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FBAR Financial Accounts Definition | International Tax Lawyer & Attorney

In the realm of US international tax compliance, few topics are as crucial as the reporting of foreign financial accounts, particularly The Foreign Bank and Financial Accounts Report (FBAR). This article focuses on one specific aspect of FBAR compliance: what accounts need to be disclosed on FBAR. In particular, we will delve into the intricacies of the scope of the FBAR financial accounts definition.

Please, note that this article is an upgrade of an article that I published almost fifteen years ago.

FBAR Financial Accounts Definition: FBAR Background Information

FBAR is one of the most important US international tax compliance forms. All US persons must file an FBAR if they have a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year (31 USC. § 5314; 31 C.F.R. § 1010.350).

FBAR filing is separate from income tax filing and has its own distinct requirements and deadlines. Also, a taxpayer must comply with his FBAR reporting obligations even if he already reported the same foreign financial accounts elsewhere (such as Form 8621 or Form 8938). US filers must file their FBARs (officially FinCEN Forms 114a) electronically through FinCEN’s BSA E-Filing System.

Additionally, FBAR has its own unique and very severe penalty system for noncompliance, including criminal penalties. This is why it is so important to understand what type of accounts should be disclosed on FBAR.

FBAR Financial Accounts Definition: Determining Reportable Accounts

When assessing whether an account qualifies as an FBAR foreign financial account, one should consider:

1. The account’s location. The account must be outside the United States – there is special definition for FBAR purposes for what this means. I will not discuss the definition of “foreign accounts” in this article; instead I will only focus on what type of accounts need to be disclosed.

2. The account type. The main issue is whether this particular foreign asset falls within the definition of a “financial account” – this is the main topic of this article.

3. Your relationship to the account. In other words, do you have a financial interest in or signature authority over the foreign accounts in question.

4. The aggregate value of all foreign financial accounts. Generally, the accounts must exceed $10,000 in the aggregate at any point in the year. I will discuss in another article how this is calculated.

FBAR Financial Accounts Definition: Broad Scope

The definition of “financial account” for FBAR purposes is very broad. It is very important to understand that it is so broad that many taxpayers would not even normally consider certain arrangements as financial accounts.

In general, if there is a value maintained as part of a fiduciary relationship with a financial institution, it is likely to be a reportable account on FBAR. See 75 Fed. Reg. at 8846. The IRS, however,has stated “an account is not established simply by conducting transactions such as wiring money or purchasing a money order where no relationship has otherwise been established.” Id.

FBAR Financial Accounts Definition: Bank, Securities and Investment Accounts

For the FBAR purposes, financial accounts include all checking, savings, brokerage and securities accounts. 75 Fed. Reg. 8846 defines “securities account” as “an account maintained with a person in the business of buying, selling, holding, or trading stock or other securities.” Id. Securities derivatives and other similar financial instruments held with a financial institution all fall within the definition of a reportable account. However, paper bonds, notes and stock certificates that are not held through a financial institutions are not considered as “financial accounts.”

The FBAR financial accounts definition also applies to all demand, deposit and time deposit accounts (in other words, CD accounts and their equivalents).

FBAR Financial Accounts Definition: Debit Cards and Prepaid Credit Cards

31 C.F.R. § 1010.350(c) further expands the definition of “account” to foreign debit cards and prepaid credit cards. This definition of an account is an interesting one as even a slight overpayment of a credit card would make it a reportable account for FBAR purposes.

FBAR Financial Accounts Definition: Other Financial Accounts

31 C.F.R. § 1010.350(c)(3) introduces four additional categories of accounts that a filer must include on his FBARs:

Accounts with persons accepting deposits as a financial agency;
Insurance policies with cash value or annuity policies (for example, this definition includes Assurance Vie accounts in France, LIC policies in India and Prudential Life Insurance policies in Hong Kong);
Accounts with commodity futures or options brokers; and
Accounts with mutual funds or similar pooled investments (e.g. mutual funds owned through individual folios in India).

FBAR Financial Accounts Definition: Retirement Plans

Reporting retirement accounts on FBAR probably presents the biggest challenge to US taxpayers. Generally, all foreign retirement accounts would be need to be disclosed on FBAR unless they fall under an exception.

For example, certain US retirement plans (under IRC sections 401(a), 403(a), 403(b), 408, or 408A) are exempt from FBAR reporting. However, US filers need to disclose on their FBARs all of their Canadian RRSP accounts, Singaporean CPF accounts, Australian Superannuation accounts, Israeli retirement accounts and many other types of foreign retirement accounts that these filers may have.

