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Happy New Year 2024 From International Tax Law Firm Sherayzen Law Office!!!

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Dear clients, followers, readers and colleagues:

Mr. Eugene Sherayzen, an international tax attorney, and the entire international tax team of Sherayzen Law Office, Ltd. wishes you a very Happy New Year 2024!!!

Dear clients and prospective clients, in the New Year 2024, you can continue to rely on Sherayzen Law Office for:

  1. Resolution of your prior FBAR, FATCA and other US international tax noncompliance through offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures (SDOP), Streamlined Foreign Offshore Procedures (SFOP), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, IRS Voluntary Disclosure Practice and Reasonable Cause Disclosures;
  2. Help with your IRS audits and examination, including audits of: your prior SDOP and SFOP submissions (as well as other voluntary disclosure options) and your annual international tax compliance. We can also help you fight the imposition of IRS penalties for prior international tax noncompliance, including FBAR penalties, Form 8938 penalties, Form 3520 and 3520-A penalties, Form 5471 penalties, Form 5472 penalties, Form 8865 penalties, Form 926 penalties, et cetera;
  3. Preparation of your annual US international tax compliance, including the reporting of foreign income and preparation of FBAR, FATCA Form 8938 and other US international tax compliance forms such as: Forms 3520, 3520-A, 5471, 8621, 8865, 8938 and 926 and
  4. Your international tax planning (inbound and outbound), including individual and business tax planning, We intend to continue to help US firms with conducting business overseas, US owners of foreign businesses and foreign businesses who wish to expand their presence to the United States (including real estate investors).

In resolving all of your current US international tax issues, we will continue to employ ethical creativity, diligence, professionalism and many years of experience with helping other clients. We will also continue to utilize an individual, customized approach, understanding each client’s particular situation.

In 2024, the US international tax compliance requirements will likely grow even more complex, detailed and extensive. The IRS will continue to demand more and more information from US taxpayers, employing its expanding number of revenue agents to enforce US tax laws across the globe and especially in the United States.

In order to deal with this ever-increasing US tax compliance burden, you will need the professional help of Sherayzen Law Office. In this New Year 2024, we can help you!

Your professional US international tax help is but a phone call away from you! Contact us today to schedule a confidential consultation in this New Year 2024!

HAPPY NEW YEAR 2024 EVERYONE!!!

2023 FBAR Deadline in 2024 | FinCEN Form 114 International Tax Lawyer & Attorney

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The 2023 FBAR deadline is a critical deadline for US taxpayers this calendar year 2024. What makes FBAR so important are the draconian FBAR penalties which may be imposed on noncompliant taxpayers. Let’s discuss the 2023 FBAR deadline in more detail.

2023 FBAR Deadline: Background Information

The official name of FBAR is 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 must be timely e-filed separately from federal tax returns.

Failure to file an FBAR may result in the imposition of heavy FBAR penalties. The FBAR penalties vary from criminal penalties and willful penalties to non-willful penalties. You can find more details about FBAR penalties in this article.

2023 FBAR Deadline: Pre-2016 FBAR Deadline

For the years preceding 2016, US persons needed to file FBARs by June 30 of each year. For example, the 2013 FBAR was due on June 30, 2014. No filing extensions were allowed. The last FBAR that followed the June 30 deadline was the 2015 FBAR; its due date was June 30, 2016. .

2023 FBAR Deadline: Changes to FBAR Deadline Starting with the 2016 FBAR

For many years, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, many taxpayers simply missed the unusual FBAR filing deadline.

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 the 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, the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. For now, 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.

2023 FBAR Deadline

Based on the current law, for the vast majority of filers, the 2023 FBAR deadline will be April 15, 2024. However, the deadline is automatically extended to October 15, 2024.

The 2023 FBAR must be e-filed through the US Financial Crimes Enforcement Network’s (FinCEN) BSA E-filing system.

Contact Sherayzen Law Office for Professional Help With Your FBAR Compliance

If you have unreported foreign accounts, contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a leader in US international tax compliance and offshore voluntary disclosures. We have successfully helped hundreds of US taxpayers around the globe with their FBAR compliance and FBAR voluntary disclosures; and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Form 114 US Person Definition | FBAR Tax Lawyer

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FinCEN Form 114 US Person definition is a highly important component of FBAR and US international tax compliance.  In this essay, I will discuss in detail the FinCEN Form 114 US Person definition and highlight some common issues that arise with respect to this definition.

