FBAR violations

Not Just Another Covid-19 Announcement

March 17, 2020 | by Dennis N. Brager

Some of you may be concerned about the impact of the Coronavirus aka Covid-19 outbreak on your taxes, and those of your clients. The news from the IRS has been slow in coming. On Friday of last week President Trump declared a National Emergency. At the same time, he directed Treasury Secretary Mnuchin to provide relief from “tax deadlines” to Americans who are adversely impacted by the emergency. This allows the IRS to extend various deadlines for up to a one-year period. This authority is not, however, self-executing. That is, the IRS must specify exactly which due dates, and for how long they are being extended.

Prior to President Trump’s announcement Secretary Mnuchin had told reporters that most deadlines would be extended for “small businesses” and most individuals other than the “super rich.” Our tax lawyers couldn’t find a definition of super rich anywhere in the Internal Revenue Code. Finally, this morning, Tuesday March 17^th, after partnership and certain LLC returns were already due, Mnuchin stated in a press conference that the filing deadline for the 2019 income tax return would be extended by 90 days. For individuals that would mean July 14^th. Presumably, the IRS will actually extend the date to July 15^th just to make things a touch easier. Individuals living overseas already have an extension to June 15^th so presumably they would have until September 15^th to file.

In addition to stating that the income tax filing deadline would be extended, Mnuchin also stated that the 2019 payment deadline for income taxes owed of less than $1 million dollars for individuals or $10 million for corporations. This would be an interest and penalty free extension. For those who are over the thresholds it is unclear whether the entire amount due would be subject to interest and penalties or just that amount over the threshold. It is also not clear whether the filing extension would apply to those who owe taxes in excess of the cut-off amount.

Dennis Brager Published in Fox News Article

January 22, 2020 | by Dennis N. Brager

Recently, Dennis was interviewed by Fox News on his thoughts on Prince Harry and Meghan Markle’s move to North America and how it may impact their taxes. Below is an excerpt of the quote:

“Basically speaking, the U.S. has a system of taxation which is different from the vast majority of countries in the world in that in the United States, if you’re a U.S. citizen, it doesn’t matter where you’re living in the world, you pay tax on all of your income wherever you earn it.”

He also went on to say, “So if Meghan takes a modeling job in the U.K., she still pays tax in the United States. She’s still subject to all the reporting requirements that U.S. citizens are.”

When the 50 Percent Penalty Applies During Offshore Voluntary Disclosure

October 3, 2017 | by Dennis N. Brager

The Offshore Voluntary Disclosure Program (OVDP) normally comes along with an “offshore penalty” equal to 27.5 percent of the highest aggregate account balance of the previously unreported foreign financial assets. However, the penalty is increased to 50 percent for taxpayers who have accounts at foreign financial institutions that are under investigation by the IRS or Department of Justice, or who are cooperating with the U.S. government regarding accounts held by U.S. persons. These foreign financial institutions have been referred to as “bad banks”, and the list of bad banks has continued to grow each year.

How the 50 Percent Penalty Works

Not only does a taxpayer face a 50 percent offshore penalty for any assets held at a bad bank, the taxpayer must pay the 50 percent penalty on all of their unreported foreign assets. For example, a taxpayer with a $10,000 account at a bad bank and $500,000 at a foreign bank that is not under investigation will be subject to the 50 percent penalty on the total of both accounts, despite the fact that the majority of their funds are held at a bank that is not under investigation.

How Does Living Overseas Impact Your FBAR and FATCA Obligations?

September 28, 2017 | by Dennis N. Brager

U.S. taxpayers who live overseas may still have a Foreign Bank Account Report (FBAR) and form 8938 filing report for their foreign financial accounts. In general, your FBAR obligations will not be impacted by the fact that you live overseas. If you are a U.S. person and your aggregate account balance of foreign accounts exceeded $10,000 during the year, you must file an FBAR, regardless of where you live.

Your Foreign Account Tax Compliance Act (FATCA) obligations using form 8938 require a bit more discussion. Whether you need to file a form 8938 could be impacted by country of residency because there are different threshold amounts depending on whether you live in the U.S. or abroad.

Form 8938 Thresholds for Taxpayers Living Abroad

What is the Foreign Account Tax Compliance Act?