As a separate note, the greatest difficulty concerning foreign retirement accounts is not even FBAR reporting, but potential other requirements as such Form 8938 and, most importantly, Form 3520 and even Form 3520-A. The latter forms (Forms 3520 and 3520-A) are triggered if the foreign accounts are considered to be “foreign trusts”. However, this decision to treat foreign accounts as trusts should be done with great care.

FBAR Financial Accounts Definition: Exceptions

Finally, certain categories of foreign financial accounts are exempt from FBAR reporting:

Accounts in US military banking facilities serving US government installations abroad;
Accounts over which most bank officers or employees have only signature authority (unless they have a personal financial interest); and
Accounts over which officers or employees of publicly traded or large privately held US corporations have only signature authority, subject to specific conditions (31 C.F.R. § 1010.350(f)).

Contact Sherayzen Law Office for Professional FBAR Help

FBAR noncompliance is one of the most common and one of the most fearsome problems facing US individual taxpayers with respect to their US international tax compliance. Sherayzen Law Office can help you resolve past FBAR noncompliance and bring your US tax affairs into full compliance with US tax laws.

We are a leading US international tax compliance and FBAR compliance firm. This is our core specialty in which we have profound knowledge and extensive experience.

Amato Case: 5-Years in Prison for Secret Russian Bank Accounts | FBAR News

May 10, 2019/in FBAR Litigation Lawyer & Attorney, Legal Notes /by Manager

Failure to file FBARs for secret Russian bank accounts and income tax evasion led to the imposition of a five-year prison sentence on a New Jersey chiropractor. This is the essence of the new IRS victory in the Amato case. Let’s explore this case in more detail, because the case demonstrates the long reach of the FBAR requirement even in unusual jurisdictions, like Russia.

The Amato Case: Factual Background

Mr. Amato is a US citizen. He was a chiropractor who resided and worked in New Jersey. He practiced medicine through two corporate entities: Chiropractic Care Consultations, Inc. (“Chiropractic Care”) and Accident Recovery Physical Therapy, Inc. (“Accident Recovery”).

It appears that, between January 1, 2013 and December 7, 2016, Mr. Amato over-billed at least six insurance companies. In many cases, he was simply billing for services that he never actually rendered. For these crimes, he was separately charged by the US Department of Justice. On April 9, 2018, in his guilty plea, Mr. Amato admitted that his over-billings were over $1 million.

In order to hide these illegal proceeds, sometime between January 1, 2013 and December 7, 2016, Mr. Amato opened bank accounts in Russia and wired over $1.5 million to these accounts.

On September 14, 2015, Mr. Amato filed his 2014 tax return, stating that he had no taxable income and he owed no taxes. In reality, his 2014 taxable income was about $561,258.

At about the same time, Mr. Amato also deposited checks from his businesses into accounts owned by his minor children. He never disclosed these checks as part of his earnings on his US tax returns. Additionally, there were more funds deposited in his corporate accounts which he also never disclosed on his personal and corporate tax returns.

The Amato Case: IRS investigation and Criminal Prosecution

It appears that the 2014 return was the trigger and huge contributing factor to the commencement of the subsequent IRS investigation of Mr. Amato’s dealings. In 2018, the US Department of Justice (the “DOJ”) filed criminal charges against Mr. Amato with respect to two different types of violations.

The first charge was tax evasion pursuant to 26 USC 7201. It was directly tied to his 2014 tax return, stating that Mr. Amato knowing and willfully attempted to evade his income taxes due.

The second charge was made under 31 USC 5314 & 5322(b) – these are FBAR criminal penalties. Again, the DOJ chose to focus only on 2014 FBAR.

The Amato Case: Tax Evasion and FBAR Criminal Sentence

As part of his deal with the DOJ, Mr. Amato pleaded guilty to both counts. On May 7, 2019, as a result of his failure to pay a large amount in taxes and failure to file FBARs, the New Jersey federal court sentenced him to five years in prison.

Contact Sherayzen Law Office for Professional Help With the Reporting of Your Undisclosed Foreign Bank and Financial Accounts

The Amato case is one more reminder of the legal dangers that US taxpayers with undisclosed foreign accounts face. You do not want to be in Mr. Amato’s position.

This is why you need to contact Sherayzen Law Office for professional help with the reporting of your undisclosed foreign bank and financial accounts. We have helped hundreds of US taxpayers with the voluntary disclosure of their foreign assets and foreign income, and We Can Help You!

