16.2.2(4), below.
FBAR Statutory Authority.
The statutory authority for the FBAR is 31 USC 5314.
Section 5314 directs the Secretary of the Treasury to require a resident or citizen of the United States to keep records and/or file reports when making transactions or maintaining a relationship with a foreign financial agency.
31 USC 5321(a)(5) and (a)(6) establish civil penalties for violations of the FBAR reporting and recordkeeping requirements. See IRM 4.26.16.6 below for a discussion of penalties.
FBAR Regulatory Authority.
31 CFR 1010.350 contains the FBAR definitions and requirements. Section 1010.350 states "each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner of Internal Revenue for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under 31 USC 5314 to be filed by such persons."
31 CFR 1010.306(c) specifies a filing due date of June 30th for the report for the prior year. The report is required to be electronically filed with FinCEN on FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR) .
31 CFR 1010.420 requires maintenance and retention of FBAR records for a period of five years.
31 CFR 1010.810(g) references a Memorandum of Agreement between FinCEN and the IRS, which redelegates, to the IRS, FinCEN's authority to enforce the provisions of 31 USC 5314 and 31 CFR 1010.350 and 1010.420. This includes the authority to:
Assess and collect civil FBAR penalties.
Investigate possible civil violations of these provisions.
Employ the summons power of subpart I of Chapter X.
Issue administrative rulings under subpart G of Chapter X.
Take any other action reasonably necessary for the enforcement of these and related provisions, including pursuit of injunctions.
FBAR Filing Criteria.
An FBAR is required if all of the following apply:
The filer is a U. S. person.
The U. S. person has a financial interest in a financial account or signature or other authority over a financial account.
The financial account is in a foreign country.
The aggregate amount(s) in the account(s) valued in dollars exceed $10,000 at any time during the calendar year.
For a discussion of the requirements of money transmitters, see Exhibit 4.26.16-2 This exhibit also includes several Frequently Asked Questions.
United States Person.
A "United States person" is defined by 31 CFR 1010.350(b) to include:
A citizen of the United States.
A resident of the United States.
An entity formed under the laws of the United States, any state, the District of Columbia, any territory or possession of the United States, or an Indian tribe.
The federal tax treatment of a United States person does not determine whether the person has an FBAR filing requirement.
Single-member Limited Liability Companies (LLCs) are disregarded for federal tax purposes, but would have to file the FBAR if otherwise required to do so.
Some trusts may not file tax returns but may have an FBAR filing requirement.
The definition of "United States" for this purpose is found in 31 CFR 1010.100(hhh). For FBAR and other Title 31 purposes, "United States" includes:
The States of the United States.
The District of Columbia.
The Indian lands (as defined in the Indian Gaming Regulatory Act).
The territories and insular possessions of the United States.
U. S. territories and insular possessions currently include:
U. S. Virgin Islands.
Northern Mariana Islands.
U. S. Citizen.
A citizen of the U. S. has a U. S. birth certificate or naturalization papers.
U. S. citizenship is not defined by residency. A citizen of the U. S. may reside outside the U. S.
Children born of U. S. citizens living abroad are U. S. citizens despite the fact that they may never have been to the U. S.
U. S. Resident.
Prior to February 24, 2011, when revised regulations were issued, the FBAR regulations did not define the term "U. S. resident."
For FBARs required to be filed by June 30, 2011, or later, 31 CFR 1010.350(b) defines "United States resident" using the definition of resident alien in IRC 7701(b), but using the Title 31 definition of "United States." The major tests of residency found in section 7701(b) are:
The green-card test. Individuals who at any time during the calendar year have been lawfully granted the privilege of residing permanently in the U. S. under the immigration laws automatically meet the definition of resident alien under the green-card test.
The substantial-presence test. Individuals are defined as resident aliens under the substantial-presence test if they are physically present in the U. S. for at least 183 days during the current year, or they are physically present in the U. S. for at least 31 days during the current year and meet the specifications contained in IRC 7701(b)(3).
The individual files a first-year election on his income tax return to be treated as a resident alien under IRC 7701(b)(4).
The individual is considered a resident under the special rules in section 7701(b)(2) for first-year or last-year residency.
Individuals residing in the U. S. who do not meet one of these residency tests are not considered U. S. residents for FBAR purposes. This includes individuals in the U. S. under a work visa who do not meet the substantial-presence test.
Using these rules of residency can result in a non-resident being considered a U. S. resident for FBAR purposes. This would occur when a green-card holder actually resides outside the U. S.
FinCEN clarified in the preamble to the regulations that an election under IRC 6013(g) or (h) is not considered when determining residency status for FBAR purposes.
U. S. tax treaty provisions do not affect residency status for FBAR purposes. A treaty provision which allows a resident of the U. S. to file tax returns as a non-resident does not affect residency status for FBAR purposes if one of the tests of residency in IRC 7701(b) is met.
Diplomats residing at foreign embassies in the U. S. are not generally considered U. S. residents since foreign embassies are generally considered part of the sovereign nation they represent.
A U. S. entity is a legal entity formed under the laws of the U. S., any state, the District of Columbia, any territory or possession of the U. S., or an Indian tribe.
31 CFR 1010.350(b) specifically names, but does not limit these types of entities to:
Limited Liability Companies.
The preamble to the regulations clarifies that pension plans and welfare benefit plans are included as U. S. entities.
The definition of entities allows for new types of legal entities to be included in the future.
Financial Account.
A reportable financial account includes a:
Bank account, such as a savings deposit, demand deposit, checking, time deposit (CD), or any other account maintained with a financial institution or other person engaged in the business of banking.
Securities account, securities derivatives account, or other financial instruments account held with a person engaged in the business of buying, selling, holding or trading stock or other securities.
Other financial account, as defined in (2) below. IRM 4.26.16.3.2 (2)
"Other Financial Account" is defined by the regulations to include:
An account with a person in the business of accepting deposits as a financial agency.
An insurance or annuity policy that has a cash value.
The preamble to the regulations clarifies that there need be no current payment of an income stream to trigger reporting. The cash value of the policy is considered the account value.
An account with a person that acts as a broker or dealer for futures or options transactions in any commodity on or subject to the rules of a commodity exchange or association.
A mutual fund or similar pooled fund defined as "a fund which issues shares available to the general public that have a regular net asset value determination and regular redemptions."
The following are not considered financial accounts:
Stocks, bonds, or similar financial instruments held directly by the person.
Real estate or an account holding solely real estate (e. g., Mexican "fideicomiso" ).
A safety deposit box.
A reportable account may exist where the financial institution providing the safety deposit box has access to the contents and can dispose of the contents upon instruction from, or prearrangement with, the person.
Precious metals, precious stones, or jewels held directly by the person.
31 USC 5314 defines "foreign financial agency" as "a person acting for a person as a financial institution, bailee, depository trustee, or agent, or acting in a similar way related to money, credit, securities, gold, or a transaction in money, credit, securities, or gold." Therefore, a reportable account relationship may exist where a foreign agency holds precious metals on deposit or provides insurance or other services as an agent of the person owning the precious metals.
Financial Account Exceptions.
The following are not considered reportable financial accounts for FBAR purposes:
An account of a department or agency of the U. S., an Indian tribe, any state or any political subdivision of a state, any territory or insular possession of the U. S., or a wholly-owned entity, agency or instrumentality of any of the foregoing.
An account of an international financial institution of which the U. S. government is a member. (e. g., the International Monetary Fund (IMF) and the World Bank.)
An account in an institution known as a "United States military banking facility," that is, a facility designated to serve U. S. military installations abroad.
Correspondent or "nostro" accounts that are maintained by banks and used solely for bank-to-bank settlements.
Custodial or "omnibus" accounts held for the person by a U. S. institution acting as a global custodian, as long as the person cannot directly access the foreign custodial account.
Account Valuation.
The FBAR is required for each calendar year during which the aggregate amount(s) in the foreign account(s) exceeded $10,000, valued in U. S. dollars, at any time during that calendar year. To determine the account value to report on the FBAR follow these steps:
Determine the maximum value in locally denominated currency. The maximum value of an account is the largest amount of currency and non-monetary assets that appear on any quarterly or more frequent account statement issued for the applicable year.
If the statement closing balance is $9,000 but at any time during the year a balance of $15,000 appears on a statement, the maximum value reportable on an FBAR is $15,000.
If periodic account statements are not issued, the maximum account asset value is the largest amount of currency and non-monetary assets in the account at any time during the year.
Convert the maximum value into U. S. dollars by using the official exchange rate in effect at the end of the year at issue for converting the foreign currency into U. S. dollars. The official Treasury Reporting Rates of Exchange for recent years are posted on the FBAR home page of the IRS web site at irs. gov. Search for keyword "FBAR" to find the FBAR home page. Current and recent quarterly rates are also posted on the Bureau of the Fiscal Service website at fiscal. treas. gov.
If the filer has more than one account to report on the FBAR, each account is valued separately in accordance with the previous paragraphs.
If a person has one or more but fewer than 25 reportable accounts and is unable to determine whether the maximum value of these accounts exceeded $10,000 at any time during the calendar year, the FBAR instructions state that the person is to complete the applicable parts of the FBAR for each of these accounts and enter "value unknown" in Item 15.
