2018 FBAR Deadline in 2019 | FinCEN Form 114 International Tax Lawyer & Attorney

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The 2018 FBAR deadline is one of the most important deadlines for US taxpayers in the calendar year 2019. Since FBAR is not filed with the federal income tax return, many taxpayers may miss this deadline. This is why Sherayzen Law Office is publishing this notice to US taxpayers.

2018 FBAR Deadline: Background Information

FBAR is an acronym for FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. US Persons must file FBAR if they have a financial interest in or signatory or any other authority over foreign financial accounts if the highest aggregate value of these accounts is in excess of $10,000. FBARs are filed separately from federal tax returns.

2018 FBAR Deadline: Pre-2016 FBAR Deadline

For the years preceding 2016, the US government chose a very strange deadline for FBARs – June 30 of each year. For example, 2012 FBAR was due on June 30, 2013. No filing extensions were allowed.

There was another surprising rule for FBAR deadlines. Prior to the mandatory e-filing of FBARs, taxpayers had to mail their FBARs to the specialized center in Detroit, Michigan. Unlike the rest of the tax forms, FBARs did not follow the “mailbox rule”. In other words, the filing of an FBAR was recognized by the IRS not upon the mailing of this form, but upon its receipt. For example, if FBAR was mailed on June 30, but received on July 1, it was not timely filed.

Federal tax returns, on the other hand, do follow the mailbox rule. This means that the IRS will consider the mailing date, not the date of receipt, as the date of the filing of a tax return. I should point out that, in practice, the IRS often confuses the rule and incorrectly issues failure-to-file penalties based on the date of receipt. This is why it is important to have a proof of mailing for your federal tax return.

The last FBAR that followed the June 30 deadline was 2015 FBAR; its due date was June 30, 2016. Nevertheless, due to the six-year FBAR statute of limitations, it is important to remember this history for the purpose of offshore voluntary disclosures and IRS FBAR audits. It will continue to be relevant as late as June 30, 2022.

2018 FBAR Deadline: Changes to FBAR Deadline Starting 2016 FBAR

Of course, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, taxpayers found it very difficult to timely comply with its requirements due to its very strange filing rules.

The US Congress took action in 2015 to alleviate this problem. As it usually happens, it did so when it passed a law that, on its surface, had nothing to do with FBARs. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with 2016 FBAR. Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.

Furthermore, during the transition period (which continues to this date), the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. Taxpayers do not need to make any specific requests in order for an extension to be granted.

Thus, starting with the 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. This is the case even if federal law requires a different filing date. For example, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day; the FBAR deadline will follow suit and also shift to the next business day.

2018 FBAR Deadline

Based on the current law, the 2018 FBAR deadline will be April 15, 2019. In other words, your 2018 FBAR has to be e-filed by and including that date. Automatic extension to October 15, 2019, is available.

Italian Bank Accounts | International Tax Lawyer & Attorney New York New Jersey

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US tax requirements concerning Italian bank accounts can be quite burdensome and complex. The chief three US reporting requirements applicable to Italian bank accounts are: worldwide income reporting, FBAR and FATCA Form 8938. Let’s discuss each of these requirements in more depth.

Italian Bank Accounts: US Tax Residents and US Persons

Before we delve into the discussion of these requirements, we need to identify who is required to comply with these requirements. This task is complicated by the fact that each of aforementioned three requirements has its own definition of a required filer.

Nevertheless, we can readily identify the categories of required filers shared by all three requirements. These categories correspond most closely, but not exactly to the concept of US tax residents. “US tax residency” is a broad term which includes US citizens, US permanent residents, residents who satisfy the Substantial Presence Test and individuals who declare themselves as US tax residents.

This definition of a US tax resident is fully applicable to the worldwide income reporting requirement and very closely corresponds to the concept of the Specified Person of Form 8938. FBAR’s concept of “US Persons”, however, does differ more significantly from the definition of a “US tax resident”, but only in more unusual circumstances. The most common differences arise with respect to the treaty “tie-breaker” provisions to escape US tax residency and persons who declare themselves tax residents of the United States.

Additionally, I wish to caution the readers that even the definition of US tax residents which I just stated has a number of important exceptions, such as visa exemptions (for example, an F-1 visa five-year exemption for foreign students) from the Substantial Presence Test.

