Polish Bank Accounts | International Tax Lawyer & Attorney Chicago IL

A large number of Polish immigrants in the United States continue to maintain close ties to Poland, including the ownership of Polish bank accounts. The same is true for Polish citizens with “green cards” who reside outside of the United States during most of the year. Many of these new American tax residents do not realize that these accounts may be subject to numerous reporting requirements in the United States. In this article, I will discuss, in a general manner, the top three US tax reporting requirements that may apply to these Polish bank accounts.

Polish Bank Accounts: Definition of a “Filer”

There is one critical term that we need to understand in order to properly apply US tax reporting requirements to Polish bank accounts – the concept of “filer”. In this context, “filer” means a person who fits into the category of taxpayers who are required to file a certain form.

It is important to understand that the definition of a filer changes from one form to another. In other words, a person may be required to file one form but not the other even though it concerns the same foreign account.

Despite these differences in the definition of a filer, we can identify a certain common definition that underlies all of the requirements we will discuss in this article, even if this definition is modified for the purposes of a particular form. This common definition can be found in the concept of a “US tax resident”.

All of the following persons are considered to be US tax residents: US citizens, US permanent residents, persons who satisfy the Substantial Presence Test and persons who declare themselves as US tax residents. This general definition of US tax residents is subject to a number of important exceptions.

All of the US international tax reporting requirements adopt the concept of US tax residency as the basis for their definitions of a filer. Where there are differences from the definition of US tax residency, they are mostly limited to the application of the Substantial Presence Test and/or the first-year and last-year definitions of a US tax resident.

For example, Form 8938 identifies its filers as “Specified Persons” (a concept that is applied increasingly throughout US tax code after the 2017 tax reform) while FBAR defines its filers as “US Persons”. Yet, the differences between these two terms mostly arise with respect to persons who declared themselves as US tax residents or non-residents. A common example can be found with respect to treaty “tie-breaker” provisions, which foreign persons use to escape the effects of the Substantial Presence Test for US tax residency purposes.

The determination of your US tax reporting requirements is the primary task of your international tax attorney. It is simply too dangerous for a common taxpayer or even an accountant to attempt to dabble in US international tax law.

Polish Bank Accounts: Worldwide Income Reporting

Now that we understand the concept of US tax residency and the fact that the definition of a filer may differ between different tax forms, we are ready to explore the aforementioned three US reporting requirements with respect to Polish bank accounts.

The first and most fundamental requirement is worldwide income reporting. It is also the requirement that applies to US tax residents as they are defined above (i.e. we are dealing here with the classic definition of US tax residency in its purest form).

All US tax residents must disclose their worldwide income on their US tax returns. This means that they must report to the IRS their US-source and foreign-source income. The worldwide income reporting requirement applies to all types of foreign-source income: bank interest income, dividends, royalties, capital gains and any other income.

Worldwide income reporting requirement applies even if the foreign income is subject to Polish tax withholding or reported on a Polish tax return. It also does not matter whether the income was transferred to the United States or stayed in Poland; the Polish-source income of a US tax resident must still be disclosed on his US tax returns.

Polish Bank Accounts: FinCEN Form 114 – FBAR

The second requirement that I would like to discuss today is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”). Under the Bank Secrecy Act of 1970, the US government requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over Polish (and any other foreign country) bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. If these requirements are met, the disclosure requirement is satisfied by filing an FBAR.

It is important to understand all parts of the FBAR requirement are terms of arts that require further exploration and understanding. I encourage you to search our firm’s website, sherayzenlaw.com, for the definition of “US Persons” and the explanation of other parts of the FBAR requirement.

There is one part of the FBAR requirement, however, that I wish to explore here in more detail – the definition of “account”. The reason for this special treatment is the fact that the definition of an account for FBAR purposes is a primary source of confusion among US Persons with respect to what needs to be disclosed on FBAR.

The FBAR definition of an account is substantially broader than what this word generally means 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.

Despite the fact that FBAR compliance is neither easy nor straightforward, FBAR has a very severe penalty system. On the criminal side, FBAR noncompliance may lead to as many as ten years in jail (of course, these penalties come into effect in extreme situations). On the civil side, the most dreaded penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Even FBAR non-willful penalties can wreak a havoc in a person’s financial life.

Civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. In 2015, the IRS added another layer of limitations on the FBAR penalty imposition. One must remember, however, that these are voluntary IRS actions and may be disregarded by the IRS whenever circumstances warrant such an action.

Polish Bank Accounts: FATCA Form 8938

The third requirement that I wish to discuss today is a relative newcomer, FATCA Form 8938. This form requires “Specified Persons” to disclose 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.

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 report same foreign assets on FBAR and Form 8938.

Specified Persons consist of two categories of filers: 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 income tax consequences (including disallowance of foreign tax credit and imposition of 40% accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.

One must also remember that, unlike FBAR, Form 8938 is filed with a federal tax return and forms part of the tax return. This means that a failure to file Form 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.

