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Archive for FBAR

Exercising Broad Regulatory Authority, US Treasury Has Clarified The Meaning Of “Resident” For FBAR Purposes

John Richardson On FBAR

Introduction – Looking For Mr. FBAR

What’s new?

I haven’t written a post about Mr. FBAR for quite some time. But, a post about the recent Boyd Case at Tax Connections, by Darlene Hart got me thinking about FBAR again. For those interested – where the IRS successfully argued that it was appropriate to impose penalties on each individual account – here is the case:

Those who know little about Mr. FBAR might find this introduction to FBAR – although written in 2012 – helpful. Incidentally, it’s pretty obvious that Russia’s Foreign Bank account reporting laws were based on an admiration of Treasury’s success with the FBAR rules.

The purpose of this post
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Written by | Posted in FBAR

Coming to America? Welcome To The Land of FBARs

Green Cards And Taxes

Thoughts From A Conversation About Green Cards And Taxes

The purpose of this is to reinforce some very simple points. I find that people always have more trouble remembering what’s simple.

Moving to America

1. Taxation of income from your remaining “non-U.S. assets”
You will be shocked to find that many of your “foreign assets” will be subject to particularly punitive U.S. taxation.

2. Reporting of your “non-U.S. assets”
If you are moving to America, you are moving from another country. You will very likely retain financial assets and bank accounts in that country. From a U.S. perspective, these assets are “foreign” and therefore a “fertile ground” for taxation and penalties.

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Written by | Posted in FBAR • FBAR Penalties • Green Card

Form 3520 And Substitute Form 3520-A For Foreign Trusts And Gifts From Nonresidents

Gary Carter Form 3520-A

Section 6048 of the Internal Revenue Code requires a United States person, as defined for FBAR reporting, (and the executor of the estate of a US decedent) to file Form 3520 to report:

  • Certain transactions with foreign trusts,
  • Ownership of foreign trusts, and
  • Receipt of certain large gifts or bequests from certain foreign persons.

Additionally, an owner of a foreign trust might be required to file a Substitute Form 3520-A if the foreign trust fails to file Form 3520-A (See SUBSTITUTE Form 3520-A below). Here is Form 3520 and Instructions.

What Is a Foreign Trust For Which Form 3520 Must Be Filed?

Although the Internal Revenue Code (IRC) refers to trusts in numerous sections, nowhere in the IRC is the term “trust” actually defined. There is a definition of foreign trust. IRC Section 7701(a)(31)(B) says: “The term ‘foreign trust’ means any trust other than a trust described in subparagraph (E) of paragraph (30).” Subparagraph (E) describes “any trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust, and (ii) one or more United States persons have the authority to control all substantial decisions of the trust.”

So a foreign trust is one that is not under the jurisdiction of United States courts or controlled by a United States person. But what is a “trust”?

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Written by | Posted in FBAR • Foreign Trusts • Form 3520/3520-A

What Can Happen If You Fail To Disclose Offshore Accounts

Venar Ayar On FBAR

A failure to file FBARs and Form 8938 can result in numerous civil tax penalties. Criminal penalties are also a possibility, which could result in jail time.

FBAR Civil Penalties

The FBAR civil penalties have two tiers, depending on whether your conduct was willful or non-willful:

  • Willful penalties can result in a penalty of $100,000 or 50% of the aggregate foreign account balance
  • Non-willful penalties can result in a penalty of up to $10,000 per violation

These penalties can be assessed for each account and for each year a FBAR should have been filed, but wasn’t.  So a taxpayer with 5 foreign accounts and 5 years of unfiled FBARs could have 25 FBAR violations.  In practice, examiners may recommend only one penalty per year and may even  recommend a single penalty for multiple years of violations.

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Written by | Posted in FBAR • Form 8938

Record Penalties Sought In California In Latest Major FBAR Case

Helen Burggraf

The U.S. Internal Revenue Service is seeking what is said to be a record US$119.6m in penalties over what it has claimed in California district court documents were violations of the FBAR regulations, which require Americans to disclose their overseas financial accounts above a certain amount each year.

Foreign Bank Account Report penalties are famously high, which is why tax experts often stress to their clients the importance of complying, particularly as the penalties for “wilful” non-compliance are that much greater.

The case (U.S. vs Burga, No. 5:19-cv-03246-EJD), emerged in the U.S. media recently, where it was noted that court documents had claimed that Francis Burga and her late husband, Margelus Burga, had some 294 foreign bank accounts between 2004 and 2009, in Liechtenstein, the British Virgin Islands, Switzerland, Singapore, Japan, Panama, China and Vietnam, for which they had failed to file the requisite FBARs.
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Written by | Posted in FBAR • FBAR Penalties

Summary of FATCA Reporting For U.S. Taxpayers

IRS Logo 123

The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. The Treasury Department and the IRS continue to develop guidance concerning FATCA. For current and more in-depth information, please visit FATCA.