Form 114 US Person Definition: What is Form 114 and What is its Relation to FBAR

FinCEN Form 114, Report of Foreign Bank and Financial Accounts (used to be TD F 90-22.1) is commonly known as FBAR, the Report of Foreign Bank and Financial Accounts. This form is used by US persons to report to the IRS a financial interest in or signatory authority over foreign financial accounts.  This is one of the most important forms that US taxpayers need to file in order to comply with their US international tax law requirements. A failure to file an FBAR when required may result in an imposition of severe IRS penalties.

Form 114 US Person Definition: Only US Persons are Required to File FBARs

It is important to understand that only “US Persons”, as defined by the IRS for the FBAR compliance purposes, are required to file FBARs.  What is the legal basis for this and where does this term “US Person” come from?

BSA (Bank Secrecy Act) §5314(a) states that the Secretary of the Treasury shall require a “resident or citizen of the United States or a person, in, and doing business in, the United States, to keep records, file reports”.  This seems like the FBAR requirement may apply a hugely broad group of people (far beyond US residents and citizens), especially if one takes into account that the “United States” is defined to include all 50 states, the District of Columbia, the territories, and insular possessions of the United States and the Indian lands as defined in the Indian Gaming Regulatory Act. 31 CFR §§1010.350(b) and 1010.100(hhh).  The territories and possessions of the United States include American Samoa, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the US Virgin Islands (see BSA Electronic Filing Requirements for Report of Foreign Bank and Financial Accounts (FinCEN Form 114), p. 5.).

Despite this initial impression, the actual definition that we use today is much smaller than what is mandated by §5314(a) and it is thanks to BSA §5314(b).  BSA §5314(b) states that the IRS has the discretion to interpret what this provision actually means and who is exempt from the FBAR filing requirement.

Armed with this authority, on February 26, 2010, the IRS issued proposed regulations, which for the first time defined that only “US Persons” needed to file FBARs. This is why we discuss the definition of a US Person when we discuss who is required to file FBARs.

Form 114 US Person Definition: Who is a Person

Before we turn to the definition of a “US Person”, we need to discuss who is considered to be a “Person” for the Form 114 purposes. Under 31 CFR §1010.350(b), a “person” includes:  natural persons (US citizens and US residents) and entities, including but not limited to: corporations, partnerships, trusts, or limited liability companies formed under the laws of the United States.  This definition includes entities disregarded for tax purposes (as long as they are US persons).

Additionally, pension and welfare plans are also US entities that need to file FBARs. See Amendment to the Bank Secrecy Act Regulations—Reports of Foreign Financial Accounts, 76 Fed. Reg. 10, 234 (Feb. 24, 2011); IRM 4.26.16.2.1.3(3) (06-24-21).  Even though the regulations do not mention it, the Form 114 instructions expand the “person” definition to estates.  It is important to note that, according to page 6 of the FBAR electronic filing instructions, an executor of an estate has a fiduciary obligation to file FBAR on behalf of the estate and on behalf of the decedent in the year following the decedent’s death.

Form 114 US Person Definition: General Definition of a US Person

The definition of a US person includes the following categories of persons:

(1) US citizens;

(2) residents of the United States;

(3) an entity, such as a corporation, partnership and a limited liability company, created or organized in the United States or under the laws of the United States;

(4) a trust formed under the laws of the United States; and

(5) an estate formed under the laws of the United States.

Let’s analyze each of these categories in more detail.

Form 114 US Person Definition: US Citizens

All US citizens are subject to the FBAR filing requirement, even minor children.  The general definition of a US citizen is contained in 8 USC §1401.

Form 114 US Person Definition: US Residents

All US residents are subject to FBAR filing requirements.  Pursuant to 31 CFR §1010.350(b)(2), the definition of “US residents” follows the definition of a resident alien under §7701(b) with one modification – the definition of the “United States” still follows 1010.100(hhh) described above. Also, see IRM 4.26.16.2.1.2 (11-06-15).

There are three classes of US residents: (1) US permanent residents; (2) persons who satisfied the Substantial Presence Test; and (3) persons who elected to be treated as US residents.  Let’s discuss each of these classes of US residents in more detail.

1.  US Permanent Residents (the “Green Card Test”)

A person is considered a US person if at any time during the calendar year the person has been lawfully granted the privilege of residing permanently in the United States under the immigration laws and such status has not been revoked. 26 USC §§7701(b)(1)(A)(i) and 7701(b)(6).