Financial Interest.
Direct Financial Interest:
A U. S. person has a financial interest in each account for which such person is the owner of record or has legal title, whether the account is maintained for his own benefit or for the benefit of others including non-U. S. persons.
If an account is maintained in the name of two persons jointly, or if several persons each own a partial interest in an account, each of those U. S. persons has a financial interest in that account and, generally, each person must file the FBAR. However, see special rules for spousal filing in IRM 4.26.16.4.4, below.
Because the FBAR is a report of foreign financial accounts, the entire account value for jointly-owned accounts is reported on each FBAR. Accounts are not prorated for a person's percentage of ownership interest.
Indirect financial interest: A U. S. person has an "other financial interest" in each bank, securities, or other financial account in a foreign country for which the owner of record or holder of legal title is:
A person acting as an agent, nominee, attorney, or in some other capacity on behalf of the U. S. person.
A corporation, whether foreign or domestic, in which the U. S. person owns directly or indirectly more than 50 percent of the total value of shares of stock or more than 50 percent of the voting power for all shares of stock.
A partnership, whether foreign or domestic, in which the United States person owns an interest in more than 50 percent of the profits (distributive share of income, taking into account any special allocation agreement) or more than 50 percent of the capital of the partnership.
Any other entity in which the U. S. person owns directly or indirectly more than 50 percent of the voting power, total value of the equity interest or assets, or interest in profits.
A trust, if the U. S. person is the trust grantor and has an ownership interest in the trust for U. S. federal tax purposes under 26 USC 671–679 and the regulations thereunder.
A trust, whether foreign or domestic, in which the U. S. person either has a present beneficial interest, either directly or indirectly, in more than 50 percent of the assets of the trust or from which such person receives more than 50 percent of the trust’s current income.
The family attribution rules under Title 26 do not apply to FBAR reporting.
Anti-avoidance rule: A U. S. person that causes an entity including, but not limited to, a corporation, partnership, or trust, to be created for the purpose of evading the FBAR reporting and/or recordkeeping requirements shall have a financial interest in any bank, securities, or other financial account in a foreign country for which the entity is the owner of record or holder of legal title. 31 CFR 1010.350(e)(3).
Signature or Other Authority Over an Account.
An individual has signature or other authority over an account if that individual (alone or in conjunction with another) can control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained.
Individuals not considered as having signature authority:
Individuals with only the authority to buy or sell investments within the account, but no authority to disburse assets from the account.
Individuals with supervisory authority over the individuals who actually communicate with the person with whom the account is maintained. FinCEN clarified, in the preamble to the regulations at 31 CFR 1010.350, that approving a disbursement that a subordinate actually orders is not considered signature authority.
Only individuals can have signature authority. Signature authority attributed to entities must be exercised by individuals.
Signature Authority Exceptions.
An officer or employee of the following institutions need not report signature or other authority over a foreign financial account owned or maintained by the institution if the officer or employee has no financial interest in the account:
A bank that is examined by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or the National Credit Union Administration.
A financial institution that is registered with and examined by the Securities and Exchange Commission or Commodity Futures Trading Commission.
An Authorized Service Provider for a foreign financial account owned or maintained by an investment company that is registered with the Securities and Exchange Commission.
Authorized Service Provider is an entity that is registered with and examined by the Securities and Exchange Commission and that provides services to an investment company registered under the Investment Company Act of 1940.
An entity with a class of equity securities listed (or American depository receipts listed) on any U. S. national securities exchange.
Previously, instructions to the form allowed a "large corporation" exception for listed corporations. That exception was expanded to include all listed entities.
An entity that has a class of equity securities registered (or American depository receipts registered) under section 12(g) of the Securities Exchange Act.
An officer or employee of a U. S. subsidiary of an entity in (d) above need not report signature authority over accounts of the subsidiary if the entity files a consolidated FBAR listing the accounts of the subsidiary.
Extended Due Dates for Certain Individuals Who Only Had Signature Authority.
IRS Notice 2009-62, issued in August 2009, Exhibit 4.26.16-3 , extended the due date for the FBAR filing requirement for calendar years 2008 and prior years until June 30, 2010 for:
U. S. persons with signature authority, but no financial interest, in an account.
U. S. persons with a financial interest in, or signature authority over, a foreign financial account in which the assets are held in a commingled fund.
IRS Notice 2010-23 extended again the due date for the FBAR filing until June 30, 2011, for the same filers named in Notice 2009-62. The Notice stated the extension was provided "in order for the Treasury Department to have the time necessary to develop comprehensive FBAR guidance." See Exhibit 4.26.16-4 .
FinCEN Notice 2011-1, issued in June 2011, Exhibit 4.26.16-5 , extended to June 30, 2012, the filing due date for:
An employee or officer of an entity under 31 CFR 1010.350(f)(2)(i)-(v) who has signature or other authority over, and no financial interest in, a foreign financial account of a controlled person of the entity.
An employee or officer of a controlled person of an entity under 31 CFR 1010.350(f)(2)(i)-(v) who has signature or other authority over, and no financial interest in, a foreign financial account of the entity, the controlled person, or another controlled person of the entity.
FinCEN Notice 2011-2, also issued in June 2011, extended to June 30, 2012, the filing due date for FBARs of filers reporting only their signature authority over accounts of employers who are registered investment advisors. See Exhibit 4.26.16-6 .
FinCEN Notice 2012-1, issued February 14, 2012, extended to June 30, 2013, the filing due date for FBARs of filers named in FinCEN Notices 2011-1 and 2011-2. See Exhibit 4.26.16-7 .
FinCEN Notice 2012-2, issued December 26, 2012, extended to June 30, 2014, the filing due date for FBARs of filers named in FinCEN Notice 2012-1. See Exhibit 4.26.16-8 .
FinCEN Notice 2013-1, issued December 17, 2013, extended to June 30, 2015, the filing due date for FBARs of filers named in FinCEN Notice 2012-2. See Exhibit 4.26.16-9 .
FinCEN Notice 2014-1, issued November 24, 2014, extended to June 30, 2016, the filing due date for FBARs of filers named in FinCEN Notice 2013-1. See Exhibit 4.26.16-10 .
Examiners should be aware of these extension provisions when determining the timeliness of FBAR filings. It is possible that some signature authority filers may have received several years of extensions due to these Notices.
Foreign Country.
A foreign country includes all geographical areas located outside of the United States as defined in 31 CFR 1010.100(hhh). An account is "foreign" for FBAR purposes if it is located outside:
the States of the United States.
The District of Columbia.
The Indian lands (as defined in the Indian Gaming Regulatory Act).
The territories and insular possessions of the United States. See IRM 4.26.16.3.1(4) above.
It is the location of an account, not the nationality of the financial institution, that determines whether an account is "foreign" for FBAR purposes. Accounts of foreign financial institutions located in the U. S. are not considered foreign accounts for FBAR; conversely, accounts of U. S. financial institutions located outside the U. S. are considered foreign accounts. Os exemplos são:
An account with a Hong Kong branch of a U. S.-based bank is a foreign financial account for FBAR purposes.
An account with a New York City branch of a foreign-based bank is not a foreign financial account for FBAR purposes.
Aggregate Value Over $10,000.
The final criterion triggering the FBAR filing requirement is the aggregate value of all foreign financial accounts in which the person has a financial interest, or over which the individual has signature or other authority, must be greater than $10,000, valued in U. S. dollars, at any time (on a particular day) during the calendar year.
Steps to aggregate account values:
Each account should be separately valued according to the steps outlined in IRM 4.26.16.3.2.2 to determine its highest valuation during the year in the foreign denominated currency.
Money moved from one foreign account to another foreign account during the year must only be counted once.
Each account should be converted from foreign denominated value to U. S. dollars using the FMS conversion rate for December 31st of the calendar year being reported. See IRM 4.26.16.3.2.2, Account Valuation , above.
All reportable accounts should be aggregated, including:
Direct financial interest accounts (see IRM 4.26.16.3.3(1), above).
Indirect financial interest accounts (see IRM 4.26.16.3.3(2), above).
Signature authority accounts (see IRM 4.26.16.3.4, above).
FBAR Filing Procedures.
The determination to file the FBAR is made annually. For example, a person may be required to file an FBAR for one calendar year but not for a subsequent year if the person’s aggregate foreign account balance does not exceed $10,000 at any time during the year.
An FBAR must be filed for each calendar year that the person has a financial interest in, or signature authority over, foreign financial account(s) whose aggregate balance exceeds the $10,000 threshold at any time during the year.
General FBAR Filing.
The FBAR must be filed on or before June 30 each year for the previous calendar year.
All FBARs filed after June 30, 2013, must be filed electronically through the FinCEN BSA E-Filing website at bsaefiling. fincen. gov/main. html unless the filer requested, and was granted, an exception to e-filing by FinCEN.
The FBAR should not be filed with the filer’s federal income tax return or information return.
FBAR Filing Help.
Help with technical FBAR questions is available from IRS. Filers may:
E-mail FBAR questions to FBARquestions@irs. gov. This is the preferred method and generally results in the quickest response.
