Tag Archives: FBAR

Statute of limitations on an IRS tax audit demonstrates U.S. dislike of all things #Offshore

The above tweet references an excellent summary of the various IRS statutes of limitation by Robert Wood of the various statute of limitations.

In true U.S. tax style:

1. The U.S. is very suspicious of anything that is foreign; and

2. They will have a longer time to audit it.

The article includes:

With foreign accounts, six years is typical, and in some cases, the IRS has no limit. An FBAR (also called FinCEN Form 114), is a disclosure form for reporting foreign accounts. FBARs have a separate audit period, generally six years. For unfiled tax returns, criminal violations or fraud, the limits can be longer. In most cases, the practical limit is six years, but for some information returns the IRS can audit forever.

You might think that if you fix your tax returns or FBARs, you would reduce your audit time. However, the answer varies with IRS disclosure options. The main IRS program for offshore accounts is the OVDP, and in that program, once your closing agreement is signed, you are truly done, with no audits thereafter. But with the IRS Streamlined programs, there is no closing agreement.

(Please note that I added the hyperlinks in the above quote. Mr. Wood’s original post did NOT include these links.)

In an earlier post I referenced Mr. Wood’s article on America’s deadliest form – the “5471”. This is the information return for a “Controlled Foreign Corporation” (non-U.S. corporation). A failure to file the “5471” (which is a separate tax return) means that the statute of limitations never starts running. In general, U.S. citizens abroad should avoid carrying on business through a non-U.S. corporation – including the Canadian Controlled Private Corporation.

 

FINCEN Form 114 – The #FBAR Basics – Part 1 – Good summary by @RachelMillios

The FBAR (“Foreign Bank Account Report”) has been in existence since 1970. In general, any “U.S. Person” with a total of more than $10,000 USD in non-U.S. bank or brokerage accounts must report the existence of the account and the maximum balance annually to the U.S. Treasury. The penalties for failure to report are absolutely draconian. The law of FBAR is difficult to understand and is a combination of the Statute, the Regulations made pursuant to the statute (which do allow for the exemption of Americans abroad) and the Form itself. (Incredibly this information is required to be disclosed electronically which raises many issues of privacy and potential theft).

The above tweet references a good FBAR summary by Rachel Millios. I suggest that you read it in its entirety.

Highlights include:

Who Must File the FBAR?

A United States person must file an FBAR if that person has a financial interest in or signature authority over any financial account(s) outside of the United States and the aggregate maximum value of the account(s) exceeds $10,000 at any time during the calendar year. …

I recommend the rest of the post to you …

Should it be reported on your #FBAR? Not even your accountant knows for sure

The deadline is fast approaching. Mr. FBAR has been updated and modernized.

He has a new name (Form 114).

He has a new look.

He must now be filed online.

He is still one of the U.S.A.’s deadliest forms.

But, the question still remains:

What exactly is required to be reported on your FBAR?

Taxpayers “navel gaze” in fear!

Tax professionals continue to educate!

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Formulating the problem – Thoughts on the compliance dilemma for #Americansabroad – What you need to consider before contacting a lawyer

decision

The Reality of U.S. Citizenship Abroad

Nobody denied that the unintended targets of Congressional legislation aimed at those who supposedly “owe allegiance” to the USA, now assisted by craven foreign governments anxious lest their financial services entities lose access to the US market, are mostly unlikely to do anything at all. But the whole idea of universal self-assessment of taxation is to keep the taxpayer in an anxious condition, to make him overpay if possible, but at least not to underpay. Those now faced with an unprecedented, even retroactive, enforcement campaign and who must, if they wish to become compliant and avoid penalty or even prosecution (should they be identified in the future), sacrifice much of their wealth, even become insolvent.

Comment at the Isaac Brock Society blog – July 29, 2013

http://isaacbrocksociety.ca/2013/07/29/traumatized-by-the-irs-reaching-into-the-world-london-july-28-2-5-pm/comment-page-1/#comment-455276

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