One of the most common issues occurs when a person has been issued a green card and he has not yet physically entered the United States. In such cases, this person would not be considered as a resident alien until he actually physically enters the United States. 26 USC §7701(b)(2)(A)(ii).  Once he enters the country, however, he becomes a US permanent resident and continues to be one until the green card is revoked or considered abandoned either judicially or administratively. See 26 CFR §301.7701(b)-1(b)(2) and 26 CFR §301.7701(b)-1(b)(3).

2.  Substantial Presence Test

Even if a person is not a US permanent resident, he may still be considered a US Person if he meets the IRC §7701(b)(3) substantial presence test.  In reality, there are two substantial presence tests.

The first substantial presence test is met if a person is physically present in the United States for at least 183 days during the calendar year. 26 USC §7701(b)(3).  The second substantial presence test is met if two conditions are satisfied: (1) the person is present in the United States for at least 31 days during the calendar year; and (2) the sum of the days on which this person was present in the United States during the current and the two preceding calendar years (multiplied by the fractions found in §7701(b)(3)(A)(ii)) equals to or exceeds 183 days. 26 USC 7701(b)(3)(A).

Let’s focus on the mechanics of the second calculation.  The way to determine whether the 183-day test is met is to add: (a) all days present in the United States during the current calendar year (i.e. the year for which you are trying to determine whether the Substantial Presence Test is met) + (b) one-third of the days spent in the United States in the year immediately preceding the current year + (c) one-sixth of the days spent in the United States in the second year preceding the current calendar year. See 26 USC §7701(b)(3).

Note that the Internal Revenue Code (IRC) provides a number of important exceptions to the Substantial Presence Test.  In this article, I am just providing the general rule.

3.  Election to be Treated as a US Resident Alien

A person who makes the first-year election to be treated as a US resident alien pursuant to §7701(b)(4) is a US Person for FBAR purposes.   Note, however, that this rule applies only to elections made under this provision.  A nonresident alien spouse of a US person who makes an election under the IRC §§6013(g) and 6013(h) to be treated as a resident alien will not be considered as a US person for the FBAR compliance purposes.  This is an important divergence between the income tax and FBAR rules.

Form 114 US Person Definition: US Entities, Trusts & Estates

Entities (corporations, partnerships, limited liability companies, et cetera), trusts and estates created, organized or formed in the United States or under the laws of the United States are generally considered to be US Persons for FBAR purposes.

A foreign subsidiary of a US parent will not have any FBAR obligations as long as it is not formed, created or organized under the laws of the United States. However, the US parent company may be required to include the foreign accounts of its foreign subsidiary on its FBAR. 31 CFR §1010.350(e)(2)(ii).

Moreover, a foreign entity organized in and under the laws of a foreign country will not be subject to the FBAR requirements even if it elects to be treated as a US entity for US tax purposes. See Amendment to the Bank Secrecy Act Regulations—Reports of Foreign Financial Accounts, 76 Fed. Reg. 10, 234-238 (Feb. 24, 2011).

Contact Sherayzen Law Office for Professional Help with Your FBAR Compliance

If you need questions concerning your FBAR compliance or a voluntary disclosure concerning your prior FBAR noncompliance, contact Sherayzen Law Office for professional help!  Our firm specializes in FBAR compliance and offshore voluntary disclosures to remedy prior FBAR noncompliance.

We have helped hundreds of clients around the world and we can help you! Contact Us Today to Schedule Your Confidential Consultation!

2020 FBAR Criminal Penalties | FBAR International Tax Lawyers

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2020 FBAR criminal penalties is a potential threat to any US taxpayer who willfully failed to file his FBARs or knowingly filed a false FBAR. In this essay, I would like to review the 2020 FBAR criminal penalties that these noncompliant US taxpayers may have to face.

2020 FBAR Criminal Penalties: Background Information

A lot of US taxpayers do not understand why the 2020 FBAR criminal penalties are so shockingly severe. These taxpayers question why failing to file a form that has nothing do with income tax calculation should potentially result in a jail sentence.

The answer to this questions lies in the legislative history of FBAR. First of all, it is important to understand that FBAR is not a tax form. The Report of Foreign Bank and Financial Accounts (“FBAR”) was born in 1970 out of the Bank Secrecy Act (“BSA”), in particular 31 U.S.C. §5314. This means that the initial primary purpose of the form was to fight financial crimes, money laundering and terrorism. In other words, FBAR was not initially created to combat tax evasion.

Rather, FBAR criminal penalties were structured from the very beginning for the purpose of punishing criminals engaged in financial crimes and/or terrorism. This is why the FBAR penalties are so severe and easily surpass the penalties of any tax form.

It was only 30 years later, after the enaction of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), that the enforcement of FBAR was turned over to the IRS allegedly to fight terrorism. Instead, the IRS almost immediately commenced using FBAR to fight the tax evasion schemes that utilized offshore accounts.

