rev.JPG)
Go to Jail. If you have a bank account with more than $10,000 outside the country and have not reported it to the US government every year, you could go to jail for five to ten years and pay fines from $100,000 to $500,000.
End of Swiss Bank Privacy? The IRS recently announced that the US government has worked out an arrangement where the IRS will receive the names of US citizens who have not reported their Swiss bank accounts to the IRS. There were media reports that the IRS sought information on 52,000 accounts, however, a recent settlement calls for UBS to give the IRS between 4,500 and 5,000 names. Once the IRS has these names, the IRS can then initiate criminal prosecutions for tax evasion. Several US citizens with UBS accounts have recently pleaded guilty of not reporting foreign bank accounts, with their information being posted on the IRS website.
Grandmother Lee. Grandmother Lee fled Vietnam when the North Vietnamese Communist government took over South Vietnam and she settled in France. In 2006, she died and left her money equally to her three children in her bank account in France. Dr. Lee, one of her daughters, is a US citizen living in Virginia and is a medical doctor. In 2006, Dr. Mae Lee found out that she had inherited $80,000 in a savings account in a French bank from her mother. Dr. Lee left the money in France, thinking that when she had time from her busy medical practice, her family would have a great vacation in France. The first time Dr. Lee received a statement of the interest income from this French Bank account was in 2008. Dr. Lee filed a personal tax return for 2008 reporting the interest income from the French Bank account. The IRS examines the return and started a criminal investigation of Dr. Lee for failing to timely file Form TD F 90-22.1, Report of Foreign Bank and Financial Account, commonly known as a FBAR, for three years.
Who Has to FBAR: 1.) Any US citizen or a US resident or certain persons doing business in the US or domestic trusts, corporations or partnerships AND
2.) This person had signature authority over a foreign account with a bank or foreign financial institution AND
3.) The foreign financial account had a combined value of more than $10,000. Of course, as with all tax regulations, there are many broad definitions and a lack of clarity on many points. If you want more detail, contact us for a confidential consultation. This short B-LAW-G can not be relied upond for legal or tax advise.
How to FBAR: File an annual TD F 90-22.1 by June 30, 2009 to a designated address in Detroit. You report the maximum value of the account during the year, the type of account, the name of the financial institution and its address and the account number. This form is not filed with your tax return. As a US citizen, you have to report your worldwide income on your regular 1040 personal tax return. Use Schedule B to inform the IRS of the existence of a foreign bank account. Even if you reported the income on your personal 1040 return, you would still be in trouble if you did not file the separate TD F 90-22.1 (FBAR form).
Penalties. If you fail to file the FBAR form, you can be subject to severe civil or criminal penalties or both. A non willful violation is subject to a $10,000 fine. The civil penalty is limited to the greater of $25,000 or the balance in the account up to $100,000. So for Dr. Lee, her penalty could be $80,000 and she forfeits the entire $80,000 she inherited. The IRS has six years to assess the FBAR penalty. Criminal violations can result in a fine of up to $250,000 and 5 years in jail. Where the failure to file the FBAR is part of tax evasion, the fine may go as high as $500,000 and up to ten years in prison.
Collapsing Offshore Tax Shelters. In the past, prosecutions have been rare. But with the step up in enforcement against offshore tax evasion, prosecutions may increase. For people who are not part of a tax evasion scheme and only recently realized they need to file FBAR reports, the IRS has a temporary voluntary disclosure program.
Saving Dr. Lee. Dr. Lee had no idea that she was committing a crime because she inherited money in 2006 in the form of an account in France from her departed mother. She could be subject to a civil fine of $80,000 and a possible criminal tax prosecution. She retains an attorney, not a CPA, because there is an attorney client privilege against disclosure of past crimes with an attorney, but not with a CPA. The attorney may retain an experienced CPA to do most of the work. Though her attorney, Dr. Lee participates in the IRS voluntary disclosure program. If there is unreported income from these accounts, she will have to file amended returns and pay the tax and penalties on the unreported income. The IRS warns that if Dr. Lee just filed amended returns and did not participate in the voluntary disclosure program, Dr. Lee could be subject to criminal prosecution. If Dr. Lee does participate in the voluntary disclosure program, then Dr. Lee would not pay $80,000, the entire inheritance as a penalty, but 20% of the account or $16,000. Once the IRS has started a criminal investigation, Dr. Lee is no longer eligible for the voluntary disclosure program.
Six Months Window. The voluntary disclosure program ends September 23, 2009; it was started March 23, 2009. “There are no plans to extend the deadline past September 23, 2009”, said Neil Shulman, head of a FBAR Task Force of AICPA, a national association of CPAs.
Get Out of Jail Card. In the board game of Monopoly, you can roll the dice and end up on the square “Go to Jail”. If you should have filed your FBARs and didn’t, your Get Out of Jail Card is about to expire.
