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Failure to file, or filing your tax forms incorrectly, affects the statue of limitations that the IRS has to audit you. If you fail to file Form 8938 or report a specified foreign financial asset that you are required to report, the statute of limitations for the tax year may remain open for all or a part of your income tax return until three years after the date on which you file Form 8938. If you do not include in your gross income an amount that relates to one or more specified foreign financial assets, and the amount you omit is more than $5,000, any tax you owe for the tax year can be assessed at any time within six years after you have filed your return. Specified individuals who own specified foreign financial assets, the value of which exceed the applicable reporting threshold, are required to complete Form 8938 as part of their income tax returns. Specified individuals include U.S. citizens, U.S. resident aliens for any part of the year, nonresident aliens who make an election to be treated as residents for joint filing purposes, and nonresident aliens who are bona fide residents of American Samoa or Puerto Rico.
Rather, if the bank believes that the customer is at all possibly a US person, they may simply send the account holder information to the IRS without giving the customer any notice. As a result, we are finding that many people are out of compliance for FATCA Reporting and in harm’s way — without even knowing about it.
The maximum penalty in non-willful nondisclosure is $50,000 per tax return. As of January 2013, only individuals are required to report their foreign financial assets. At a later time, a limited set of U.S. domestic entities also may have to report their foreign financial assets, but not for tax years starting before 2013. There are some exceptions to the requirement that you file Form 8938. For example, if you do not have to file a U.S. income tax return for the year, then you do not have to file Form 8938, regardless of the value of your specified foreign financial assets.
If you have a financial interest in or signatory authority over an offshore financial account, you must report the account on an FBAR (Form 114 (formerly TD F 90-22.1)), regardless of your obligation to file Form 8938. Certain foreign financial accounts are reported on both Form 8938 and the FBAR. However, the information required by the forms is not identical in all cases.
Also, if you report interests in foreign entities and certain foreign gifts on other forms, you may just list the submitted forms on Form 8938, without repeating the details. For most American expats, the annual filing of their U.S. tax return is not the real issue to worry about - it's the required disclosure reporting! Some of the most draconian IRS penalties are associated with the non-filing or incorrect filing of the various disclosure reports that you need to file if you hold foreign investments, foreign bank accounts, or foreign business interests.
Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR. If you missed the FATCA Reporting Requirements, the IRS has developed various amnesty programs to assist you with compliance. Some of these programs including the IRS Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures. The IRS can issue penalties for Penalties for failing to comply with the FATCA Filing Requirements.
Signed into law in 2010, the purpose of FATCA is to combat tax evasion in the wake of the financial crisis of 2008, as part of the HIRE Act. For details on what these thresholds are, please read our previous blogs on the subject. For now, we will focus on the financial and legal ramifications of FATCA for those entities and people who are required to report.
If you are not married, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year. If you are married and you and your spouse file a joint income tax return, you satisfy the reporting threshold only if the total value of your specified foreign financial assets Example.
This section is very important, as there are serious penalties for failing to report foreign financial assets. If you are unsure if you fall under the classification of people who should file Form 8938, it is wise to consult and international tax law specialist. U.S. taxpayers holding foreign financial assets worth at least $50,000 in aggregate value must file Form 8938. In 2010, the United States created a federal law to combat foreign asset tax evasion called the Foreign Account Tax Compliance Act .
If you make a showing that any failure to disclose is due to reasonable cause and not due to willful neglect, no penalty will be imposed for failure to file Form 8938, however. If you receive a distribution from a foreign trust or foreign estate, however, you are considered to have knowledge of your interest in the trust or estate.
You may have to file additional forms to Form 8938 regarding foreign assets. These can include FinCEN Form 114, Report of Foreign Bank and Financial Accounts.
He worked patiently, efficiently and in professional manner in resolving overseas taxes. You must convert the maximum account value for each account into United States dollars using the Treasury year-end exchange rate.
The other significant form of noncompliance is non-willful noncompliance, meaning that there was no intent on the part of the individual filing to hide the specified foreign financial assets in question from the IRS. And while these penalties are not as harsh, they can pile up very quickly. The penalty for non-willful nondisclosure of specified foreign financial assets under FATCA is $10,000 per year for every year of nondisclosure up to the six-year limit. However, there are additional penalties for a failure to file Form 8938 — this is a separate penalty from filing the form while participating in non-willful nondisclosure. This is not where the penalties for non-willful nondisclosure end, though.
FFIs that do not comply with FATCA will face a 30% withholding of their own from U.S.-source income. This is a steep penalty to pay for many FFIs that do regular business with U.S.-based individuals and entities. The Foreign Account Tax Compliance Act is a key provision of U.S. international tax law.
This comparison tablewill help you figure out whether you need to file Form 8938, the FBAR, or both. You may also have to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts . Financial institutions and host country tax authorities can transmit and exchange FATCA data with the United States. https://iwtas.com/ Search and download a monthly list of approved foreign institutions that have a Global Intermediary Identification Number . Mr. Kunal Patel is a very competent tax attorney handling FATCA and overseas taxation.
FATCA reporting applies to U.S. taxpayers and depends on a monetary threshold of foreign financial assets. Internal Revenue Service Form 8938 is used to report these financial assets and is filed together with individual annual tax filings.
Different rules, key definitions (for example, “financial account”), and reporting requirements apply to Form 8938 and FBAR reporting. Because of these differences, certain foreign financial accounts may be reported on one but not both forms. A chart comparing Form 8938 and FBAR filing requirements is available at Comparison of Form 8938 and FBAR Requirements. You are married filing separate income tax returns and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. For purposes of calculating the value of your specified foreign financial assets in applying this threshold, include one-half the value of any specified foreign financial asset jointly owned with your spouse.
However, report the entire value on Form 8938 if you are required to file Form 8938. You are married and filing a joint income tax return and the total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year. Married individuals who file a joint income tax return for the tax year will file a single Form 8938 that reports all of the specified foreign financial assets in which either spouse has an interest. This makes it very difficult for FFIs to hide the assets of their foreign payees, and requires them to withhold 30% of specific payments to payees that are noncompliant with FATCA.
Don't risk losing your hard-earned international financial accounts to IRS penalties, work with a tax professional experienced in the international reporting requirements. Find out whether you need to file a Report of Foreign Bank and Financial Accounts , Form 8938 under the Foreign Account Tax Compliance Act , or both.
We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure. We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
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