Call IRS Help Lines Monday through Friday, (8 AM to 4:30 PM ET), at 866-270-0733 (toll-free for calls within the U. S.) or 313-234-6146 (not toll-free for calls from outside the U. S.).
Filers may find answers to many questions on the FBAR Home Page on IRS. gov. Enter "FBAR" in the search box.
Help with electronic filing is available from FinCEN. Filers may:
E-mail questions to BSAEFilingHelp@fincen. gov.
Call the E-File Help Line at 866-346-9478. (No toll call option.)
Call FinCEN's Regulatory Help Line at 800-949-2732 (toll-free for U. S. callers) or 703-905-3975 (for callers outside the U. S.) or email to frc@fincen. gov to request an exception to e-filing.
FBAR Filing Exceptions.
Individual Retirement Account (IRA) owners and beneficiaries, and participants in and beneficiaries of U. S. tax-qualified retirement plans, are not required to report a foreign financial account held by or on behalf of the IRA or retirement plan.
This exception is for U. S. plans only. Foreign plans (e. g., a Canadian Registered Retirement Savings Plan (RRSP) and accounts managed by Mexico’s Administrators of Retirement Funds (AFORES) are normally reportable on an FBAR.
A trust beneficiary with a financial interest is not required to report the trust's foreign financial accounts on an FBAR if the trust, trustee of the trust, or agent of the trust:
Is a U. S. person, and.
Files an FBAR disclosing the trust's foreign financial accounts.
FBAR Filing by Married Couples.
Accounts owned jointly by spouses may be filed on one FBAR. The spouse of an individual who files an FBAR is not required to file a separate FBAR if the following conditions are met:
All the financial accounts that the non-filing spouse is required to report are jointly owned with the filing spouse.
The filing spouse reports the jointly owned accounts on a timely, electronically filed FBAR.
Both spouses complete and sign Part I of FinCEN Form 114a, Record of Authorization to Electronically File FBARs . The filing spouse completes Part II of Form 114a in its entirety.
The completed Form 114a is not filed but must be retained for five years. It must be provided to IRS or FinCEN upon request.
If these conditions are not met (as when both spouses have individual accounts in addition to the jointly-owned accounts), both spouses are required to file separate FBARs, and each spouse must report the entire value of the jointly-owned accounts.
For calendar years prior to 2014, use the instructions for spousal filing current for that filing year.
Electronic FBAR Filing by a Third Party.
FBAR filers may authorize a paid preparer or other third party to electronically file the FBAR for them.
The person reporting financial interest in, or signature authority over, foreign accounts must complete and sign Part I of FinCEN Form 114a.
The preparer or other third-party filer must complete Part II of Form 114a.
Form 114a is not filed. Both parties must retain the form for five years. It must be provided to IRS or FinCEN upon request.
It remains the responsibility of the filer to ensure that filing takes place timely and the report is accurate. Form 114a contains a disclaimer that states: ". it is my/our legal responsibility, not that of the preparer listed in Part II, to timely file an FBAR if required by law to do so."
FBAR Filing for Financial Interest in 25 or More Accounts.
31 CFR 1010.350(g) provides that a United States person that has a financial interest in 25 or more foreign financial accounts only needs to provide the number of financial accounts and certain other basic information on the report, but will be required to provide detailed information concerning each account if the IRS or FinCEN requests it.
Filers must comply with FBAR record-keeping requirements. See IRM 4.26.16.5.1, below.
FBAR Filing for Signature Authority for 25 or More Accounts.
31 CFR 1010.350(g) provides that A United States person that has signature or other authority over 25 or more foreign financial accounts only needs to provide the number of financial accounts and certain other basic information on the report, but will be required to provide detailed information concerning each account if the IRS or FinCEN requests it.
Filers must comply with FBAR record-keeping requirements. See IRM 4.26.16.5.1, below.
FBAR Filing for U. S. Persons Residing and Employed Outside the United States.
The FBAR filing instructions allow for modified reporting by a U. S. person who meets all three of the following criteria:
Resides outside the U. S.
Is an officer or employee of an employer located outside the U. S.
Has signature authority over a foreign financial account(s) of that employer.
In such cases, the U. S. Person should file the FBAR by:
Completing filer information.
Omitting account information.
Completing employer information one time only.
Filing A Consolidated FBAR.
31 CFR 1010.350(g) allows an entity that is a U. S. person that owns directly or indirectly a greater than 50 percent interest in another entity that is required to file an FBAR to file a consolidated FBAR on behalf of itself and such other entity.
Each controlled entity that has an FBAR filing obligation must be listed in Part V, even if that entity owns foreign accounts only indirectly.
No FBAR Filing Extension.
There is no statutory authority to extend the time for filing an FBAR, and any request for such an extension will be denied.
Extensions of time to file federal income tax returns or information returns do not extend the time for filing FBARs.
IRC section 7508 "Time for performing certain acts postponed by reason of service in combat zone or contingency operation" does not grant U. S. persons that are U. S. Armed Forces members an extension to file the FBAR.
This is not to be confused with extension of the statute of limitations on assessment or collection of penalties, which is possible. See IRM 4.26.17.5.5.
Delinquent FBAR Filing Procedures.
Delinquent FBARs should be filed using the current electronic report, but using the instructions for the year being reported to determine if an FBAR filing requirement exists.
On page one of FinCEN Report 114, explain the reason the FBAR was not filed timely. Select a common reason from the drop-down box or select Other, and a 750-character text box appears to allow an explanation.
Keep a copy of the FBAR for recordkeeping purposes.
No penalty will be asserted if the IRS determines that the failure to timely file an FBAR was not willful and was due to reasonable cause.
Amending a Filed FBAR.
To amend a filed FBAR, filers should:
Check the "Amended" box in Item 1 at the top of page two and fill in the "Prior Report BSA Identifier" for the original filing in the block provided.
Complete the report in its entirety using the amended information.
FBAR Filing Verification.
IRS personnel can verify FBAR filing on the FinCEN Query System.
A FinCEN Query printout of a filed FBAR can establish that a retained copy of an FBAR provided by a filer or representative was actually filed and that the retained FBAR has the same information as the filed FBAR. FinCEN Query printouts can be obtained by both the filer’s name and Taxpayer Identification Number (TIN).
Filers receive immediate electronic verification for FBARs filed electronically with FinCEN.
Filers can request verification of FBARs filed, 60 days after the date of filing. A request for verification of FBAR filing may be made:
By calling 1-866-270-0733 and selecting option 1, up to five documents can be verified at no charge.
In writing when requesting verification for more than five documents or for requests for paper copies of FBAR reports. The request should include the filer's name, Taxpayer Identification Number, and filing period(s). Tax practitioners requesting verifications for their clients must also make these requests in writing, and provide a copy of the Form 2848, Power of Attorney and Declaration of Representative , authorizing them to receive the FBAR information. For written verifications, there is a $5.00 fee for verifying five or fewer forms and a $1.00 fee for each additional form. If copies are needed, there is an additional fee of $0.15 per copy of the entire FBAR. Checks or money orders should be made payable to the United States Treasury. Written requests and payments for FBAR filing verifications and copies of filed FBARs should be mailed to:
IRS Detroit Federal Building.
Compliance Review Team.
Detroit, MI 48232-0063.
FBAR Recordkeeping.
If the FBAR is required, certain records must be retained by the filer. 31 CFR 1010.420. Each person having a financial interest in or signature or other authority over any such account must keep the following records:
Name in which the account is maintained.
Number or other designation identifying the account.
Name and address of the foreign financial institution or other person with whom the account is maintained.
Type of account.
Maximum value of each account during the reporting period.
The records must be kept for five years from the June 30 due date for filing the FBAR for that calendar year and be available at all times for inspection as provided by law.
Note that persons are not required to keep copies of FBARs filed, only the records that underlie the filing.
An officer or employee who files an FBAR to report signature authority over an employer's foreign financial account is not required to personally retain records regarding that account.
FBAR Recordkeeping For Filers Having 25 Or More Accounts.
A filer who has financial interest in or signature authority over 25 or more foreign financial accounts must also comply with the record keeping requirements in IRM 4.26.16.5.
Filers will be required to provide detailed information concerning each account if the IRS or FinCEN requests it.
FBAR Penalties.
The IRS has been delegated authority to assess civil FBAR penalties.
When there is an FBAR violation, the examiner will either issue the FBAR warning letter, Letter 3800, Warning Letter Respecting Foreign Bank and Financial Accounts Report Apparent Violations, or determine a penalty. However, when multiple years are under examination and a monetary penalty is imposed for some but not all of the years under examination, a Letter 3800 will not be issued for the year(s) for which a monetary penalty is not imposed. See IRM 4.26.17 for further information.
Penalties should be determined to promote compliance with the FBAR reporting and recordkeeping requirements. In exercising discretion, examiners must consider whether the issuance of a warning letter and the securing of delinquent FBARs, rather than the determination of a penalty, will achieve the desired result of improving compliance in the future.
An individual failed to report the existence of five small foreign accounts with a combined balance of $20,000 for all five accounts, but properly reported the income from each account and made no attempt to conceal the existence of the accounts. The examiner must consider all the facts and circumstances of this case to determine if a warning letter is appropriate in this case or if it would be appropriate to determine civil FBAR penalties.