End of Swiss Bank Privacy? The IRS recently announced that the US government has worked out an arrangement where the IRS will receive the names of US citizens who have not reported their Swiss bank accounts to the IRS. There were media reports that the IRS sought information on 52,000 accounts, however, a recent settlement calls for UBS to give the IRS between 4,500 and 5,000 names. Once the IRS has these names, the IRS can then initiate criminal prosecutions for tax evasion. Several US citizens with UBS accounts have recently pleaded guilty of not reporting foreign bank accounts, with their information being posted on the IRS website.Grandmother Lee. Grandmother Lee fled Vietnam when the North Vietnamese Communist government took over South Vietnam and she settled in France. In 2006, she died and left her money equally to her three children in her bank account in France. Dr. Lee, one of her daughters, is a US citizen living in Virginia and is a medical doctor. In 2006, Dr. Mae Lee found out that she had inherited $80,000 in a savings account in a French bank from her mother. Dr. Lee left the money in France, thinking that when she had time from her busy medical practice, her family would have a great vacation in France. The first time Dr. Lee received a statement of the interest income from this French Bank account was in 2008. Dr. Lee filed a personal tax return for 2008 reporting the interest income from the French Bank account. The IRS examines the return and started a criminal investigation of Dr. Lee for failing to timely file Form TD F 90-22.1, Report of Foreign Bank and Financial Account, commonly known as a FBAR, for three years.
Who Has to FBAR: 1.) Any US citizen or a US resident or certain persons doing business in the US or domestic trusts, corporations or partnerships AND2.) This person had signature authority over a foreign account with a bank or foreign financial institution AND
3.) The foreign financial account had a combined value of more than $10,000. Of course, as with all tax regulations, there are many broad definitions and a lack of clarity on many points. If you want more detail, contact us for a confidential consultation. This short B-LAW-G can not be relied upond for legal or tax advise.
How to FBAR: File an annual TD F 90-22.1 by June 30, 2009 to a designated address in Detroit. You report the maximum value of the account during the year, the type of account, the name of the financial institution and its address and the account number. This form is not filed with your tax return. As a US citizen, you have to report your worldwide income on your regular 1040 personal tax return. Use Schedule B to inform the IRS of the existence of a foreign bank account. Even if you reported the income on your personal 1040 return, you would still be in trouble if you did not file the separate TD F 90-22.1 (FBAR form).
Penalties. If you fail to file the FBAR form, you can be subject to severe civil or criminal penalties or both. A non willful violation is subject to a $10,000 fine. The civil penalty is limited to the greater of $25,000 or the balance in the account up to $100,000. So for Dr. Lee, her penalty could be $80,000 and she forfeits the entire $80,000 she inherited. The IRS has six years to assess the FBAR penalty. Criminal violations can result in a fine of up to $250,000 and 5 years in jail. Where the failure to file the FBAR is part of tax evasion, the fine may go as high as $500,000 and up to ten years in prison.
Collapsing Offshore Tax Shelters. In the past, prosecutions have been rare. But with the step up in enforcement against offshore tax evasion, prosecutions may increase. For people who are not part of a tax evasion scheme and only recently realized they need to file FBAR reports, the IRS has a temporary voluntary disclosure program.
Saving Dr. Lee. Dr. Lee had no idea that she was committing a crime because she inherited money in 2006 in the form of an account in France from her departed mother. She could be subject to a civil fine of $80,000 and a possible criminal tax prosecution. She retains an attorney, not a CPA, because there is an attorney client privilege against disclosure of past crimes with an attorney, but not with a CPA. The attorney may retain an experienced CPA to do most of the work. Though her attorney, Dr. Lee participates in the IRS voluntary disclosure program. If there is unreported income from these accounts, she will have to file amended returns and pay the tax and penalties on the unreported income. The IRS warns that if Dr. Lee just filed amended returns and did not participate in the voluntary disclosure program, Dr. Lee could be subject to criminal prosecution. If Dr. Lee does participate in the voluntary disclosure program, then Dr. Lee would not pay $80,000, the entire inheritance as a penalty, but 20% of the account or $16,000. Once the IRS has started a criminal investigation, Dr. Lee is no longer eligible for the voluntary disclosure program.
Six Months Window. The voluntary disclosure program ends September 23, 2009; it was started March 23, 2009. “There are no plans to extend the deadline past September 23, 2009”, said Neil Shulman, head of a FBAR Task Force of AICPA, a national association of CPAs.
Get Out of Jail Card. In the board game of Monopoly, you can roll the dice and end up on the square “Go to Jail”. If you should have filed your FBARs and didn’t, your Get Out of Jail Card is about to expire.
Well the Toronto embassy has held a group meeting for those wanting to renounce over this Oct. 20. They said it was the first group meeting they ever had to have. They are planning another one. They called FBAR and FATCA the "ten thousand pound gorilla in the room" we can't talk about. In my case my Canadian husband makes all of our income in Canada and I stay at home. This legislation is making Americans a liability to their families. My husband has told his company to divest all his RRSP out of U.S. holdings over this and will have his bosses include our story in their newsletter. I owed no taxes and was only required to file FBAR one year but, I never heard of FBAR before and I have called the IRS as late as April 2011 after my mother died to ask of my obligations on any inheritance. They never told me about FBAR in our half hour conversation. Lots of people are renouncing since we can't afford this going forward and do not trust them anymore. After they lumped us all in with criminals and drug lords there's just no forgiving what they have put our families through. None.
ReplyDelete