In recent years the IRS has been on a mission to identify and investigate US citizens hiding assets offshore. There have been countless news articles detailing how international banks make settlements to help US citizens avoid taxes. Recently the release of the Panama Papers and the Paradise Papers (Appleby) opened the world to how the top 1% of the wealthy stash their assets offshore.
At SRF Accounting Group, LLC I work with Joshua Goldstein, CPA, our Director of International Operations and in-house expert for all global projects. Most people reading this will not have to deal with keeping their assets offshore (yet….) but there are still many cases that people do not realize could put them in a messy situation.
?I will first detail what most people might miss on their annual tax return, and then in my next article describe two clients that needed SRF and Josh’s help- just within the last year.
Many people do not know that if you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or another type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).
What does that mean? In most situations, if you have $10,000 or more at any time throughout the year in an account offshore, you need to let the IRS know about it. This is even the case if you do not own the funds. Let’s take the example of many of my friends and family that are in the finance department of a medium to large company. Since they have signing authority of the company’s bank accounts with +$10,001 technically they are required to file and disclose that account when they file their personal tax returns.
But what if I did not know or forgot? Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50 percent of the amount in the account for each violation—and each year you didn't file is a separate violation. You read that right- it’s not 50% of the income that might have been unreported but 50% of the account balance!!!
Thoughts or questions? Feel free to comment below or email me at Jay@SRFCPAS.com, (212)-744-7888
Offshore Voluntary Disclosure Program (OVDP) FBAR Streamlined Foreign Offshore Procedures (SFOP)