Civil FBAR penalties have varying upper limits, but no floor. The examiner has discretion in determining the amount of the penalty, if any.
The IRS developed mitigation guidelines to assist examiners in determining the amount of civil FBAR penalties.
There may be multiple civil FBAR penalties if there is more than one account owner, or if a person other than the account owner has signature or other authority over the foreign account. Each person can be liable for the full amount of the penalty.
Managers must perform a meaningful review of the employee's penalty determination prior to assessment. See IRM 4.26.16.6.8 .
FBAR Penalty Authority.
IRS was delegated the authority to assess and collect civil FBAR penalties. 31 CFR 1010.810(g). The delegation includes the authority to investigate possible civil FBAR violations, provided in Treasury Directive No. 15-41 (December 1, 1992), and the authority to assess and collect the penalties for violations of the reporting and recordkeeping requirements.
When performing these functions, IRS is not acting under Title 26 but, instead, is acting under the authority of Title 31. Provisions of the Internal Revenue Code generally do not apply to FBARs.
Criminal Investigation was delegated the authority to investigate possible criminal violations of the Bank Secrecy Act. 31 CFR 1010.810(c)(2).
FBAR Penalty Structure.
There are four civil penalties available for FBAR violations:
Negligence. 31 USC 5321(a)(6)(A).
Pattern of negligent activity. 31 USC 5321(a)(6)(B).
Penalty for non-willful violation. 31 USC 5321(a)(5)(A) and (B).
Although the term "non-willful" is not used in the statute, we use it to distinguish this penalty from the penalty for willful violations.
Penalty for willful violations. 31 USC 5321(a)(5)(C).
A filing violation occurs at the end of the day on June 30th of the year following the calendar year to be reported (the due date for filing the FBAR).
A recordkeeping violation occurs on the date when the records are requested by the IRS examiner if the records are not provided.
A civil money penalty may be imposed for an FBAR violation even if a criminal penalty is imposed for the same violation. 31 USC 5321(d).
BSA Negligence Penalties.
There are two negligence penalties that apply generally to all BSA provisions. 31 USC 5321(a)(6)
A negligence penalty up to $500 may be assessed against a financial institution or non-financial trade or business for any negligent violation of the BSA, including FBAR violations.
An additional penalty up to $50,000 may be assessed for a pattern of negligent violations.
These two negligence penalties apply only to trades or businesses, and not to individuals.
The FBAR penalties under section 5321(a)(5) and the FBAR warning letter, Letter 3800, adequately address most FBAR violations identified. The FBAR warning letter may be issued in the cases where the revenue agent determines none of the 5321(a)(5) FBAR penalties are warranted. If the revenue agent believes, however, that assertion of a section 5321(a)(6) negligence penalty is warranted in a particular case, the revenue agent should contact a Bank Secrecy Act FBAR program analyst for guidance.
Negligence Defined.
Actual knowledge of the reporting requirement is not required to find negligence. For example, if a financial institution or nonfinancial trade or business exercising ordinary business care and prudence for its particular industry should have known about the FBAR filing and record keeping requirements, failure to file or maintain records is negligent. Therefore, standards of practice for a particular industry are relevant in determining whether a negligent violation of 31 USC 5314 occurred. If the failure to file the FBAR or to keep records is due to reasonable cause, and not due to the negligence of the person who had the obligation to file or keep records, the negligence penalty should not be asserted.
Negligent failure to file does NOT exist when, despite the exercise of ordinary business care and prudence, the person was unable to file the FBAR or keep the required records.
Use general negligence principles in determining whether or not to apply the negligence penalty. Tesouro Reg. 1.6664-4, Reasonable Cause and Good Faith Exception to section 6662 penalties, may serve as useful guidance in determining the factors to consider.
BSA Simple Negligence Penalty.
A negligence penalty up to $500 may be assessed against a business for any negligent violation of the BSA, including FBAR violations.
The simple negligence penalty applies only to businesses, not individuals.
BSA Simple Negligence Penalty Amount.
For each negligent violation of any requirement of the Bank Secrecy Act committed after October 27, 1986, a civil penalty may be assessed not to exceed $500.
Generally, the full amount of this $500 penalty is assessed. Although 31 USC 5321(a)(6) permits discretion to assert a lower amount, there are no mitigation guidelines for this penalty.
BSA Pattern of Negligence Penalty.
31 USC 5321(a)(6)(B) provides for a civil money penalty of not more than $50,000 on a business that engages in a pattern of negligent BSA violations including violations of the FBAR rules. This penalty is in addition to any $500 negligence penalty.
The pattern of negligence penalty has applied to financial institutions since 1986. For violations occurring after October 26, 2001, the penalty applies to all trades or businesses. This penalty does not apply to individuals.
BSA Pattern of Negligence Penalty Amount.
If any trade or business engages in a pattern of negligent violations of any provision (including the FBAR requirements)] of the BSA, a civil penalty of not more than $50,000 may be imposed. This is in addition to the simple negligence $500 penalty. 31 USC 5321(a)(6)(B). The examiner is given discretion to determine the penalty amount up to the $50,000 ceiling.
There are no mitigation guidelines for this penalty. The pattern of negligence penalty should be asserted only in egregious cases.
Penalty for Nonwillful FBAR Violations.
For violations occurring after October 22, 2004, a penalty, not to exceed $10,000 per violation, may be imposed on any person who violates or causes any violation of the FBAR filing and recordkeeping requirements. 31 USC 5321(a)(5)(B).
The penalty should not be imposed if:
The violation was due to reasonable cause, and.
The person files any delinquent FBARs and properly reports the previously unreported account.
Examiners have discretion in determining the penalty amount and should use the mitigation guidelines in making their determinations. See the discussion of the mitigation guidelines below. See Exhibit 4.26.16-1 . Examiners should take the facts and circumstances of each case into account when determining if a warning letter or penalties that are less than the mitigation guidelines are appropriate. The purpose of FBAR penalties is to promote compliance with the FBAR reporting and recordkeeping requirements.
Penalty for Nonwillful Violations - Calculation.
After May 12, 2015, in most cases, examiners will recommend one penalty per open year, regardless of the number of unreported foreign accounts. The penalty for each year is limited to $10,000. Examiners should still use the mitigation guidelines and their discretion in each case to determine whether a lesser penalty amount is appropriate.
For multiple years with nonwillful violations, examiners may determine that asserting nonwillful penalties for each year is not warranted. In those cases, examiners, with the group manager’s approval after consultation with an Operating Division FBAR Coordinator, may assert a single penalty, not to exceed $10,000, for one year only.
For other cases, the facts and circumstances (considering the conduct of the person required to file and the aggregate balance of the unreported foreign financial accounts) may indicate that asserting a separate nonwillful penalty for each unreported foreign financial account, and for each year, is warranted. In those cases, examiners, with the group manager’s approval after consultation with an Operating Division FBAR Coordinator, may assert a separate penalty for each account and for each year. The examiner’s workpapers must support such a penalty determination and document the group manager’s approval.
In no event will the total amount of the penalties for nonwillful violations exceed 50 percent of the highest aggregate balance of all unreported foreign financial accounts for the years under examination.
Penalty for Willful FBAR Violations.
The penalty for willful FBAR violations may be imposed on any person who willfully violates or causes any violation of any provisions of 31 USC 5314 (the FBAR filing and recordkeeping requirements). 31 USC 5321(a)(5)(C).
The penalty applies to individuals as well as financial institutions and nonfinancial trades or businesses for all years.
For violations occurring after October 22, 2004, the statutory ceiling is the greater of $100,000 or 50% of the balance in the account at the time of the violation.
There may be both a reporting and a recordkeeping violation regarding each account.
The date of a violation for failure to timely file an FBAR is the end of the day on June 30th of the year following the calendar year for which the accounts are being reported. This date is the last possible day for filing the FBAR so that the close of the day with no filed FBAR represents the first time that a violation occurred. The balance in the account at the close of June 30th is the amount to use in calculating the filing violation.
The date of a violation for failure to keep records is the date the examiner first requests records. The balance in the account at the close of the day that the records are first requested is the amount used in calculating the recordkeeping violation penalty. The date of the violation is tied to the date of the request, and not a later date, to assure the taxpayer is unable to manipulate the amount in the account after receiving a request for records. The balance in the account at the close of the day on which the records are first requested is the amount to use in calculating the penalty for failing to keep records as required by statute.
IRS developed guidelines for the exercise of the examiner’s discretion in arriving at the amount of a penalty for a willful violation. See discussion of mitigation, below.
Willful FBAR Violations - Defining Willfulness.
The test for willfulness is whether there was a voluntary, intentional violation of a known legal duty.
A finding of willfulness under the BSA must be supported by evidence of willfulness.
The burden of establishing willfulness is on the Service.
Willfulness is shown by the person’s knowledge of the reporting requirements and the person’s conscious choice not to comply with the requirements. In the FBAR situation, the person only need know that a reporting requirement exists. If a person has that knowledge, the only intent needed to constitute a willful violation of the requirement is a conscious choice not to file the FBAR.
Under the concept of "willful blindness," willfulness is attributed to a person who made a conscious effort to avoid learning about the FBAR reporting and recordkeeping requirements.