In other words, the issue of who the required filer is, requires careful analysis of the facts and circumstances of an individual. This is definitely the job of your international tax attorney; it is just too dangerous to attempt to do it yourself.

Italian Bank Accounts: Worldwide Income Reporting

All US tax residents must report their worldwide income on their US tax returns. In other words, US tax residents must disclose both US-source and foreign-source income to the IRS. In the context of the Italian bank accounts, foreign-source income means all bank interest income, dividends, royalties, capital gains and any other income generated by these accounts.

Italian Bank Accounts: FBAR Reporting

The official name of the Report of Foreign Bank and Financial Accounts (“FBAR”) is FinCEN Form 114. FBAR requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over Italian bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000.

I wish to emphasize again that, while the term “US persons” is very close to “US tax residents”, it is not the same. The term “US tax residents” is slightly broader than “US persons”. I encourage you to search our website – sherayzenlaw.com – for articles concerning the definition of a US Person.

One aspect of the FBAR requirement, however, deserves a special mention here – the definition of an “account”. The FBAR definition of an account is substantially broader than how this word is generally understood in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.

Finally, no discussion of FBAR can be considered complete without mentioned the much-dreaded FBAR penalty system. It is complex and severe to an astonishing degree. The most feared penalties are criminal FBAR penalties with up to 10 years in jail (of course, these penalties come into effect only in the most egregious situations). The next layer of penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Finally, FBAR imposes penalties even on non-willful taxpayers.

All of the civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. One of the most important factors is the size of the Italian bank accounts subject to FBAR penalties. Additionally, since 2015, the IRS has added another layer of limitations on the FBAR penalty imposition. These self-imposed limitations of course help, but one must keep in mind that they are voluntary IRS actions and may be disregarded under certain circumstances (in fact, there are already a few instances where this has occurred).

Italian Bank Accounts: FATCA Form 8938

FATCA Form 8938 has been in existence since 2011. Unlike FBAR, it is filed with a federal tax return and considered to be an integral part of the return. This means that a failure to file File 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.

Form 8938 requires “Specified Persons” to disclose on their US tax returns all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency. For example, if he is single and resides in the United States, he needs to file Form 8938 as long as the aggregate value of his SFFA is more than $50,000 at the end of the year or more than $75,000 at any point during the year.

The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to do duplicate reporting on FBAR and Form 8938.

Specified Persons consist of two categories: Specified Individuals and Specified Domestic Entities. You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.

Finally, Form 8938 has its own penalty system which has far-reaching consequences for income tax liability (including disallowance of foreign tax credit and imposition of higher accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.

Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Italian Bank Accounts

Worldwide income reporting, FBAR and Form 8938 do not constitute a complete list of US reporting requirements that may apply to Italian bank accounts. There may be many more.

This is why, if you have Italian bank accounts, should contact Sherayzen Law Office. We have a highly knowledgeable international tax compliance team headed by an experienced international tax attorney, Mr. Eugene Sherayzen. We have helped hundreds of US taxpayers with their US international tax issues, including reporting Italian bank accounts, and We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

2019 IRS Standard Mileage Rates | IRS Tax Lawyer & Attorney

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On December 14, 2018, the IRS issued the 2019 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Let’s discuss in a bit more depth these new 2019 IRS Standard Mileage Rates.

Beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018,
  • 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018, and
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate increased 3.5 cents for business travel driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate is set by statute and remains unchanged.

According to the IRS Rev. Proc. https://www.irs.gov/pub/irs-drop/rp-10-51.pdf2010-51, a taxpayer may use the business standard mileage rate to substantiate a deduction equal to either the business standard mileage rate times the number of business miles traveled. If he does use the 2019 IRS standard mileage rates, then he cannot deduct the actual costs items. Even if the 2019 IRS standard mileage rates are used, however, the taxpayer can still deduct as separate items the parking fees and tolls attributable to the use of a vehicle for business purposes.

It is important to note that under the 2017 Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. With the exception of active duty members of Armed Forces, taxpayers also cannot claim a deduction for moving expenses. Notice-2019-02. As in previous years, a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

Sherayzen Law Office advises taxpayers that they do not have to use the 2019 IRS standard mileage rates. They have the option of calculating the actual costs of using his vehicle rather than using the standard mileage rates. In such a case, all of the actual expenses associated with the business use of the vehicle can be used: lease payments, maintenance and repairs, tires, gasoline (including all taxes), oil, insurance, et cetera.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer | International Tax Attorney

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Mr. Eugene Sherayzen, the founder and owner of Sherayzen Law Office, Ltd., is a premier Minneapolis Minnesota Voluntary Disclosure Lawyer. Why is this the case? Let’s explore the top five reasons for it.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Experience

Mr. Sherayzen started practicing law at the end of 2005. In other words, he has been an international tax lawyer for over 13 years. During this time, he has successfully conducted hundreds of voluntary disclosures for US taxpayers all around the world.

