Source: https://www.vernitaxlaw.com/resources/faq/
Timestamp: 2017-08-21 23:37:46
Document Index: 712479673

Matched Legal Cases: ['§ 5314', '§ 103', '§ 7701', '§ 7701', '§ 7201', '§ 7206', '§ 7203', '§ 5322', '§ 6404']

Frequently Asked Questions About Tax Law | Verni Tax Law
Frequently Asked Questions Regarding Tax Law
All/FBAR/Filing/Financial Accounts/Foreign Currency/US Person/Voluntary Disclosure/
Do I have to file an FBAR Report?
The Report of Foreign Bank and Financial Accounts, TD F 90–22.1, (FBAR), is required when a U.S. Person has a financial interest in or signature authority over one or more foreign financial accounts with an aggregate value greater than $10,000. If a report is required, certain records must also be kept.
Why do I have to file an FBAR report?
Statutory and regulatory authority for the FBAR are 31 U.S.C. § 5314, 31 C.F.R. §§ 103.24 and 103.27 require filing an FBAR if you meet all of the filing requirements.
What is the filing criterion?
In order to determine whether or not the FBAR is required, all of the following must apply:
A U.S. Person is defined by reference to three sources. 31 U.S.C. 5314 and 31 C.F.R. 103.24 identify persons who may be subject to the FBAR reporting requirement. The FBAR instructions identify a smaller group of persons who must file FBARs than could have been required, under the statute and regulations, to file.
A citizen of the United States has a U.S. birth certificate or naturalization papers
A “resident” of the United States is a permanent resident. “Permanent resident” is not defined in the FBAR instructions, regulations, or statute. The definition of “resident alien” found in IRC § 7701(b) is not applicable for FBAR purposes. The plain meaning of the term “resident” (in this context, someone who is living in the U.S. and not planning to permanently leave the U.S.) should be used for FBAR examination purposes. Although IRC § 7701(b) is not applicable, an individual can establish that he is not a resident for FBAR purposes if he can show that none of the following three criteria apply:
For FBAR purposes, the definition of “person” also includes a corporation, trust, or partnership.
a. A corporation that owns directly or indirectly more than a 50 percent interest in one or more other entities is permitted to file a consolidated FBAR, on behalf of itself and the other entities. The consolidated report must include a list of the entities. An authorized official of the parent corporation should sign the consolidated report.
A financial account includes a:
Bank account, such as a savings, demand, checking, deposit, time deposit, or any other account maintained with a financial institution or other person engaged in the business of a financial institution. A bank account set up to secure a credit card account is an example of a financial account. An insurance policy having a cash surrender value is an example of a financial account.
Securities, securities derivatives, or other financial instruments account.
Other financial accounts generally encompass any accounts in which the assets are held in a commingled fund and the account owner holds an equity interest in the fund. A mutual fund account is an example of such an account.
How do I determine whether an account is a Foreign Financial Account?
The location of an account, not the nationality of the financial institution with which the account is held, determines whether the account is in a foreign country. Any financial account (except accounts maintained with a U.S. military banking facility) that is located in a foreign country should be reported, even if the account is held with a branch of a United States financial institution located abroad.
Generally, an account in a foreign country includes all geographical areas located outside the United States.
How do I determine if I have a financial interest in a Foreign Financial Account?
A United States person has a financial interest in each account for which such person is the owner of record or has legal title, whether the account is maintained for his own benefit or for the benefit of others including non-United States persons
A United States person also has a financial interest in each bank, securities, or other financial account in a foreign country for which the owner of record or holder of legal title is: a person acting as an agent, nominee, attorney, or in some other capacity on behalf of the U.S. person; or
a corporation, whether foreign or domestic, in which the United States person owns directly or indirectly more than 50 percent of the total value of shares of stock; or
a partnership, whether foreign or domestic, in which the United States person owns an interest in more than 50 percent of the profits (distributive share of income); or,
a trust, whether foreign or domestic, in which the United States person either has a present beneficial interest in more than 50 percent of the assets or from which such person receives more than 50 percent of the current income. :
A bank is not required to file the FBAR to report a financial interest in an international interbank transfer
If I am only a signor on the account, but do not have a financial interest in an account, do I still have to file an FBAR report?
How do I determine if I have signatory authority over a Foreign Financial Account?
How do I convert foreign currency to U.S. Currency?
Convert foreign currency by using the official exchange rate in effect at the end of the year in question for converting the foreign currency into U. S. dollars. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into U. S. dollars at the close of the calendar year. The official Treasury Reporting Rates of Exchange for the previous quarter year can be obtained at http://fms.treas.gov/intn.html#rates
What is the filing deadline for filing an FBAR??
The FBAR must be filed on or before June 30 each calendar year.
The FBAR is considered filed when it is received in Detroit, not when it is postmarked
.Extensions of time to file federal income tax returns do not extend the time for filing FBARs. There is no statutory or regulatory provision specifically granting an extension of time for filing FBARs.
Effective July 1, 2013, all FBAR reports must be filed electronically.
What is the IRS’s Voluntary Disclosure Practice?
I have properly reported all my taxable income but I only recently learned that I should have been filing FBARs in prior years to report my personal foreign bank account or to report the fact that I have signature authority over bank accounts owned by my employer. May I come forward under the voluntary disclosure practice to correct this?
Possible criminal charges related to tax returns include tax evasion (26 U.S.C. § 7201), filing a false return (26 U.S.C. § 7206(1)) and failure to file an income tax return (26 U.S.C. § 7203). The failure to file an FBAR and the filing of a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322. A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.
File complete and accurate original or amended offshore-related information returns and Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”) for tax years covered by the voluntary disclosure;
Pay, in lieu of all other penalties that may apply to your undisclosed foreign assets and entities, including FBAR and offshore-related information return penalties and tax liabilities for years prior to the voluntary disclosure period, a miscellaneous Title 26 offshore penalty, equal to 27.5% (or in limited cases 12.5% or 5%) of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the period covered by the voluntary disclosure;
Submit full payment of any Title 26 tax liabilities for years included in the offshore disclosure period and all tax, interest, accuracy-related penalties for underpayments related to offshore accounts and entities, and, if applicable, the failure to file and failure to pay penalties with the required submissions or make good faith arrangements with the IRS to pay in full, the tax, interest, and these penalties (the suspension of interest provisions of IRC § 6404(g) do not apply to interest due in this program); and
Some taxpayers have made quiet disclosures by filing amended returns. Will the IRS	audit these taxpayers? If so, will they be eligible for the 27.5 percent offshore penalty? Is the IRS really going to prosecute someone who filed an amended return and correctly reported all their income?
If the offshore penalty is unacceptable to a taxpayer, that taxpayer must indicate in writing the decision to withdraw from or opt out of the program. Once made, this election is irrevocable. An opt out is an election made by a taxpayer to have his or her case handled under the standard audit process. It should be recognized that in a given case, the opt out option may reflect a preferred approach. That is, there may be instances in which the results under the applicable voluntary disclosure program appear too severe given the facts of the case.