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

If you have Polish bank accounts, contact Sherayzen Law Office for professional help with your US international tax compliance. We have helped hundreds of US taxpayers with their US international tax issues (including numerous taxpayers with Polish bank accounts), and We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

Sherayzen Law Office Successfully Completes 2019 April 15 Tax Season

Hundreds of filed complex tax forms and FBARs is the supreme evidence of the successful completion of the 2019 April 15 tax season by Sherayzen Law Office. Sherayzen Law Office is an international tax law firm that specializes in offshore voluntary disclosures and US international tax compliance.

Annual compliance occupies a special place in the firm’s practice. This part of our practice consists of almost entirely clients who were so satisfied with our services that they wanted us to handle their annual tax compliance. It is a proud testimony of the high quality, efficiency and professionalism of Sherayzen Law Office’s work.

Since there are more and more clients every year who wish to retain our services for annual compliance, this has been a very dynamic area of growth. It also means that, with each year, the deadline pressure is rising.

The 2019 April 15 tax season was no exception. A record number of clients placed their utmost confidence in our work and asked us to prepare their 2018 income tax returns, information returns and FBARs. Moreover, the tremendous complexity of the 2017 tax reform has further added to the difficulty of the 2019 April 15 tax season.

Mr. Eugene Sherayzen, the founder and owner of Sherayzen Law Office, recognized very early that this tax season is going to be the most difficult one yet in the firm’s existence. This why he expanded and trained additional workforce at the beginning of 2019, engaged in proper tax season planning, addressed ahead of time the needs of the ongoing audit and offshore voluntary disclosure clients and established aggressive deadlines for the firm.

Thanks to all of this work by Mr. Sherayzen and the firm’s employees, all of the annual compliance deadlines were successfully completed. Moreover, Sherayzen Law Office was also able to finalize the filings for all of the offshore voluntary disclosure clients according to the already-created (by Mr. Sherayzen) customized plans of offshore voluntary disclosure.

We are not planning, however, to simply enjoy the laurels of another success. We look forward to helping hundreds of new clients with their offshore voluntary disclosures, IRS audits and international tax planning. We also already started our preparation for June 15, September 15 and October 15 tax seasons.

If you are looking for an international tax firm to which you entrust your case, you should retain the services of Sherayzen Law Office! We are a team of highly-experienced US international tax specialists who have helped hundreds of US taxpayers with their US international tax compliance and offshore voluntary disclosures. We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

2019 Tax Filing Season Will Begin on January 28, 2019 | Tax Lawyer News

On January 7, 2019, the IRS confirmed that the 2019 tax filing season will begin on January 28, 2019. In other words, the 2019 tax filing season will begin on schedule despite the government shutdown.

2019 Tax Filing Season for 2018 Tax Returns and 2018 FBAR

During the 2019 tax filing season, US taxpayers must file their required 2018 federal income tax returns and 2018 information returns. Let me explain what I mean here.

One way to look at the US federal tax forms is to group them according to their tax collection purpose. The income tax returns are the tax forms used to calculate a taxpayer’s federal tax liability. The common example of this type of form is Form 1040 for individual taxpayers.

The information returns are a group of federal tax forms (and, separately, FBAR) which taxpayers use to disclose certain required information about their assets and activities. These forms are not immediately used to calculate a federal tax liability. A common example of this form is Form 8938. FinCEN Form 114, the Report of Foreign Bank and Financial Account, commonly known as FBAR, also belongs to this category of information returns even though it is not a tax form.

There is a third group of returns that consists of hybrid forms – i.e. forms used for both, income tax calculation and information return, purposes. Form 8621 for PFICs has been a prominent example of this type of a form since tax year 2013.

2019 Tax Filing Season Deadline and Available Extensions for Individual Taxpayers

Individual US taxpayers must file their required income tax and information returns by Monday, April 15, 2019. An interesting exception exists for residents of Maine and Massachusetts. Due to the Patriots’ Day holiday on April 15 in these two states and the Emancipation Day holiday on April 16 in the District of Columbia, the residents of Maine and Massachusetts will have until April 17, 2019 to file their US tax returns.

Taxpayers who reside overseas get an automatic extension until June 17 , 2019, to file their US tax returns.  The reason why the deadline is on June 17 is because June 15 falls on a Saturday. The taxpayers still must pay their estimated tax due by April 15, 2019.

Taxpayers can also apply for an automatic extension until October 15, 2019, to file their federal tax returns. Again, these taxpayers must still pay their estimated tax due by April 15, 2019, in order to avoid additional penalties.

Finally, certain taxpayers who reside overseas may ask the IRS for additional discretionary extension to file their 2018 federal tax return by December 16 (because December 15 is a Sunday this year), 2019. These taxpayers should send their request for the discretionary extension before their automatic extension runs out on October 15, 2019.

2019 Tax Filing Season Refunds

In light of the ongoing government shutdown, one of the chief concerns for US taxpayers is whether they will be able to get their tax refunds during the 2019 Tax Filing Season. The IRS assured everyone that it has the power to issue refunds during the government shutdown.

The IRS has been consistent in its position that, under the 31 U.S.C. 1324, the US Congress provided a permanent and indefinite appropriation for refunds. In 2011, the Office of Management and Budget (“OMB”) disagreed with the IRS and ordered it not to pay any refunds. It appears, however, that the OMB changed its position sometime after 2011.