Willful blindness may be present when a person admits knowledge of, and fails to answer questions concerning, his interest in or signature or other authority over financial accounts at foreign banks on Schedule B of his Federal income tax return. This section of the income tax return refers taxpayers to the instructions for Schedule B, which provides guidance on their responsibilities for reporting foreign bank accounts and discusses the duty to file the FBAR. These resources indicate that the person could have learned of the filing and recordkeeping requirements quite easily. It is reasonable to assume that a person who has foreign bank accounts should read the information specified by the government in tax forms. The failure to act on this information and learn of the further reporting requirement, as suggested on Schedule B, may provide evidence of willful blindness on the part of the person.
The failure to learn of the filing requirements coupled with other factors, such as the efforts taken to conceal the existence of the accounts and the amounts involved, may lead to a conclusion that the violation was due to willful blindness. The mere fact that a person checked the wrong box, or no box, on a Schedule B is not sufficient, in itself, to establish that the FBAR violation was attributable to willful blindness.
The following examples illustrate situations in which willfulness may be present:
A person files the FBAR, but omits one of three foreign bank accounts. The person had previously closed the omitted account at the time of filing the FBAR. The person explains that the omission was due to unintentional oversight. During the examination, the person provides all information requested with respect to the omitted account. The information provided does not disclose anything suspicious about the account, and the person reported all income associated with the account on his tax return. The penalty for a willful violation should not apply absent other evidence that may indicate willfulness.
A person filed the FBAR in earlier years but failed to file the FBAR in subsequent years when required to do so. When asked, the person does not provide a reasonable explanation for failing to file the FBAR. In addition, the person may have failed to report income associated with foreign bank accounts for the years that FBARs were not filed. A determination that the violation was willful would likely be appropriate in this case.
A person received a warning letter informing him of the FBAR filing requirement, but the person continues to fail to file the FBAR in subsequent years. When asked, the person does not provide a reasonable explanation for failing to file the FBAR. In addition, the person may have failed to report income associated with the foreign bank accounts. A determination that the violation was willful would likely be appropriate in this case.
Willful FBAR Violations - Evidence.
Willfulness can rarely be proven by direct evidence, since it is a state of mind. It is usually established by drawing a reasonable inference from the available facts. The government may base a determination of willfulness on inference from conduct meant to conceal sources of income or other financial information. For FBAR purposes, this could include concealing signature authority, interests in various transactions, and interests in entities transferring cash to foreign banks.
Documents that may be helpful in establishing willfulness include:
Copies of statements for the foreign bank account.
Notes of the examiner's interview with the foreign account holder/taxpayer about the foreign account.
Correspondence with the account holder's tax return preparer that may address the FBAR filing requirement.
Documents showing criminal activity related to the non-filing of the FBAR (or non-compliance with other BSA provisions).
Promotional material (from a promoter or offshore bank).
Statements for debit or credit cards from the offshore bank that, for example, reveal the account holder used funds from the offshore account to cover everyday living expenses in a manner that conceals the source of the funds.
Copies of any FBARs filed previously by the account holder (or FinCEN Query printouts of FBARs).
Copies of Information Document Requests with requested items that were not provided highlighted along with explanations as to why the requested information was not provided.
Copies of debit or credit card agreements and fee schedules with the foreign bank, which may show a significantly higher cost than typically associated with cards from domestic banks.
Copies of any investment management or broker’s agreement and fee schedules with the foreign bank, which may show significantly higher costs than costs associated with domestic investment management firms or brokers.
The written explanation of why the FBAR was not filed, if such a statement is provided. Otherwise, note in the workpapers whether there was an opportunity to provide such a statement.
Copies of any previous warning letters issued or certifications of prior FBAR penalty assessments.
An explanation, in the workpapers, as to why the examiner believes the failure to file the FBAR was willful.
Documents available in an FBAR case worked under a Related Statute Determination under Title 26 that may be helpful in establishing willfulness include:
Copies of documents from the administrative case file (including the Revenue Agent Report) for the income tax examination that show income related to funds in a foreign bank account was not reported.
A copy of the signed income tax return with Schedule B attached, showing whether or not the box pertaining to foreign accounts is checked or unchecked.
Copies of tax returns (or RTVUEs or BRTVUs) for at least three years prior to the opening of the offshore account and for all years after the account was opened, to show if a significant drop in reportable income occurred after the account was opened. (Review of the three years' returns prior to the opening of the account would give the examiner a better idea of what the taxpayer might have typically reported as income prior to opening the foreign account).
Copies of any prior Revenue Agent Reports that may show a history of noncompliance.
Two sets of cash T accounts (a reconciliation of the taxpayer's sources and uses of funds) with one set showing any unreported income in foreign accounts that was identified during the examination and the second set excluding the unreported income in foreign accounts.
Any documents that would support fraud (see IRM 4.10.6.2.2 for a list of items to consider in asserting the fraud penalty).
Penalty for Willful FBAR Violations - Calculation.
For violations occurring after October 22, 2004, a penalty for a willful FBAR violation may be imposed up to the greater of $100,000 or 50% of the amount in the account at the time of the violation, 31 USC 5321(a)(5)(C). For cases involving willful violations over multiple years, examiners may recommend a penalty for each year for which the FBAR violation was willful.
After May 12, 2015, in most cases, the total penalty amount for all years under examination will be limited to 50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination. In such cases, the penalty for each year will be determined by allocating the total penalty amount to all years for which the FBAR violations were willful based upon the ratio of the highest aggregate balance for each year to the total of the highest aggregate balances for all years combined, subject to the maximum penalty limitation in 31 USC 5321(a)(5)(C) for each year.
Examiners should still use the mitigation guidelines and their discretion in each case to determine whether a lesser penalty amount is appropriate.
Examiners may recommend a penalty that is higher or lower than 50 percent of the highest aggregate account balance of all unreported foreign financial accounts based on the facts and circumstances. In no event will the total penalty amount exceed 100 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination. The examiner’s workpapers must support all willful penalty determinations and document the group manager’s approval.
If an account is co-owned by more than one person, a penalty determination must be made separately for each co-owner. The penalty against each co-owner will be based on his her percentage of ownership of the highest balance in the account. If the examiner cannot determine each owner’s percentage of ownership, the highest balance will be divided equally among each of the co-owners.
Mitigation.
The statutory penalty computation provides a ceiling on the FBAR penalty. The actual amount of the penalty is left to the discretion of the examiner.
IRS has adopted mitigation guidelines to promote consistency by IRS employees in exercising this discretion for similarly situated persons. Exhibit 4.26.16-1 .
Mitigation Threshold Conditions.
For most FBAR cases, if IRS has determined that if a person meets four threshold conditions, then that person may be subject to less than the maximum FBAR penalty depending on the amounts in the accounts.
For violations occurring after October 22, 2004, the four threshold conditions are:
The person has no history of criminal tax or BSA convictions for the preceding 10 years, as well as no history of past FBAR penalty assessments.
No money passing through any of the foreign accounts associated with the person was from an illegal source or used to further a criminal purpose.
The person cooperated during the examination (i. e., IRS did not have to resort to a summons to obtain non-privileged information; the taxpayer responded to reasonable requests for documents, meetings, and interviews; and the taxpayer back-filed correct reports).
IRS did not sustain a civil fraud penalty against the person for an underpayment for the year in question due to the failure to report income related to any amount in a foreign account.
FBAR Penalties - Examiner Discretion.
The examiner may determine that the facts and circumstances of a particular case do not justify asserting a penalty.
When a penalty is appropriate, IRS penalty mitigation guidelines aid the examiner in applying penalties in a uniform manner. The examiner may determine that a penalty under these guidelines is not appropriate or that a lesser penalty amount than the guidelines would otherwise provide is appropriate or that the penalty should be increased (up to the statutory maximum). The examiner must make such a determination with the written approval of the examiner’s manager and document the decision in the workpapers.
Factors to consider when applying examiner discretion may include, but are not limited to, the following:
Whether compliance objectives would be achieved by issuance of a warning letter.
Whether the person who committed the violation had been previously issued a warning letter or assessed an FBAR penalty.
The nature of the violation and the amounts involved.
The cooperation of the taxpayer during the examination.
Given the magnitude of the maximum penalties permitted for each violation, the assertion of multiple penalties and the assertion of separate penalties for multiple violations with respect to a single FBAR, should be carefully considered and calculated to ensure the amount of the penalty is commensurate to the harm caused by the FBAR violation.
Managerial Involvement and Approval of FBAR Penalties.
Managers must perform a meaningful review of the examiner's penalty determination prior to assessment.
The manager must verify that the penalties were fairly imposed and accurately computed; that the examiner did not improperly assert the penalties in the first instance; and that the conclusions regarding "reasonable cause" (or the lack thereof) were proper.
) For BSA cases, written managerial approval must be documented on the Violations Summary Form - Title 31, workpaper 400-1.1.
For SB/SE examination cases, written managerial approval must be documented on the Penalty Approval Form, workpaper 300.
For LB&I cases, managerial approval must be documented on the penalty leadsheets.
For SB/SE campus cases, written managerial approval must be documented on Form 4700, Examination Workpapers .
