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Assurance Vie US Tax Compliance | FBAR FATCA Tax Lawyer

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Hello and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I’m an international tax attorney.

Today we’re doing a video from Milwaukee, Wisconsin and I was just walking on the streets and I heard French being spoken by two gentlemen, and it put me to mind about Assurance Vie Accounts.

Assurance Vie Accounts are a very common investment in France. Virtually everyone in the French middle class has them. But whenever a French citizen comes to the United States he runs into various problems with respect to reporting the Assurance Vie Accounts.

For example, a lot of Frenchmen do not know that once they become US Tax Residents they are required to report Assurance Vie Accounts on FBARs and if they meet the Form 8938 threshold, they will also be required to report them on forms 8938.

The second problem which is very common with French people who come to the United States is the issue of reporting income from the Assurance Vie Accounts. As you may already know, the income on the Assurance Vie Accounts is not taxable in France; however, it is taxable in the United States and most of Assurance Vie Accounts consist of two parts.

The first part is the investments; investments, usually in foreign mutual funds. The second part of Assurance Vie Accounts consists of the Euro-fund part and basically this is cash that is sitting in the account and just accumulates interest.

Now the interest is calculated under the specific rules which are associated with these Euro capital, but for US Tax Purposes this is just purely interest income.

So the first part which is the investments is the most complicated one because the second one really if you can figure out the interest income, the fees which are withdrawn by the bank from this interest income as well as social taxes which are being imposed by the French government on that income – then it becomes pretty easy. You just figure out what the gross income is; you convert it to US Dollars and you report it on your US Tax Return.

I will not talk today about the issue of deductibility or accrued ability of French Social Taxes. This is a different issue and a complicated one and an unsettled one as well.

But the first part, the investments is complicated because they’re usually considered to be PFICs for US Tax Purposes. As such, they are required to be disclosed on your US Tax Return on forms 8621 even if you didn’t have any transactions.

PFICs require very complex calculations and the part of PFIC gains or PFIC dividend income which are considered to be acts of distribution is going to be taxed at the highest marginal tax in existence plus the interest rate which is being calculated once you allocate your PFIC income throughout the holding period on a per-share basis.

Sounds very complex? It is; it requires a lot of calculations. Most of the information is not readily available; the French banks are not required by the French government to keep this information on file or more importantly to disclose it to French Taxpayers. Only US Taxpayers who need to report these Assurance Vie Accounts on their US Tax Returns, only they need this information and in order to get it, it’s a pain. It may take anywhere between three to nine months to get this information depending on the French institution, depending on whether you have contact with the French bank. If you don’t, it takes longer; usually it requires either a personal visit to a French bank or it may require actually a letter, a good old-fashioned paper letter being mailed to the French bank which holds the Assurance Vie Investments.

So, in short, there are a lot of issues associated with owning Assurance Vie Accounts by US Taxpayers.

If you would like to learn more about Assurance Vie Accounts and the associated US Tax Compliance requirements or you would like to get help with respect to US Tax Compliance, or if you were or think you may be required to comply with US Tax Requirements and haven’t done that yet and now you’re thinking about possible Voluntary Disclosure Options, contact Sherayzen Law Office.

Our professional team headed by myself, Eugene Sherayzen an International Tax Attorney will review thoroughly all of your documents, prepare all of the tax forms and then I will be drafting all of the legal documents associated with submitting your Voluntary Disclosure.

So call or email me now to further discuss your Assurance Vie Accounts. Thank you for watching and until the next time.

Lokata Accounts in Poland & US Tax Compliance | FBAR Lawyers

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Hello and welcome to Sherayzen Law Office Video Blog. My name is Eugene Sherayzen and I’m an International Tax Attorney and today I would like to talk with you about accounts called Lokatas; these are Polish accounts and basically what they are for US Tax Purposes are fixed-deposit accounts like CD accounts in the United States.

A lot of Polish citizens who come to live and work in the United States do not realize that these Lokata accounts need to be reported here in the United States. The reporting has to be done not only from the income tax perspective but also from the perspective of information returns; in other words, US Taxpayers who have Lokata accounts in Poland have to disclose their foreign accounts on forms FBAR and potentially form 8938 as well as to report the income from those foreign accounts on their US Tax Returns, usually form 1040.

Now why is it a problem? Why is it that a lot of US Taxpayers who have these Lokata accounts not report them or do not report income from them? Well, one of the problems is that a lot of these accounts are opened automatically by Polish banks. In other words, these banks open them up automatically; these are Sweep Accounts. They sweep the balance from the savings account and they open up these accounts and they can open them for as little as one day; usually they’re open for at least a month. Some of them are long-term; they can be a year or even two years; but it’s uncommon for Lokata to be open for more than one year.

Because these are automatic accounts created by banks, a lot of US Taxpayers don’t realize that they have to be reported separately from their main savings accounts.

Failure to report Lokata accounts may lead to FBAR Penalties and Form 8938 Penalties in addition to income tax penalties with Accuracy-related Penalties and if the failure to report was intentional, you could also be looking at a 75% Fraud Penalty.

Now, Sherayzen Law Office can help you properly report the income from your Lokata accounts on your US Tax Returns as well as disclose the accounts themselves on the appropriate information returns such as FBAR or Form 8938.

If you would like to learn more about your US Tax Compliance concerning Lokata accounts, you can contact me directly at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com.

Thank you for watching until the next time.

FBAR Noncompliance – Doing Nothing is Not an Option | FBAR Law Firm

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Hello and welcome to Sherayzen Law Office Video Blog. My name is Eugene Sherayzen; I’m an International Tax Attorney and owner of Sherayzen Law Office, Ltd.

