On July 29, 2021, the United States Attorney for the Southern District of New York, the Assistant Attorney General for the Department of Justice Tax Division, and the IRS Commissioner all announced that a federal court in New York had entered an order “authorizing the IRS to issue summonses requiring multiple couriers and financial institutions to produce information about U.S. taxpayers who may have used the services of Panama Offshore Legal Services (‘POLS’) and its associates (together, the ‘POLS Group’) to evade federal income taxes.” A copy of the news release can be found here. Although the government’s efforts to identify additional foreign assets and accounts is not surprising, the news release does provide another cautionary tale of the government’s power and reach to identify taxpayers who hold foreign accounts and assets overseas without proper reporting and payment of federal taxes.
Archive for FBAR Filing
IRS Gets Green Light To Seek Information From Third Parties Regarding Panama Offshore Legal Services
In a recent decision, a federal district court found that a long-time CPA/tax-return preparer recklessly failed to file FBARs to disclose several foreign financial accounts. As avid readers of our Insights are aware, many federal courts have found that reckless reporting failures are sufficient to impose “willful” FBAR penalties—and those penalties can be quite signficant.
The case was United States v. Kronowitz. And it is yet another reminder that courts addressing FBAR reporting failures tend to look critically at the account holder’s background, including educational and professional. Account holders with tax-related backgrounds or professionals with substantial business experience are often held to a higher standard.
The Foreign Accounts
The FBAR For United States Citizens And Residents Is Due Today, Oct 15th – What About Business Visitors?
Update 2020 …
US citizens and residents – Report early! Report often! Report everything! Keep a record of what you report! "Looking for Mr. #FBAR: John Richardson @Expatriationlaw in discussion with Virginia La Torre Jeker @VlJeker" https://t.co/GcMxzsmWj7 via @YouTube
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 15, 2020
Prologue: Circa 1948 – George Orwell anticipates the arrival of Mr. FBAR
Every year, under the law known as the Bank Secrecy Act, you must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and keep certain records of those accounts. You report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114.
Who Must File
A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:
- a financial interest in or signature or other authority over at least one financial account located outside the United States if
- the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
According to the IRS, a U.S. citizen, resident, corporation, partnership, limited liability company, trust, and estate, must file an FBAR if they meet certain criteria. These requirements can include: if you have a financial interest in or authority over at least one foreign financial account and if the combined value of the foreign accounts exceeds $10,000 at any time during the calendar year.
When you have foreign bank accounts, there are certain situations in which seeking help from a tax attorney can be beneficial. In addition to getting information on how to file an FBAR, a tax attorney can help you with the following:
The law requires each “United States person” who has a financial interest in or signature authority over any foreign financial account to file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. The form required is FinCEN Form 114.
This is one that should be pretty well known by now. The obligation to file a Report of Foreign Bank and Financial Accounts (FBAR) with the US Treasury was initially imposed by the Bank Secrecy Act in 1970. Here are the Instructions to FinCEN Form 114 (FBAR). You can electronically file Form 114 for free here.
What Is a Financial Interest for the FBAR?
According to the FBAR instructions:
In a global economy, many people in the United States have foreign financial accounts. The law requires U.S. persons with foreign financial accounts to report their accounts to the U.S. Treasury Department, even if the accounts don’t generate any taxable income. They need to report by April 15 of the following calendar year.
The U.S. government requires reporting of foreign financial accounts because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions.
Who Needs To Report
Since 1970, the Bank Secrecy Act requires U.S. persons to file a Report of Foreign Bank and Financial Accounts (FBAR) if they have:
You’re living your adventure and you’re settled in your new home, having non-US bank accounts, a non-US employer and a non-US social life. You have limited ties with the US and since the people who pay you (banks, employer) are not in touch with the IRS, you consider simply not filing US tax return. What could go wrong?
As you might know, on some level… US citizens are required to report their worldwide income on a US tax return, regardless of where they live.
IRS has a few proven ways they use to track people down.
Below you will find the most common ways that IRS can track you down and check if you filed your US tax return, no matter where you live in the World.
You have three major option for filing Foreign Bank Account Reports (FBARs) for previous tax years. The best option for you will depend on the specific facts of your case, such as:
- Whether you failed to report foreign income during the tax years in question.
- Whether your failure to file was willful or non-willful.
- Your risk tolerance.
- How much the estimated amount of penalties will be when using the Streamlined Procedure or the new Offshore Disclosure Framework.
Consult a tax attorney before you use any type of offshore disclosure method to make sure you are correctly following IRS procedures.
Delinquent FBAR Submission
This method involves simply sending in the delinquent FBARs. You don’t pay any penalties and you don’t have to amend your tax returns.
You can only use this strategy if you are not under civil examination or criminal investigation by the IRS and have not been contacted about the delinquent FBARs. You won’t owe any penalties if you didn’t have foreign income or paid tax on your foreign income during the years you failed to file FBARs.