| « Back to News Archive |
| Uncle Sam Wants to Know All About Your Foreign Affairs |
02-17-2009 |
Some of the greatest movies of all time involve foreign affairs, most notably the king of all date movies, “Casablanca” starring Ingrid Bergman and Humphrey Bogart.
Who can forget those classic “Casablanca” lines: “We’ll always have Paris,” “Here’s looking at you, kid,” and of course the most famous line never actually spoken verbatim in the film, “Play it again, Sam.”
But unless you find the prospect of imprisonment appealing, you’ll want to report your foreign affairs – at least the financial ones – on an annual basis to the Internal Revenue Service.
Under the Bank Secrecy Act, each U.S. person must annually file a Report of Foreign Bank and Financial Accounts (FBAR) if they own or have authority over a foreign financial account that exceeds $10,000 in value at any time during the calendar year.
The act defines “U.S. person” to include citizens, residents of the U.S., and those in and doing business in the United States. The foreign accounts include bank accounts, brokerage accounts, mutual funds, unit trusts, debit and prepaid credit card accounts, cash-value life insurance and other types of foreign financial holdings.
By foreign, the act means anywhere other than the United States, the commonwealths of Puerto Rico and the Northern Mariana Islands, and the territories/possessions of Guam, American Samoa and the U.S. Virgin Islands.
It’s perfectly legal for Americans to own foreign accounts, of course. The reason FBAR came into existence was to identify those who may be using their foreign financial accounts for illicit purposes or to shelter unreported income made and/or held abroad.
The IRS recently stepped up its FBAR enforcement in light of several high profile investigations into undisclosed foreign accounts in LGT Bank of Liechtenstein, UBS Bank of Geneva and other financial institutions.
Penalties are indeed steep. Civil penalties can run up to $10,000 per accidental violation and as high as $100,000 or 50 percent of an undeclared balance per willful violation. In addition, criminal charges can result in up to $500,000 in fines and imprisonment of up to 10 years.
Complying with FBAR is by no means intuitive. Oh, the paperwork is simple enough: you check the appropriate box on Form 1040 Schedule B and fill out Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts).
The tricky part is, you don’t file Form TD F 90-22.1 with your federal income tax return. Instead, you send it on or before June 30 of the succeeding year to: U.S. Department of the Treasury, P.O. Box 32621, Detroit, MI 48232-0621.
While the statute buys you an additional 2.5 months to report, that’s the absolute deadline for FBAR – no extensions.
The IRS makes a few exceptions to the reporting requirements. These include:
- Accounts in U.S. military banking facilities operated by a United States financial institution to serve U.S. Government installations abroad.
- An officer or employee of a bank that is subject to the supervision of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, or the Federal Deposit Insurance Corporation, if they have no personal interest in the account.
- An officer or employee of a domestic corporation whose equity securities are listed on a national securities exchange or which has assets exceeding $10 million and 500 or more shareholders of record, if they have no personal financial interest in the account and have been advised in writing by the chief financial officer of the corporation that the corporation has filed a current report that includes the foreign account.
As a foreign account holder, you may have a reporting obligation even though your account produces no taxable income.
Be sure to check with your Traders Accounting tax pro if you are unsure whether you need to report your “foreign affair.”
As Bogey might say, this could be “the beginning of a beautiful friendship.”
|
| |
| « Back to News Archive |
|
|
|
- I just listened to your webinar offered re Traders Tax issues and was impressed with the no-nonsense straight talk approach, as well as the informa...
Kirk Knight CPA
|
|
| • |
Comprehensive overview on the business of trading. |
| • |
Learn how to save $5,000 to $8,000 a year off trader tax. |
| • |
Breakthrough recommendations to legally lower your taxes. |
| • |
Fill out our short form to receive the free guide AND a 30 minute phone consultation! |
| • |
Get updates of our weekly Free Webinar Training classes. |
| • |
Automatically receive our weekly newsletter. (No Spam!) |
| • |
Learn if new Tax Court rulings affect you. |
| • |
Get the latest tax reduction strategies. |
|
|
|
|
 |
|
News Details