The Congress liked the IRS initiative and responded with the American Jobs Creation Act of 2004 (“2004 Jobs Act”). The 2004 Jobs Act further increased the FBAR existing penalties and created an new non-willful penalty of up to $10,000 per violation.

2020 FBAR Criminal Penalties: Description

Now that we understand why the 2020 FBAR criminal penalties are so severe, let’s describe what these penalties actually may be. There are three different 2020 FBAR criminal penalties associated with different FBAR violations.

First, a criminal penalty may be imposed under 26 U.S.C. 5322(a) and 31 C.F.R. § 103.59(b) for willful failure to file FBAR or retain records of a foreign account. The penalty is up to $250,000 or 5 years in prison or both.

Second, when the willful failure to file FBAR is combined with a violation of other US laws or the failure to file FBAR is “part of a pattern of any illegal activity involving more than $100,000 in a 12-month period”, then the IRS has the option of imposing a criminal penalty under 26 U.S.C. 5322(b) and 31 C.F.R. § 103.59(c). In this case, the penalty jumps to incredible $500,000 or 10 years in prison or both.

Finally, if a person willingly and knowingly files a false, fictitious or fraudulent FBAR, he may be penalized under 31 C.F.R. § 103.59(d). The penalty in this case may be $10,000 or 5 years or both.

Contact Sherayzen Law Office for Help With Past FBAR Violations

If you were required to file an FBAR but you have not done it, contact Sherayzen Law Office to explore your voluntary disclosure options. Our international tax law firm specializes in FBAR compliance and we have helped hundreds of US taxpayers around the world to resolve their past FBAR noncompliance while reducing and, in some cases, even eliminating their FBAR penalties.

We can help You! Contact Us Today to Schedule Your Confidential Consultation!

October 31 2020 FBAR Deadline | FBAR Tax Lawyer & Attorney

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US taxpayers can still timely file their 2019 FBAR (Report of Foreign Bank and Financial Accounts) by the new October 31 2020 FBAR deadline. This FBAR deadline extension is highly unusual and requires some explanation.

October 31 2020 FBAR Deadline: What is FBAR?

The Report of Foreign Bank and Financial Accounts (“FBAR”) is officially known as FinCen Form 114. This form must be filed by US persons with an ownership interest in or signatory authority or any other authority over foreign bank and financial accounts if the aggregate value of such accounts exceeds $10,000 at any point during a calendar year. This is a very important US international information return; a failure to timely and correctly file an FBAR may result in an imposition of draconian FBAR penalties. This is why it is so important to learn about FBAR deadlines.

October 31 2020 FBAR Deadline & FinCEN Mistake

The 2019 FBAR deadline extension became possible as a result of an incorrect message posted by FinCEN on its BSA (Bank Secrecy Act) website. On October 14, 2020, FinCEN posted a message that incorrectly stated that the 2019 FBAR deadline was extended to December 31, 2020 for all FBAR filers. Within twenty-four hours, FinCEN removed the message.

On October 16, 2020, FinCEN posted a corrected message that stated that the extension to December 31, 2020, was intended only for victims of recent natural disasters listed in FinCEN’s October 6, 2020 notice.

Since, however, there were filers who have missed the October 15 deadline due to the incorrect October 14 message, FinCEN decided to allow these filers to have an extra couple of weeks to file their 2019 FBARs. For this reason, FinCEN established a new October 31 2020 FBAR deadline for all FBAR filers (except those who were victims of natural disasters listed in the aforementioned October 6 list).

October 31 2020 FBAR Deadline & December 31 2020 FBAR Deadline

Thus, there are two separate FBAR filing deadline extensions still outstanding. The first one is the October 31 2020 FBAR deadline which applies to all FBAR filers except the ones who are also eligible for the second deadline extension.

The second deadline extension to December 31, 2020 applies only to victims of natural disasters listed in FinCEN’s October 6, 2020 notice.

Contact Sherayzen Law Office for Professional Help with FBAR Compliance

Sherayzen Law Office is a leading US international tax law firm that specializes in US international tax law and FBAR compliance. We have filed thousands of FBARs for our clients. We have also helped US taxpayers from over 70 countries to deal with FBAR filing violations for prior years, including as part of a voluntary disclosure (such as Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures and Reasonable Cause disclosures). Our FBAR clients include individuals, corporations, partnerships, estates, trusts and disregarded entities.

We can help you! Contact Us Today To Schedule Your Confidential Consultation!