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. There are serious penalties for not reporting these financial assets (as described below). This FATCA requirement is in addition to the long-standing requirement to report foreign financial accounts on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) (formerly TD F 90-22.1).

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Written by | Posted in FBAR

IRS Rules: FATCA Reporting For U.S. Taxpayers

IRS, U.S. Citizens Reporting Foreign Assets, TaxConnections

The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. The Treasury Department and the IRS continue to develop guidance concerning FATCA. For current and more in-depth information, please visit FATCA.

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. There are serious penalties for not reporting these financial assets (as described below). This FATCA requirement is in addition to the long-standing requirement to report foreign financial accounts on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) (formerly TD F 90-22.1).

FATCA will also require certain foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. The reporting institutions will include not only banks, but also other financial institutions, such as investment entities, brokers, and certain insurance companies. Some non-financial foreign entities will also have to report certain of their U.S. owners.

Therefore, if you set up a new account with a foreign financial institution, it may ask you for information about your citizenship. FATCA provides special (and lessened) reporting requirements about the U.S. account holders of certain financial institutions that do not solicit business outside their country of organization and that mainly service account holders resident within it. In order to qualify for this favorable treatment, however, the local foreign financial institution cannot discriminate by declining to open or maintain accounts for U.S. citizens who reside in the country where it is organized.

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Written by | Posted in FATCA • FBAR • IRS

Supreme Court Refuses To Review Million Dollar FBAR Penalty

Despite the taxpayer’s persistent challenges, the Supreme Court has refused to review a Ninth Circuit Court of Appeals’ decision affirming a lower court’s decision in favor of the IRS, which assessed a giant $1.2 million penalty for failing to disclose financial interests in an overseas account.

The April 30th decision, which is now final, is noteworthy for two reasons. First, it shows the magnitude of penalty that can be reached, even with respect to an individual and a single foreign account and tax year (in this case, the relevant tax year was 2006). Second, it shows the type of taxpayer arguments that courts will likely reject when reviewing an FBAR penalty case.

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Written by | Posted in FBAR • FBAR Penalaty • Supreme Court

Sentencing Guidelines For A Taxpayer Charged with FBAR Violations

Do You Have Foreign Income?

In case you have foreign income or assets, you might be under an obligation to file a Report of Foreign Bank and Financial Accounts (FBAR) disclosing your assets and income to the IRS. The FBAR filing requirements specifically apply to US taxpayers with financial interest in, or signature authority over a financial account or foreign bank with a value of at least $10,000 at any point.

These FBAR requirements extend to U.S. residents, U.S. citizens and various kinds of business entities, such as limited liability companies (LLCs), corporations and partnerships. Keep in mind that FBAR violations, which usually involve failure to maintain relevant financial records or failure to file an FBAR, could result in severe penalties, especially if these violations are “willful.”

Failure To File

Since 2017, any failure to file can lead to harsh sentencing; this depends on how much you or your business has in foreign financial institutions or offshore accounts. A failure to disclose and furnish the information is usually an intentional act to deceive the IRS. You have to file the FBAR paperwork, as long as your accounts have over $10,000.

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Written by | Posted in FBAR • FBAR Violations • IRS • TaxConnections

District Court Broadens Scope Of Willful Requirement In Applying Enhanced FBAR Penalities

A new U.S. District court case has added to the recent upswing in cases tackling the issue of defining “willful” for purposes of applying the more severe penalties for failure to file the FBAR.

In U.S. v. Garrity, 2018 U.S. Dist. LEXIS 56888 (D. Conn. 2018), a United States District Court of Connecticut judge ordered that in moving to the next phase of trial, the IRS must prove the elements of its FBAR penalty claim only by a preponderance of the evidence, and the IRS can satisfy its burden to prove willfulness by evidencing reckless conduct by the taxpayer. Read More

Written by | Posted in FBAR

IRS Reminds Those With Foreign Assets About U.S. Tax Obligations

WASHINGTON — The Internal Revenue Service today reminded U.S. citizens and resident aliens, including those with dual citizenship, to check if they have a U.S. tax liability and a filing requirement. At the same time, the agency advised anyone with a foreign bank or financial account to remember the upcoming deadline that applies to reports for these accounts, often referred to as FBARs.

Here is a rundown of key points to keep in mind:

Deadline For Reporting Foreign Accounts Read More

Written by | Posted in FBAR • IRS • OVDP • TaxConnections
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