At any time during 2017, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? published by JD Supra on 5/13/18.
On April 9, 2018, IRS released Notice (IR-2018-87) to remind Taxpayers that hold foreign assets of their U.S. tax obligations which could include a filing requirement and a U.S. tax liability. This Notice applies to all U.S. citizens and Resident Aliens, including Taxpayers with dual citizenship. IRS expects Taxpayer Compliance and Voluntary Disclosure. IRS will rely on its arsenal of tools which consists of Taxpayer education, whistleblower leads, civil examination and criminal prosecution, FATCA and information exchange programs with other Tax Authorities to combat offshore tax avoidance.
Here is what IRS wants Taxpayers to remember:
- Part III of Schedule B of IRS Form 1040 addresses foreign accounts and wants Taxpayers to answer the question: Do you have foreign accounts? If Taxpayers answer “Yes,” they are required to file (Financial Crimes Enforcement Network) FinCEN Form 114 also known as the Report of Foreign Bank and Financial Accounts (FBAR) in order to report the Taxpayer’s financial interest or signature authority. Taxpayers also have to disclose the name of the foreign country where the financial account(s) is located. The FBAR must be filed electronically with FinCEN and it is due by April 17, 2018. Taxpayers get an automatic extension until October 15, 2018 to file the FBAR without requesting a specific extension. Taxpayers that have a financial interest or signature authority over financial accounts that at any time during 2017 had an aggregate value exceeding $10,000 must file the FBAR.
- The Offshore Voluntary Disclosure Program (OVDP) will close on Sept. 28, 2018. Taxpayers with undisclosed foreign financial assets will have until September 28, 2018 to participate in the OVDP. IRS stated that the Streamlined Filing Compliance Procedures are still available to eligible Taxpayers, BUT, the IRS said it may end the streamlined filing compliance procedures at some point.
- Eligible Taxpayers that file a US Tax Return may qualify for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which could reduce or eliminate the Taxpayer’s US tax liability. These benefits are only applicable if the Taxpayer files a Tax Return. The income tax filing and payment deadline for US citizens and resident aliens whose tax home is outside of the US and PR is June 15, 2018.
- US Taxpayers and Resident Aliens need to report their worldwide income which includes the income from foreign bank accounts, foreign trust and foreign securities accounts. Certain Taxpayers are required to file Form 8938 (Statement of Foreign Financial Assets).
- Certain domestic corporations, partnerships and trusts that are considered formed for the purpose of holding (directly or indirectly) specified foreign financial assets must file Form 8938 if the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year.
Don’t be a victim of your own making
Taxpayers with undisclosed foreign financial assets ought to come forward as soon as possible. Consult a specialist in tax amnesty programs.