September 26, 2017 | by Dennis N. Brager

The Foreign Account Tax Compliance Act (FATCA) sets reporting requirements for both foreign financial insinuations and U.S. taxpayers who hold specified foreign assets. If your foreign financial institution is in a country that has an agreement with the United States, then you will be asked whether or not you are a U.S. person for tax purposes. Answering “yes” to this question will trigger a requirement on behalf of the financial institution to report your account information to the IRS.

Individual Requirements Under FATCA

By requiring foreign financial institutions to report account information for U.S. taxpayers, the government and the IRS have made it easier to track tax evasion by individuals who are hiding money in foreign bank accounts. In addition, taxpayers must file their own report of their foreign accounts, which is done on form 8938.

What Expats Should Know About Their U.S. Tax Obligations

September 25, 2017 | by Dennis N. Brager

Expats may decide to leave the U.S. due to work, retirement, or other reasons. Tax reduction may also be a motivation for moving to a foreign country, but the United States uses citizenship-based taxation. Therefore, the taxpayer still has a continuing obligation to file and pay U.S. taxes (although they may be eligible for some exclusions, such as the Foreign Earned Income Exclusion).

Tax Mistakes Expats Should Avoid

First, expats need to continue to file and pay their taxes. Many other countries use territorial-based taxation, which only taxes income earned inside the country. The United States, on the other hand, taxes citizens on all worldwide income.

What is a “Financial Interest” in a Foreign Accounts for FBAR Purposes?

September 19, 2017 | by Dennis N. Brager

Any United States person with a financial interest in or signature authority over a foreign financial account, where the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the year, must file a Foreign Bank Account Report (FBAR). These terms can be difficult to apply in some situations, and can lead to FBAR compliance issues for those that are unaware that they have a filing requirement.

“Financial Interest” in a Foreign Account

If you are the owner of record for a foreign account, you have a financial interest, even though the account is maintained for the benefit of another person. Spouses are not required to file separate FBARs if all the foreign accounts that the non-filing spouse is required to report are owned jointly with the filing spouse, and filing spouse files an FBAR for all of the accounts, along with an Authorization to Electronically File FBARs.

What Is the Statute of Limitations for FBAR Penalties?

September 15, 2017 | by Dennis N. Brager

The IRS has six years from the due date of the FBAR to assess the FBAR penalty. In addition, the IRS can assess a separate penalty for each unreported account for each tax year that an FBAR has not been filed, causing the total amount of penalties to add up quickly for some taxpayers.

The current civil FBAR penalties are $12,459 per violation for non-willful violations and the greater of $124,588 or 50 percent of the balance in the account at the time of the violation, for each willful violation. An individual with five foreign financial accounts who has not filed any required FBARs for the past six years could then face a penalty of over $373,000, and that is assuming that the violations are considered to be non-willful.

These penalties can be reduced in certain cases if the IRS believes that penalty mitigation is appropriate. Taxpayers will no previous history of criminal tax violations who cooperate with IRS examiners may receive reduced penalties. If you need assistance negotiating a reduced FBAR penalty, contact a tax attorney with FBAR experience.

How Does the IRS Collect FBAR Penalties?

September 14, 2017 | by Dennis N. Brager

The IRS imposes severe penalties on taxpayers who fail to file a Report of Foreign Bank and Financial Accounts (FBAR). Those who are required to file an FBAR and fail to do so can face the following penalties:

a civil penalty not to exceed $12,459 per violation for non-willful violations that are not due to reasonable cause
a penalty equal to the greater of $124,588 or 50 percent of the balance in the account at the time of the violation, for each willful violation

Swiss Banker Pleads Guilty to Defrauding the United States with Tax Scheme

September 1, 2017 | by Dennis N. Brager

A former employee of Credit Suisse bank has pleaded guilty to conspiring to defraud the United States. Susanne D. Rüegg Meier admitted to a tax scheme that allowed U.S. taxpayers to hide their assets in Swiss bank accounts. The plea agreement states that Credit Suisse went to great lengths to assist their clients in evading their U.S. tax obligations, including reporting their foreign income on their tax return and filing accurate FBARs.

Some components of the scheme include the following:

all mail related to the accounts were retained in Switzerland