Foreign Bank Account Owners to Report Financial Account & Assets by June 28th for 2012 or File a FBAR Amnesty to Avoid IRS Financial and Criminal Penalties
Plano, Texas (PRWEB) July 22, 2013 -- June 30, the deadline for the filing of the Report of Foreign Bank and Financial Accounts or FBAR to the IRS, is fast approaching. Sam Thakkar of Perfect Tax states, "Any U.S. resident with an aggregate balance of $10K has to file a FBAR by the 28th of June instead of the 30th as the latter date falls on a weekend. Failure to do so can lead to heavy financial penalties, criminal prosecution, and seizure of property."
Consider these 10 rules for filing a FBAR:
1. Worldwide income must be reported on the taxpayer's U.S. tax return if he or she is a U.S. resident. These include H1, L1, green card holders, citizens, and those with dual citizenship.
If the taxpayer has an interest in a foreign bank or financial account, the individual must see to it that it is reflected in Schedule B of the 1040 Tax Return, even if he or she has lived outside the U.S.
Click here to know more about a FBAR Amnesty
2. All U.S. persons with foreign bank accounts exceeding a deposited amount of $10,000 at any time during the year must file a FBAR every 30th of June.
These include following assets:
- Bank accounts
- Stocks/demat accounts
- Mutual funds
- Life insurance policies
- Join accounts with parents, siblings or anyone
- Rental property value or any other income producing asset
June 30th deadline for FBAR
3. With a tax return, the taxpayer also needs to file an IRS Form 8938 to report foreign accounts and assets.
Click here to know about FBAR vs. 8938 and on what should be filed
4. There are big penalties upon failing to do so. One could face tax evasion and fraud charges. The criminal statute of limitations for such is six years. For civil tax fraud, there is no maximum duration.
5. FBAR penalties are more severe. Failing to file a FBAR penalizes the person $10,000 for each non-willful violation. For willful ones, the penalty may go above $100,000 or 50% of the amount in the account. Separate violations apply for each year the taxpayer fails in the filing.
6. Taxpayers may also be incarcerated. Tax evasion charges can carry a prison term of up to five years and would include having to pay a maximum fine of $250,000. Falsification of tax returns may mean ending up in prison for three years or less and at utmost, another fine of $250,000.
Failing to file a tax return can mean a year in prison and a fine of up to $100,000. Finally, taxpayers who neglect in filing FBARs may face monetary penalties of up to $500,000 and ten years in prison at most.
7. Offshore Voluntary Disclosure Initiatives (OVDI) and a FBAR Amnesties are options to reduce noncompliance for past years, from 2003 to 2011. These privileges exist to reduce penalties.
8. Silent Disclosures, also known as “Quiet Disclosures,” are discouraged as they are corrections of past tax returns and FBARs which do not draw attention. The IRS warns against them.
9. Can a taxpayer start filing complete tax returns and FBARs respectively while not trying to fix past issues? Maybe, but this entails risk, as noncompliance in the past will be taken note of and it may be too late for a voluntary disclosure.
10. Disclosure is the key. Taxpayers are allowed to have money and investments anywhere in the world, so long as they disclose foreign accounts. When in doubt, taxpayers should practice transparency.
When a taxpayer has to file a FBAR
Taxpayers have to report accounts if they have single or joint ownerships, or signatory authority on any financial account like bank accounts, life insurance policies, stock accounts, mutual funds, retirement funds, rental properties and business ownerships.
The fine for not submitting FBARs may go up to 50% per year and an added criminal penalty would apply as well. File an OVDI to avoid FBAR or OVDI penalties from 5% to 27.5%.
Perfect Tax, a well known tax and business firm with multiple CPAs and attorneys serving more than 2,000 clients, gives excellent tips to reduce FBAR penalties in the U.S.
How can taxpayers avoid FBAR penalties?
FBAR penalties may be averted through the following:
• When a tax advisor offers written advice about non-requirements to file a FBAR
• If the IRS determines that the violation was due to reasonable cause e.g. the taxpayer reasonably acting on the written advice of an independent legal advisor after disclosing the account to the person. By then, the taxpayer will pay ZERO penalty for a FBAR.
• When an opt out strategy is considered:
A FBAR violation penalty may come down to 3% by considering an opt out strategy. Click here to read about what an opt out strategy is all about.
• When inherited accounts have limited account contact and draw:
Penalty is reduced to 5% if the balance in the account is inherited and the taxpayer withdraws less than $1,000 per year. The taxpayer would have sent money out of income on which U.S. taxes were paid.
• If persons from the U.S. who are residing abroad have paid taxes in foreign countries
Click here to find out about those impacted by FBARs
In this case, the taxpayer may pay merely 5% and must have filed tax returns in the country of residency. Additionally, income with sources in the U.S. should be less than $10,000.
Perfect Tax offers several other strategies in order to help taxpayers lower FBAR penalties, as well as regular taxes.
The firm affords unique guarantees for all services, such as a 200% money back assurance for error of law point--if any--in tax planning and a 125% money back if all other CPAs are able to lawfully reduce even down to $1 in tax worked out by the organization.
It has over five franchise offices and is in the process of opening 15 more in 2013. You may contact Perfect Tax before the deadline on the 28th of June for a FBAR Amnesty and before the end of the year for tax planning.
Click here for more information on FBARs
Still worried about FBARs? Click here to have expert review on the FBAR impact.
Sam Thakkar, Perfect Tax, http://www.perfecttax.com, 1-888-671-0829, [email protected]
Share this article