(PRWEB) June 15, 2012
Thompson & Associates, CPAs, LLC, a leading Atlanta CPA firm, warns that the deadline for reporting Foreign Financial Accounts (FBAR) is June 30, 2012. For individuals, corporations and foreign banks, the IRS is determined to enforce reporting of financial account information and income through foreign banking and financial institutions. As a result, the Foreign Account Tax Compliant Act (FATCA) and the Report of Foreign Bank and Financial Accounts (FBAR) could affect millions of people in the U.S.
The FBAR isn’t a new filing requirement nor is it a tax return. Initially implemented by the Bank Secrecy Act in 1972, the form is used to report financial interest in, or signature authority over, one or more financial accounts located in foreign countries. Generally, if a taxpayer has signature authority over one or more financial accounts in a foreign country and the total of the foreign investments exceed $10,000, then taxpayers are required to file. The form includes the taxpayer’s account information as well as the average daily balance and the highest balance for the year. The form must be RECEIVED by the IRS no later than June 30 of each calendar year, not just mailed by that date.
The penalties for not reporting are severe. Taxpayers who fail to file because they did not know can receive a civil penalty of $10,000 per violation. Knowingly violating the reporting requirement carries an even larger penalty of the greater of $100,000 or 50% of the account balance. Additionally, the IRS may evoke criminal penalties including a fine of up to $250,000 and imprisonment of 5 years.
The IRS is taking the issues of penalties quite seriously and does not allow taxpayers to merely put their head in the sand. Under the Internal Revenue Manual, a “willful blindness” may constitute “knowingly” violating the reporting requirement.
FACTA takes the FBAR one step further and generally requires taxpayers holding foreign assets with an aggregate value of more than $50,000 to report certain information concerning those assets on an IRS form 8938. This form was required for the 2011 tax year, thus reporting started in 2012, is required to be filed the date the taxpayer’s return is due.
With regards to penalties under FATCA, there is an initial penalty of $10,000 per violation that jumps to $50,000 if the taxpayer continues to not report after notified by the IRS. Additionally, if any underpayments of tax are attributable to the non-disclosed funds, the IRS imposes a stiff 40% understatement penalty.
FACTA rules extend beyond reporting requirements by taxpayers to the IRS for financial assets greater than $50,000. It requires foreign financial institutions (FFI) to report to the IRS all financial accounts held by U.S. Taxpayers and for resident aliens in the United States, if the balances in such accounts exceed $50,000. If a FFI refuses to be compliant with the law, they face a stiff withholding tax of 30% on all relevant US-sourced payments paid to them.
The impact of these new laws will be far reaching, particularly in well-known of offshore banking locations such as the Caribbean, Luxembourg, Singapore and Hong Kong. The law requires FFI reporting to commence in the first quarter of 2014. Thus, count on the IRS knowing about taxpayer’s foreign financial accounts by 2014.
Thompson & Associates CPAs are leaders in forensic accounting and tax law. Written in conjunction with Bomar Rice, LLC, a leading Atlanta Tax Law Firm, the entire article may be found at http://www.atlantacpas.com/Latest-News.html.