He is a highly experienced lawyer in every type of a voluntary disclosure: OVDP/OVDI (while these programs existed), Streamlined Domestic Offshore Procedures (“SDOP”), Streamlined Foreign Offshore Procedures (“SFOP”), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause Disclosures.

During 2014-2016, Mr. Sherayzen also conducted the Transition to Streamlined Disclosure for some of his OVDP clients. Moreover, starting 2017, he has also helped his clients with the IRS audits of voluntary disclosures done pursuant to SDOP and SFOP. During all of these years, Mr. Sherayzen also helped clients with amendment of Forms 906 signed pursuant to OVDP or OVDI.

As a result of such an intense and diverse voluntary disclosure practice, Mr. Sherayzen has accumulated a tremendous, in many ways unique, amount of experience in offshore voluntary disclosures.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Knowledge

Knowledge comes with experience. Mr. Sherayzen may be considered a true expert on offshore voluntary disclosure. Not only does he possess a deep understanding of substantive US international tax law, but his extensive experience with offshore voluntary disclosures endowed him with a profound knowledge of the procedural aspects of offshore voluntary disclosures.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Ethical Creativity

This combination of knowledge and experience allows Mr. Sherayzen to devise creative ethical legal strategies for his clients’ offshore voluntary disclosures. Each strategy is customized based on the facts of each case. All pros and cons are carefully considered to achieve the necessary balance of risks and rewards. Potential IRS challenges are considered and prepared for. Each alternative strategy is discussed with each client in order to choose the most agreeable one to the client.

It should be emphasized that Mr. Sherayzen offers only those voluntary disclosure strategies which comply with the legal and ethical standards demanded by the IRS as well as the legal profession.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Customization

Mr. Sherayzen rejects “one size fits all” approach to offshore voluntary disclosure and strongly believes a case strategy must be considered only in light of the specific facts of each case. Too often, with dismay, he sees how many accountants and even lawyers herd their clients into one approach, charging a flat fee for it, without the proper consideration of specific facts of each case.

Mr. Sherayzen believes that each case is unique and deserves a special consideration of its special facts and circumstances. Each legal strategy must be adjusted to fit these facts and circumstances in order to produce the best result for the client.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Voluntary Disclosure Team

Mr. Sherayzen also counts on the support of a superb voluntary disclosure team of accountants and staff – a team which he has gradually built and trained over the past 13 years. He carefully chose each member of the team and personally trained them to master certain aspects of a voluntary disclosure. The team is not trained only in their specific duties, but also to help each other, creating a sense of comradeship among Sherayzen Law Office employees. Everyone’s work goes through at least two levels of review to assure the highest quality. As a result, Mr. Sherayzen and his team are able to conduct and produce successful highly-efficient high-quality offshore voluntary disclosures.

Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!

Costa Rican Bank Accounts | International Tax Lawyer & Attorney Miami

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Upon moving to Costa Rica, many US retirees open Costa Rican bank accounts in order to pay for their local expenses and purchase properties. While to US retirees their Costa Rican bank accounts seem innocent and completely unrelated to US tax laws, the ownership of these accounts may put them at a significant risk for US tax noncompliance. In this article, I would like to discuss the top three US reporting requirements with which US owners of the Costa Rican bank accounts need to comply.

Costa Rican Bank Accounts: Who Must Report Them?

Before we discuss these US tax requirements in more detail, we need to make it clear that, generally, only US tax residents must comply with these requirements. The definition of a US tax resident is broad and includes US citizens, US permanent residents, an individual who declares himself a US tax resident.

A couple of words of caution. First, there are important exceptions to this general definition of a US tax resident. For example, students on an F-1 visa are generally exempt from the Substantial Presence Test for five years. It is the job of your international tax attorney to determine whether you fall within any of these exceptions.

