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 [email protected].
Thank you for watching until the next time.