Today, I’m on a train in Eastern Europe and this is the perfect time to share my thoughts about unfiled FBARs. What I’m talking about is a situation where a taxpayer discovers all-of-a-sudden that he needed to file FBARs for prior years and he never did.

In this situation a taxpayer really has three options. First: do nothing; second, a Quiet Disclosure and finally, a real Voluntary Disclosure.

Today, I’d like to talk about the first option: Do Nothing; because this is often the first thing that comes to your mind, right? You discover noncompliance; you know you are panicking; you don’t know what to do. You are worried about the FBAR Penalties; they’re horrendous: criminal penalties, willful penalties and you think that maybe it’s better just to bury your head in the sand and do nothing.

The obvious advantage that you see behind this strategy, or so-called strategy is that if the IRS never discovers your past FBAR noncompliance, basically you can get away without ever paying FBAR Penalties.

The problem is that this is not a strategy; this is just hope. A hope which is based on nothing. In fact, this is an irrational hope, a hope born out of desperation. The reason for it is because the US Government has signed treaties with countries all over the world that make the discovery of noncompliant taxpayers an ever-present danger and an ever-increasing danger.

There are all kinds of treaties. There are FATCA treaties: the Foreign Account Tax Compliance Act treaties. There are bilateral agreements, multilateral agreements, mutual assistance treaties, information exchange treaties – all of that body of treaties basically makes it extremely unlikely that a taxpayer can get away with FBAR noncompliance in today’s world.

So in essence, doing nothing with respect to your unfiled FBARs is not just dangerous; it’s reckless and the consequences could be not just disastrous but life-altering, especially if the IRS deems your noncompliance a willful one.

So if you have undisclosed foreign accounts, contact Sherayzen Law Office as soon as possible. Remember, doing nothing is not an option; it’s a Russian Roulette. So, contact me today for professional help at (952) 500-8159 or send me an email at: eugene@sherayzenlaw.com.

Thank you for watching, until the next time.

FATCA Lawyer Boulder CO | Three Main Parts of FATCA

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Now FATCA, when it came out in 2010, was a revolutionary piece of legislation. It completely changed not only US Tax Compliance but the entire landscape of International Tax Compliance. After FATCA, we have OECD countries developing a Common Reporting Standard, the CRS to which the US did not join for very interesting reasons; that could be a topic of a CLE in of itself.

But, FATCA affects pretty much everyone who is doing business internationally. Why is that? Well, there are the three parts of FATCA that I would like to discuss today. There are some different provisions of FATCA which do not quite fall within those three parts; but they’re not important for today’s discussion, or at least not directly important.

The first part of FATCA is the requirement by Foreign Financial Institutions to report assets owned by US Persons to the IRS directly or indirectly; it depends on the FATCA enforcement treaty. So in essence, all the Foreign Financial Institutions are now forced to become agents of the IRS, reporting agents. In essence it’s that third party verification of US Tax Compliance that has been completely absent from US Tax Law; it just never existed before. For example FBARs, they don’t have any third party verification. That’s why as an information return, FBARs actually have very limited utility.

Now why would Foreign Financial Institutions comply with it? There’s a second part of FATCA: a 30% withholding tax on the gross amount of transactions. Can you imagine that a 30% withholding tax on the entire value of the transaction, not on the gain, loss it doesn’t matter just on the gross value? So this means that if say Institution A which is FATCA compliant and there’s an Institution B which is not FATCA compliant and then your client comes to Institution A and says, ‘Here, I’m sending $100,000 to Institution B, Institution A is going to withhold 30% tax from that $100,000 and send the rest of it to Institution B and obviously when the clients, the other party comes in to collect, they will see that instead of $100,000 there is about $70,000; that’s a pretty big difference. It could be the entire profit margin.

And because every institution is linked to another institution (so basically we have a system where all FATCA compliant institutions are forcing all of the FATCA noncompliant banks to become FATCA compliant); otherwise there’s not going to be any dealing between them.

So under the first part of FATCA, the Foreign Financial Institutions provide this information so they’re a third party verification. But verification of what?

And then there’s a third part of FATCA which really came into the tax landscape without as much fanfare as the first part. The first part, people have heard about: there have been protests, letters to congressmen, organizations, lobbying against it: what have you. But the third part of FATCA, and this is form 8938, it came in sort of in a very quiet way, in gradually but very early on already in 2011.

Indianapolis Form 8938 Lawyer | The Compliance Burden of Form 8938

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Form 8938, even though it does not share the same amount of penalties (and we will talk about penalties in a little bit later), still it’s importance is much more significant than that of FBAR.

The reason being is that not only are the US Persons required to report their Foreign Financial Accounts, which is very similar to FBAR, but they’re also required to disclose pretty much every type of a financial instrument.

In your handout you see here ‘Specified Foreign Financial Assets‘ under the column, under line I it should say: ‘Specified Foreign Financial Assets‘; this is a huge paragraph of assets. All of these assets must be disclosed on the form 8938.

So, we have Foreign Financial Accounts, we have Assets Held for Investment and not held in a financial institution, so we are talking about stocks and securities issued by a non US Person, any interest in a foreign entity, any interest in a foreign partnership, any financial instrument or contract including interest rate swaps, currency swaps, basis swaps, interest rate caps, bonds, notes, debentures, options, derivatives; I mean we’re talking about a whole range of financial assets that have to be now disclosed on form 8938 and they were never required to be disclosed in the same format at least before.

It’s a huge compliance burden obviously.