Second, different information returns may modify the categories of persons which are included in the category of the required filers. In other words, while it is generally true that US tax residents are the ones who are required to comply with the US tax requirements concerning Costa Rican bank accounts, there are important, though limited exceptions. The most prominent example is FBAR discussed below; the form requires “US persons”, not “US tax residents” to disclose the ownership of foreign accounts. While these two concepts are similar, they are not exactly the same.

Costa Rican Bank Accounts: Worldwide Income Reporting

All US tax residents must report their worldwide income on their US tax returns. In other words, US tax residents must disclose both US-source and foreign-source income to the IRS. In the context of the Costa Rican bank accounts, foreign-source income would usually include bank interest income, but this concept also covers dividends, royalties, capital gains and any other income generated by the Costa Rican bank accounts.

Costa Rican Bank Accounts: FBAR Reporting

The official name of the Report of Foreign Bank and Financial Accounts (“FBAR”) is FinCEN Form 114. FBAR requires all US persons to disclose their ownership interest in or signatory authority or any other authority over Costa Rican bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000.

Note that the term “US persons” is very close to “US tax residents”, but it is not the same. The term “US tax residents” is slightly broader than “US persons”. I have already discussed the definition of US persons in a series of articles (for example, see this article on individuals who are considered US persons); hence, I will not discuss it here, but I urge the readers to search sherayzenlaw.com for more materials on this subject.

There is one aspect of the FBAR requirement that I wish to explain in more detail here – the definition of an “account”. The FBAR definition of an account is substantially broader than how this word is generally understood by taxpayers. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.

The final aspect of FBAR that I wish to discuss here is its penalty system. US taxpayers dread FBAR penalties which are supremely severe to an astonishing degree. At the apex are the criminal penalties with up to 10 years in jail (of course, these penalties come into effect only in the most egregious situations). While FBAR willful civil penalties do not threaten incarceration, they are so harsh that they can easily exceed a person’s net worth. Even taxpayers who non-willfully did not file an FBAR (either because they did not know about it or due to circumstances beyond their control) are not free from FBAR penalties. Since 2004, the Congress added non-willful FBAR penalties of up to $10,000 per account per year.

In order to mitigate the potential for the 8th Amendment challenges to FBAR penalties and make the penalty imposition more flexible, the IRS created a multi-layered system of penalty mitigation. Since 2015, the IRS has added additional limitations on the FBAR penalty imposition. These self-imposed limitations of course help, but one must keep in mind that they are voluntary IRS actions and maybe disregarded under certain circumstances (in fact, there are already a few instances where this has occurred).

Costa Rican Bank Accounts: FATCA Form 8938

Form 8938 is one of the most important and relatively recent additions to the numerous US international tax requirements. The IRS created Form 8938 under the Foreign Account Tax Compliance Act (“FATCA”) in 2011.

Form 8938 is filed with a federal tax return. This means that, without Form 8938, the tax return would not be complete and, potentially, open to an IRS audit.

The primary focus of Form 8938 is on the reporting by US taxpayers of Specified Foreign Financial Assets (“SFFA”). SFFA includes a very diverse range of foreign financial assets, including: foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera.

In some ways, Form 8938 requires the reporting of the same assets as FBARs (especially with respect to foreign bank and financial accounts), but the two requirements are independent. This means that a taxpayer may have to do duplicate reporting on FBAR and Form 8938.

Form 8938 has a filing threshold that depends on a taxpayer’s tax return filing status and his physical residency. For example, if a taxpayer is single and resides in the United States, he needs to file Form 8938 as long as the aggregate value of his SFFA is more than $50,000 at the end of the year or more than $75,000 at any point during the year.

Form 8938 needs to be filed by Specified Persons. Specified Persons consist of two categories: Specified Individuals and Specified Domestic Entities. There are specific definitions for both categories; you can find them by searching our website sherayzenlaw.com.

Finally, Form 8938 has its own penalty system which has far-reaching consequences for income tax liability (including disallowance of foreign tax credit and imposition of higher accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.

Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Costa Rican Bank Accounts

Foreign income reporting, FBAR and Form 8938 do not constitute a complete list of requirements that may apply to Costa Rican bank accounts. There may be many more.

If you have Costa Rican bank accounts, contact the experienced international tax attorney and owner of Sherayzen Law Office, Mr. Eugene Sherayzen. Mr. Sherayzen has helped hundreds of US taxpayers with their US international tax issues, and He can help You!

Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!