FBAR Penalty Mitigation Guidelines for Violations Occurring After October 22, 2004.
The Bank Secrecy Act (BSA) allows the Secretary of the Treasury some discretion in determining the amount of penalties for violations of the FBAR reporting and record keeping requirements. There is a penalty ceiling but no minimum amount. This discretion has been delegated to the FBAR examiner.
The examiner may determine that the facts and circumstances of a particular case do not justify a penalty.
If there was an FBAR violation but no penalty is appropriate, the examiner must issue the FBAR warning letter, Letter 3800.
When a penalty is appropriate, IRS established penalty mitigation guidelines to ensure the penalties determined by the examiner’s discretion are uniform. The examiner may determine that:
A penalty under these guidelines is not appropriate, or.
A lesser amount than the guidelines otherwise provide is appropriate.
The examiner must make this determination with the written approval of that examiner’s manager. The examiner’s workpapers must document the circumstances that make mitigation of the penalty under these guidelines appropriate. When determining the proper penalty amount, the examiner should keep in mind that manager approval is required to assert more than one $10,000 non-willful penalty per year, and in no event can the aggregate non-willful penalties asserted exceed 50% of the highest aggregate balance of all accounts to which the violations relate during the years at issue. Similarly, manager approval is required to assert willful penalties that, in the aggregate, exceed 50% of the highest aggregate balance of all accounts to which the violations relate during the years at issue, and in no event can the aggregate willful penalties exceed 100% of the highest aggregate balance of all accounts to which the violations relate during the years at issue.
To qualify for mitigation, the person must meet four criteria:
The person has no history of criminal tax or BSA convictions for the preceding 10 years and has no history of prior FBAR penalty assessments.
No money passing through any of the foreign accounts associated with the person was from an illegal source or used to further a criminal purpose.
The person cooperated during the examination.
IRS did not determine a fraud penalty against the person for an underpayment of income tax for the year in question due to the failure to report income related to any amount in a foreign account.
Money Transmitter FBAR Filing Requirements.
This material was originally issued as Interim Guidance Memorandum SBSE-04-0607-024, Interim Guidance on Money Transmitter Report of Foreign Bank and Financial Accounts (FBAR) Filing Requirements.
BSA Examiners should continue to be alert to FBAR reporting and recordkeeping requirements encountered during all BSA compliance examinations. Examiners often encounter FBAR issues specific to the money transmission industry. Some of the most common issues and questions have been summarized and are addressed below.
Money transmitters in the U. S. send money overseas generally through the use of foreign banks or non-bank agents located in foreign countries. The arrangement permits the money transmitter to readily send payments, in the currency of the foreign country, to the recipient. The U. S. money transmitter wires funds to the foreign bank or non-bank agent and provides instructions to make payments to the recipient located in the foreign country. The money transmitter typically does not have signature or other authority over the agent’s bank account. In this situation, the money transmitter is not required to file an FBAR for the agent’s bank account.
However, if the money transmitter has a direct financial interest in the foreign financial account, has signature authority, or other authority, over the foreign financial account and the aggregate value is in excess of $10,000 at any time during the year in question, the money transmitter is required to file an FBAR. Another person holding the foreign account on behalf of the money transmitter does not negate the FBAR filing requirement.
Frequently Asked Questions (FAQ’s):
Is there an FBAR filing requirement when the money transmitter wires funds to a foreign bank account or has a business relationship with someone located in a foreign country?
Is there an FBAR filing requirement where the money transmitter owns a bank account located in a foreign country or has signature authority over someone else’s bank account located in a foreign country?
Is an FBAR required to be filed by a money transmitter engaged in Informal Value Transfer System (IVTS)/Hawala transactions?
What constitutes "other authority" for FBAR reporting purposes?
Does a money transmitter who has a business relationship with a person located in a foreign country have a financial interest in a foreign financial account if the person in the foreign country is providing services of a financial institution (such as money transmission services) and both parties maintain books and records of their business transactions (including books and records of offsetting transactions or trade accounts receivable or payable)?
Do receivables accounts maintained by foreign non-bank agents which net out the US money transmitter settlement obligations to the foreign agent constitute a financial account for FBAR filing purposes?
Do the FBAR filing requirements apply when a money transmitter maintains a bank account with a foreign bank for the purpose of settling money transmission transactions with a foreign bank?

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FATCA & CRS COMPLIANCE BY MUTUAL FUND HOUSES.
Greetings of the day.
We are communicating to a certain set of investors to provide us with details such as Country of Tax residence, Tax Identification Number from such country, Country of Birth, Country of Citizenship, etc under the FATCA/CRS obligation. Individual Investors are expected to provide details such as Place and Country of Birth, Country of Citizenship/Nationality, all countries of tax residency, Tax Identification Number from each such country, etc. in Additional KYC, FATCA & CRS Updation Form .
In case of Non-individual investors, referred as ‘Entity’, are expected to provide details such as Place and Country of Incorporation, all countries of tax residency, Tax Identification Number from each such country, as well as additional details related to the type of entity, details of Ultimate Beneficial Owners. The forms are FATCA - CRS Updation Form (Non - Individuals) and Ultimate Beneficial Ownership (UBO) Form (Non-Individuals) .
- 30th November 2015 – Last date of submission of these details.
- 1st January 2016 - We will not be able to accept any purchase or switch transactions in mentioned folios, if the additional KYC details are not updated.
- 1st November 2015 - For all new accounts/folios opened on or after, details related to FATCA and CRS will have to be provided mandatorily, failing which application to open the new account(s)/folio(s) may not be considered.
Subject : Important information required under new IT Rules (FATCA / CRS Obligations) and KYC .
1. India has joined the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information (AEOI) on Jun 3, 2015 and has agreed to certain global standards on automatic exchange of information, known as Common Reporting Standards (CRS). Further, the Government of India (GoI) signed an Inter-Governmental Agreement (IGA) with United States of America (USA) on Jul 9, 2015 to improve international tax compliance and to implement Foreign Account Tax Compliance Act (FATCA) in India.
2. To implement the CRS on AEOI and also the IGA with USA, the GOI has made necessary amendments in the Income-tax Rules, 1962 vide amendment dated Aug 7, 2015 and inserted Rules 114F to 114H. These rules are available on: incometaxindia. gov. in/Pages/communications/notifications. aspx .
3. SEBI has issued a circular dated Aug 26, 2015 advising all registered intermediaries (which includes Indian Mutual Funds) to implement FATCA and CRS as per above mentioned rules .
We do understand that the information mentioned above is technical in nature and hence we advise you to consult your financial or tax advisor for more details.
Information needed from investors:
Meanwhile, to ensure necessary and timely reporting to the GoI, we require certain additional information from investors, as described below:
1. Place and Country of Birth, Country of Citizenship/Nationality,
2. All countries of tax residency (other than India), Tax Identification Number and Identification Type of each such country,
3. Additional KYC details such as Income details, occupation and PEP status.
Immediate action expected from investors :
1. Scan and email to service@dspblackrock through your Email ID registered in the folio,
We request you to kindly provide us the required details within the stipulated time, since as per Income Tax Rules mentioned above we are required to report information regarding:
1. Those investors who do not provide the required information in time, and we may have to freeze the accounts/folios for any further subscriptions or switch transactions .
Please also note that for all new accounts/folios opened by you on or after 1st November, 2015, details related to FATCA and CRS will have to be provided mandatorily, failing which your application to open the new account(s)/folio(s) may not be considered.
Further, effective January 01, 2016, we will not be able to accept any purchase or switch transactions in your folio, if the additional KYC details are not updated.
DSP BlackRock Mutual Fund.
Contact Centre: 1800 200 4499 (Monday through Saturday, 8am to 9pm)
Enclosed: Prefilled form for your convenience.
If you reply to this email directly, we might not get it. We do want to hear from you, so please reply to service@dspblackrock .
Tel. No. : 0091 281 245 3367 (four lines) / 245 9613.
Cell : 0091 98240 49944.
email : rajesh@femaonline ; keynote@nribanks.
But for sure this indeed is the last opportunity as a failure to opt for SFCP can result in penal action by the IRS upon receipt of NRI account holders' account information from all Indian banks , Mutual Fund Houses, Insurance Companies and Stock brokers where after one cannot opt for SFCP / SDOP and be liable for civil & criminal action.
On their part Banks , Mutual Funds , and Indian Financial Institutions have initiated their exercises of availing information and declaration from NRI clients as they are required to submit the information to Central Board of Direct Taxes (CBDT) . Copy of HDFC Bank communiction and declaration form from NRIs are posted herein.
You can avail our professional services regarding Streamlined Domestic Offshore Procedure (SDOP) by way of Computation of penalty ; preparations of Indian income in US$ terms for revising Fed Tax returns for previous 3 years ; annexures of Foreign Bank Account Reporting (FBAR) for previous 6 years. ; annexures of Foreign Assets Tax Compliance Act (FATCA) for previous 3 years and address queries of US CPA and lawyer if any.
We will also be happy to revert to your queries if you need any clarifications .
Hope you are fine and in best of the health.
As you might be aware, on 9 July 2015, India has signed an inter-governmental agreement with the United States of America for co-operation on Foreign Account Tax Compliance Act (FATCA). In addition, India has also signed the OECD’s Model Competent Authority Agreement for tax information sharing in accordance with multilateral Common Reporting Standard (CRS) on 3 June 2015. These developments have resulted in compliance and reporting obligations on Financial Institutions like HDFC Bank.
We are now being required to submit to the Indian Government, on an urgent basis, information on customers, particularly with US tax residency. Hence we are writing to all relevant customers, such as you, to seek confirmation and additional information to determine your tax residency in the US and/ or in any other countries (other than India).
Under the applicable Rules, HDFC Bank will be required to report your account to the Indian tax authorities or any other agencies, as may be applicable, on the basis of available details in respect of your account.
On the basis of internal verification and inquiry performed at our end, one or more U. S. indicia were observed in your records with us.
We urge you to cooperate in providing us before 10 th August 2015, a self-certification with the required details in the attached format. In case you wish to state that you are not a US tax resident, please submit your self-certification along with the applicable “curing documents (refer list below).
Please note that, in any case, it is mandatory to submit filled in self-certification (along with any curing documents) at the latest by 10 th August 2015. You may submit a signed scanned copy of the attached self-certification from your registered email id along with self-attested scan copy of the curing document (if applicable).
We would like to inform you, that as per India and United States Inter Governmental Agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA), it is mandatory to have self-certification of the account holder to indicate the jurisdiction(s) of residence for tax purposes on bank's record otherwise bank will be constrained to close the account on non-receipt of such self-certification.
In case you require any assistance on this / have queries in this regard, please feel free to approach back to me.
Should you require more information regarding the FATCA regulations, please visit website hdfcbank/nri_banking/home. htm.
|| Relationship Manager - NRI Services || HDFC Bank Ltd. || Rajkot ||
"Wherever in the world you are one bank takes care of your needs"
My business depends on your thoughtful referrals. If you have benefited from my banking or investment advice, please share my name with your friends, relatives or professional associates.
(Applicable for Resident and Non-Resident Customers)
(Please consult your professional tax advisor for further guidance on your tax residency, if required)
Date: __________ Place: ____________ AOF ref number: ___________________.
FATCA/CRS Annexure - Individuals (including sole-proprietors)
(Passport, Election Id Card, PAN Card, ID Card, E - Driving License, UIDAI Letter, NREGA job card, Others)
If no , please tick below.
 First account holder - I am a tax resident of India and not resident of any other country.
 Second account holder - I am a tax resident of India and not resident of any other country.
% In case Tax Identification Number is not available, kindly provide functional equivalent$
I/We have understood the information requirements of this Form (read along with the FATCA Instructions ) and hereby confirm that the information provided by me/us on this Form is true, correct, and complete. I/We also confirm that I/We have read and understood the FATCA Terms and Conditions above and hereby accept the same.
Signature of first holder Signature of second holder.
Date: __/ ___/ ____ Place: _________________________.
FATCA/CRS Annexure - Individuals (including sole-proprietors)
Details under FATCA/Foreign Tax Laws: Towards compliance with tax information sharing laws, such as FATCA and CRS, we would be required to seek additional personal, tax and beneficial owner information and certain certifications and documentation from our account holders. Such information may be sought either at the time of account opening or any time subsequently. In certain circumstances (including if we do not receive a valid self-certification from you) we may be obliged to share information on your account with relevant tax authorities. If you have any questions about your tax residency, please contact your tax advisor. Should there be any change in any information provided by you, please ensure you advise us promptly, i. e., within 30 days. Towards compliance with such laws, we may also be required to provide information to any institutions such as withholding agents for the purpose of ensuring appropriate withholding from the account or any proceeds in relation thereto. As may be required by domestic or overseas regulators/ tax authorities, we may also be constrained to withhold and pay out any sums from your account or close or suspend your account(s).
If you are a US citizen or resident or green card holder, please include United States in the foreign country information field along with your US Tax Identification Number. Foreign Account Tax Compliance provisions (commonly known as FATCA) are contained in the US Hire Act 2010.
$It is mandatory to supply a TIN or functional equivalent if the country in which you are tax resident issues such identifiers. If no TIN is yet available or has not yet been issued, please provide an explanation and attach this to the form.
Please note that you may receive more than one request for information if you have multiple relationships with HDFC Bank or its group entities. Therefore, it is important that you respond to our request, even if you believe you have already supplied any previously requested information.
2. Non-US passport or any non-US government issued document evidencing nationality or citizenship (refer list below); E.
3. Any one of the following documents:
uma. Certified Copy of "Certificate of Loss of Nationality or.
b. Reasonable explanation of why the customer does not have such a certificate despite renouncing US citizenship; or Reason the customer did not obtain U. S. citizenship at birth.
2. Documentary evidence (refer list below)
2. Documentary evidence (refer list below)
2. Documentary evidence (refer list below)
Pls find breif details of US tax laws requring tax payment and declaration of overseas including Indian income and financial assets under Internal Revenue Code. (IRC).
1. US Tax Laws require US Citizens ; Green Card Holders and resident of USA [ resident alien ] to report their worldwide income in US tax return .
2. However tax payers are not burdenize to pay tax twice. Tax payers can opt for applicability of USA India Tax Treaty or other country's Tax Treaty.
if income arises from such other country and if the provisions of Tax Treaty are beneficial.
authority or control. It is to be filed online in Form FinCEN 114 before 30th June every year.
2. It is required to be filed by a person who is a US citizen, resident of USA, a USA partnership firm, a Limited Liability Company (LLC) or trust.
(referred as United States Person) which has financial interest or signing authority in overseas financial investment exceeding US $ 10,000 during a.
3. Foreign Financial Account includes all accounts maintained with a financial institution such as Securities ; brokerage account; Bank accounts;
Commodity Futures & Options Accounts; insurance policy and any annuity with cash value; Mutual fund or similar pooled fund and any account maintained with a foreign financial institution.
4. The link to IRS website is :-
1. Under Foreign Account Tax Compliance Act (FATCA) regulation every individual being US Citizens ; Green Card Holders and resident of USA are.
required to report their foreign financial assets to the IRS if the value of foreign financial assets exceeds US$ 50,000 as on 31st December or US$
75,000 during the tax year and in case of married couple tax-payers US$ 100,000 and US$ 150,000 respectively.
For individual tax-payers living abroad these limits are raised to US$ 200,000 and US$ 300,000 respectively and US$ 400,000 and US$ 600,000 for a.
married couple filing joint return.
2. Foreign Financial Account includes all accounts maintained with a financial institutions whcih are covered under FBAR and in addition to that.
it also covers interest in foreign partnership or trusts ; foreign estate; foreign retirement plan and foreign-issued insurance contract etc.
3. FATCA covers investments of any and every size in equity shares of a private limited company, capital in partnership or proprietorship, loans and.
advances including personal loans etc. Immovable properties are excluded.
4. FATCA is to be submitted in Form 8938 with the IRS with the tax return and the due dates for filing tax returns with the IRS including extension.
will apply accordingly. Failure to file Form 8938 by the due date or filing an incomplete form attracts penalty of $10,000.
5. The link to IRS website is :-
1. A US citizen and / or US resident is required to pay tax on passive investments as income at normal rates.
2. Income from passive investments will include capital gains; dividend; interest etc.
3. PFIC rules have an option of computation and payment of tax on notional income i. e. Net Asset Value (NAV) as at the end of the year.
We hope the contents are found useful and will be happy to provide assistance in case of doubts but it would be appropriate that a professional CPA or the IRS is contacted for specific clarifications .
Tel. No. : 0091 281 245 3367 (four lines) / 245 9613.
Cell : 0091 98240 49944.
We offer professional services regarding Streamlined Domestic Offshore Procedure (SDOP) by way of Computation of penalty ; preparations of Indian income in US$ terms for revising Fed Tax returns for previous 3 years ; annexures of Foreign Bank Account Reporting (FBAR) for previous 6 years. ; annexures of Foreign Assets Tax Compliance Act (FATCA) for previous 3 years ; Addressing queries of US CPA and lawyer if any and response to queries raised by tax Authorities if any.
Ensuring tax compliance and establishing tax discipline is the basic objective of law makers and for some unexplained reasons jumping the tax payments is many tax payers’ delight across the world. Eventually when law enforcers realize the weakness of the stick, they offer carrots of amnesty schemes now and then and the United States of America is no exception.
In 2009 and 2011 the Internal Revenue Service (IRS) offered schemes of Overseas Voluntary Disclosure Initiatives (OVDI) for tax defaulters to come clean paying taxes on their hitherto undisclosed foreign income and also to adhere to the requirements of yearly disclosure of foreign financial assets under the Foreign Bank Account Reporting (FBAR). Having received a lukewarm response to the OVDI IRS introduced Overseas Voluntary Disclosure Programme (OVDP) which is presently open. Apart from this, Foreign Assets Tax Compliance Act (FATCA) has become effective from the year 2011.
Under FATCA tax payers who are US citizens, Green Card holders or resident aliens are required to declare their foreign financial assets to the IRS. However, through FATCA the US law makers have, probably for the first time in the history of taxation, also sought to stretch the geographical limits of the IRS jurisdiction to almost all the nations across the globe and the responsibility of collecting taxpayer’s information is cast on global institutions.
No doubt, Double Tax Treaties grant abundant rights to Tax Authorities to seek tax payer’s information, but FATCA turns the tables by entrusting the responsibility of collecting and providing information as regarding financial affairs of all US citizens and US address accounts on banks, mutual funds, insurance companies, broking houses and other financial institutions across the world thereby tightening the IRS grip to control possible tax evasion.
Effective 1 st January 2014 many Non Resident Indians of USA who by ignorance or otherwise have failed to submit FBAR and FATCA reports or declare Indian income in US tax returns may have nightmares. It would therefore be prudent for every NRI to understand and address these important changes being implemented next year. The most innocent mistake NRIs residing in US tend to make is non-declaration of their Indian assets owned prior to migration and financial assets inherited or received through partition of family which are otherwise covered by reporting requirements of FBAR and FATCA and non-payment of tax on income generated out of such assets.
GLOBAL INCOME OF US PERSONS BEING TAXED IN USA :
Internal Revenue Code (IRC) requires a US citizen or resident of USA to declare and pay income tax on worldwide income irrespective of his place of residence. Of course taxpayers having income in India can choose between the IRC and the regulations of India USA Double Tax Treaty for income arising in India and opt to be governed by the provisions of either as is found more beneficial to him, subject to conditions as may be applicable.
USA ENGAGING WITH INDIA FOR COMPLIANCE :
US Treasury has initiated signing of agreements with various Governments requiring domestic financial institutions operating in their country to provide requisite information for calendar year 2013 of all US citizens and US addressee customers to IRS from 1st January, 2014. While Governments of UK, Denmark and Mexico have already signed such agreement, France, Germany, Spain, and Italy are in the process of concluding the agreement and efforts are undertaken for similar agreements with many other countries.
As posted in US Embassy report, US Treasury Secretary Mr. Timothy Geithner and US Fed Chairman Mr. Ben Bernanke met the Finance Minister of India and the Prime Minister of India on the 9th October, 2012 and discussed various options and possible actions for combating tax evasion by US based NRIs.[newdelhi. usembassy. gov/sr100913.html].
As a consequence, reportedly Reserve Bank of India has been asked to draft a domestic legislation requiring Indian banks, mutual funds, insurance companies, broking houses and other financial institutions to provide information of investments of US citizens and US addressees to the IRS from 1st January, 2014. [ articles. economictimes. indiatimes/2012-11-27/news/35385827_1_financial-assets-fatca-financial-institutions ]
To take an overview of the subject, salient features of the FBAR, FATCA and taxability of global income under USA tax laws are briefly discussed below.
FOREIGN BANK ACCOUNT REPORT (FBAR) :
FBAR is an acronym for the Foreign Bank Account Report. It is a simple form to collect basic information of US citizens or US residents of their overseas financial accounts in their names or wherein they have signing authority or control.
Applicability : The FBAR is required to be filed by a person who is a US citizen, resident of USA, a USA partnership firm, a Limited Liability Company (LLC) or trust (referred as United States Person) which has financial interest or signing authority in overseas financial investment exceeding US $ 10,000 during a calendar year. It may be noted that filing of tax returns jointly by a married couple is common in USA but the limit of US $ 10,000 is for each individual.
Foreign Financial Account : It includes all accounts maintained with a financial institution and also includes:
Securities or brokerage account; Bank account including savings, current or deposits held as NRE, NRO, FCNR account and also Resident account. Commodity Futures & Options Accounts; Whole life insurance policy and any annuity with cash value; Mutual fund or similar pooled fund and Any account maintained with a foreign financial institution or other person performing the services of a financial institution.
It may be noted that investment in a partnership or proprietorship firm, private limited company, personal loans and personal assets like jewellery are not included and hence not required to be reported. Immovable properties are also not covered under FBAR but bank balances generated by funds remitted for purchase of Immovable property in India need to be reported.
Financial Interest: A United States person is said to have a financial interest in a foreign financial account if:
&touro; He is the owner of record or holder of legal title, or.
&touro; The owner of record or holder of legal title is another person who may be:
a) an agent, nominee, attorney or a person acting in on behalf of the US person with respect to the account;
b) a corporation / company in which the US person owns directly or indirectly more than 50 percent of the total value of shares or voting power;
c) a partnership in which the US person owns directly or indirectly or has interest greater than 50 percent of the profits or capital;
d) a trust of which the US person is the trust grantor and has an ownership interest in the trust for US federal tax purposes;
e) a trust in which the US person has a more than 50 percent beneficial interest in the assets or income of the trust for the calendar year; ou.
any other entity in which the US person owns directly or indirectly more than 50 percent of the voting power or total value of equity interest or total assets or interest in profits.
Joint Owners : A husband and wife owning a joint account need not file separate reports. But if either spouse has a financial interest in any other account not held jointly then such a person should file a separate report for all accounts including those owned jointly with the spouse.
Form and Filing : The report is to be submitted in form TD F 90-22.1 with the U. S. Department of the Treasury, Detroit by June 30 of the following year.
Penalty : Improper filing of FBAR attracts penalty of $10,000 whereas wilful failure to file FBAR is liable to penalty of greater of $100,000 or 50% of the balance at the time of violation and also is subjected to criminal penalties.
FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA) :
FATCA, an acronym for Foreign Account Tax Compliance Act (FATCA) enacted with the primary goal to gain information about US persons and requires US persons to report their foreign financial assets to the IRS and also requires foreign financial institutions to report directly to the IRS details of financial accounts of US persons held with them .
Applicability : Individuals who are U. S. citizens, tax residents, non-residents who elect to be resident aliens and non-residents who are bonafide residents of American Samoa or Puerto Rico having foreign financial assets above the threshold limit.
Foreign Financial Assets : It includes following financial assets:
Checking, savings and deposit accounts with banks held as NRE, NRO, FCNR or Resident accounts ; Brokerage accounts held with brokers & dealers; Stocks or securities issued by a foreign corporation; Note, bond or debenture issued by a foreign person; Swaps of all kinds including interest rate, currency, equity, index, commodity and similar agreements with a foreign counterparty; Options or other derivative instruments of any currency, commodity or any other kind that is entered into with a foreign counterparty or issuer; Partnership interest in a foreign partnership; Interest in a foreign retirement plan or deferred compensation plan; Interest in a foreign estate; Any interest in a foreign-issued insurance contract or annuity with a cash-surrender value; and Any account maintained with a foreign financial institution and every foreign financial asset, income or gain whereof is to be reported in the tax return to be filed with the IRS.
It is significant to note that unlike FBAR, FATCA covers investments of any and every size in equity shares of a private limited company, capital in partnership or proprietorship, loans and advances including personal loans etc. Immovable properties are excluded. If the US person is not required to file US tax return for any reason then he is not required to file the FATCA report.
Both FBAR and FATCA cover erstwhile investments in India and inherited or partitioned family assets.
Reporting Threshold : Individuals are covered by FATCA if the value of foreign financial assets exceeds US$ 50,000 as on 31st December or US$ 75,000 during the tax year and in case of married couple tax-payers US$ 100,000 and US$ 150,000 respectively.
For individual tax-payers living abroad these limits are raised to US$ 200,000 and US$ 300,000 respectively and US$ 400,000 and US$ 600,000 for a married couple filing joint return.
Joint Owners : As the report is filed with IRS tax return, tax return of a married couple will include assets of both the spouses.
Form and Filing : The report is to be submitted in form 8938 with the IRS with the tax return and the due dates for filing tax returns with the IRS including extension will apply accordingly.
Penalty : Failure to file Form 8938 by the due date or filing an incomplete form attracts penalty of $10,000. Additional penalty of $10,000 per month up to a maximum penalty of $ 50,000 may become payable for failure to file inspite of IRS notice.
Tax Withholding : FATCA also requires 30 percent tax withholding on certain payments of US source income paid to non participating foreign financial institution or account holders who fail to provide requisite information. [irs. gov/uac/Treasury,-IRS-Issue-Proposed-Regulations-for-FATCA-Implementation]
U. S. OFFSHORE VOLUNTARY DISCLOSURE PROGRAMME.
The IRS has once again given an opportunity for voluntary disclosure of overseas assets and income thereon under the Offshore Voluntary Disclosure Programme (OVDP).
The OVDP is similar to the earlier OVDI under which tax-payers are required to pay tax on hitherto undisclosed income of earlier eight tax years together with interest thereon and in addition a penalty of 27.5% of the highest balance of hitherto undisclosed foreign bank accounts and / or value of foreign assets over the last 8 years. For balance upto $ 75,000 reduced penalty of 12.5% applies. In cases of tax payers disclosing and paying tax on foreign incomes but failing only to file FBAR returns delinquent reports may be filed possibly saving oneself from penal provisions. [irs. gov/uac/2012-Offshore-Voluntary-Disclosure-Program]
Many NRIs may not have abided by the FBAR provisions and few by ignorance have also failed to pay tax on their Indian income in the USA but ignorance of law cannot be an excuse and therefore it would be appropriate for USA based NRIs and Chartered Accountants advising them to take advantage of the OVDP before the programme is discontinued.