Adding Children to a Foreign Account and FBAR Issues | IRS FBAR Lawyer

January 2, 2017/0 Comments/in FBAR Lawyers, Legal Notes /by Manager

FBAR problems and parental love – at first, it seems that nothing can be more contradictory. Yet, in reality, parental love may often cause grave US tax problems for children if this love extends to adding children to a foreign account, and especially if this is done without the knowledge of the children. In this article, I would like to explore some of the common patterns of adding children to a foreign account and how this act of parental love may cause grave FBAR problems for the children.

FBAR Background

FinCEN Form 114 (the Report of Foreign Bank and Financial Accounts – commonly known as FBAR) is one of the most important information returns for US taxpayers. Generally, FBAR requires a US person to disclose his financial interest in and signatory authority over foreign bank and financial accounts if these accounts, in the aggregate, exceed $10,000 at any point during a calendar year.

The importance of FBAR is tied to its draconian penalties, which include willful penalties of up to 50% of the account or $100,000 (whichever is greater) per violation; each undisclosed account in each year is a violation. Criminal penalties, including jail time, are also possible.

Common Four Patterns of Adding Children to a Foreign Account

While there are many ways of adding children to a foreign account, we can distinguish the four most common patterns for the purposes of this article. The first pattern of adding children to a foreign account is creation of joint accounts with minor and student children; this usually occurs when the parents and their children still live outside of the United States. Millions of parents create joint accounts with a minor child to help him get a credit history, learn about financial responsibility and exercise control over their children’s expenses. The same pattern often applies to already adult children who begin their college lives.

These accounts often still remain in existence long after the expiration of the original purpose of adding children to a foreign account. Most often, this happens as a matter of fact – just out of habit or indifference to the account. Sometimes, the account starts to play a new role of a conduit of financial transactions between adult children and their parents. Whichever is the reason, these foreign accounts often continue to exist even after the children move to the United States.

The second common pattern of adding children to a foreign account occurs on the opposite end of the spectrum of life for estate planning purposes. Under this pattern, non-resident alien parents add their adult children (who may already be US tax residents) to their foreign accounts to make sure that the children have access to the parents’ accounts in case of an emergency or death. Furthermore, in countries with a difficult court system (India is a prominent example), adding children to a foreign account may assure that these children and no one else inherit the funds.

The third common pattern of adding children to a foreign account occurs as part of business succession planning. Children are granted shares of a foreign corporation and are provided with a signatory authority over the corporate accounts in order to assure smooth transition of business ownership and corporate leadership. This pattern is very close to the previous one, but the difference here is that the process of adding children to a foreign account here is done as an integral part of running a foreign business, whereas the second pattern is concerned mostly with non-business estate planning.

Finally, the fourth common pattern involves a situation where parents (usually operating under a power of attorney provided by their children) engage in various business and real estate transactions under their childrens’ names. The act of adding children to a foreign account merely constitutes one more part of these transactions. Especially in Southeast Asia (most notably, India, South Korea and China), but also in South America, the parents are conducting various transactions under their children’s names often without ever informing their children about these transactions. The parents can even sign and file local tax returns under their children’s names.

How Adding Children to a Foreign Account Can Cause FBAR Problems

Setting aside the issue of income tax compliance complications, adding children to a foreign account may be highly problematic from the FBAR compliance standpoint. The problems usually occur for three reasons.

The first and most common reason is the simple fact that, in many cases, parents never inform their children about the fact that they added them to their foreign accounts. This often occurs because the parents simply do not know that adding children to a foreign account obligates the children to report such a joint account to the IRS. Since the children do not know about their ownership of a foreign account, they cannot report it on the FBAR (assuming that they know about the existence of this form), thereby subjecting themselves to the draconian FBAR noncompliance penalties. This reason can be present in all four patterns described above.

The second reason for FBAR problems is closely tied to the first pattern of adding children to a foreign account. In cases where accounts have been open for a very long time without active usage, children may simply forget about the existence of these accounts or mentally ignore them as a matter of habit of treating these accounts as childhood accounts that should not be taken seriously.

Finally, the third reason is closely tied to the fourth pattern of adding children to a foreign account. In such cases, children often feel that the accounts do not belong to them since the parents opened them in their interests only as part of their own local business transactions. Hence, the children erroneously believe that these accounts are not reportable on their FBARs, exposing themselves to FBAR penalties. Such cases may present additional difficulties to international tax lawyers because of the amount of documentation (local tax returns under the children’s names, all transaction documents in children’s names, deposits remaining on the children’s accounts, et cetera) that may convince the IRS that FBAR noncompliance was willful.

Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts and Foreign Income

Parents love their children and are prepared to do anything for them. Sometimes, though, parents may unintentionally complicate their children’s lives by adding their children to a foreign account. Failure to report such an account on FBAR may expose the children to draconian civil and criminal FBAR penalties.

In such cases, the help of an experienced international tax law firm is indispensable. Sherayzen Law Office, Ltd. is a highly experienced international tax law firm that specializes in FBAR compliance, including offshore voluntary disclosures. We have helped hundreds of US taxpayers around the globe to bring their US tax affairs into full compliance and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Miami FBAR Lawyer | Foreign Accounts Tax Attorney

September 7, 2016/0 Comments/in FBAR Lawyers, Legal Notes /by Manager

Are you looking for a competent Miami FBAR Lawyer to help you with the filing current or delinquent FBARs? Then, you need to understand who is considered to be a Miami FBAR Lawyer and why you should retain the services of Sherayzen Law Office, Ltd. – an international tax law firm that provides FBAR services to Miami residents.

Miami FBAR Lawyer Definition: Legal FBAR Services Provided in Miami, Florida

The definition of a Miami FBAR lawyer is determined based on the geographical spread of a lawyer’s legal services (i.e. where a lawyer offer his legal services) rather than his physical presence. This means that as long as a lawyer offers his FBAR services in Miami, Florida, he will be regarded as a Miami FBAR lawyer.

The reasoning for this definition is rather straightforward – FBAR is a creation of federal law, not state law. This means a lawyer can provide his services in Miami in the area of US international tax law and specifically FBARs irrespective of his actual location (but as long as he is licensed to practice law in any of the 50 states or District of Columbia). Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. is an excellent example of such a lawyer -he is physically located in Minneapolis, but successfully provides FBAR services to its clients who reside in Miami.

What are these FBAR services? Mr. Sherayzen helps his clients with current (on-going) FBAR compliance as well as FBAR voluntary disclosures in cases where his clients did not timely comply with their required FBAR filings.

Miami FBAR Lawyer Must Be an International Tax Lawyer

Unlike location, the competence of a lawyer should be the key factor in retaining the services of a Miami FBAR lawyer. The knowledge of FBARs and US international tax law should be the key consideration in this matter.

Why is competence in US international tax law so important? Two Reasons. First, FBAR forms part of a much bigger area of US international tax law. Second, in almost all cases, the FBAR issues are highly related to other international tax compliance requirements. In fact, the interaction between FBAR and other international tax issues is one of the main considerations that determines a taxpayer’s legal position. This is why your Miami FBAR lawyer should be an expert not just FBARs, but US international tax law in general.

Miami FBAR Lawyer: the Local Ease-of-Communication Myth

There is a substantial minority of persons who prefer, in spite of all of the factors in favor of a, for example, Minneapolis-based Miami FBAR lawyer (better knowledge of the FBARs and international tax law, higher experience and sometimes even better fee structure), to retain a local Miami FBAR lawyer mainly due to their belief that it would easier to communicate and control a local lawyer.

This belief is nothing more than an illusion and can be highly harmful to a person’s case. First of all, the development of modern means of communication completely erase any purported advantages of ease of communication with a lawyer in your town. Email, Video Skype Conferences, telephone and text messages make your out-of-state Miami FBAR lawyer at least as equally accessible as your local Miami FBAR lawyer.

Second, it is simply naive to believe that your local lawyer will be meeting with you every day while the case lasts. In addition to the unnecessary expense of such a situation, the lawyer simply will not have the time or the necessity to do it. In reality, almost the entire course of communication between you and your local lawyer is going to be exactly the same as it would be between you and your out-of-state lawyer – i.e. email, telephone and even regular mail. The only exception may be your initial consultation and your final meeting; both of these meetings can be easily replaced by Skype.

Sherayzen Law Office is a Preferred Choice for Your Miami FBAR Lawyer

Sherayzen Law Office is one of the leading US international tax firms with respect to FBARs and US international tax law. Our strength lies in extensive knowledge of the subject matter and large experience concerning all major relevant areas of international tax law including offshore voluntary disclosures (in fact, we are one of the few firms which advised clients regarding all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP and 2014 OVDP, as well as Streamlined Procedures (Domestic and Foreign)).

This is why, if you are looking for a Miami FBAR lawyer, contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

2012 OVDP and Domestic Voluntary Disclosure

February 8, 2013/in Legal Notes, offshore voluntary disclosure tax attorney Los Angeles /by Manager

Sometimes a taxpayer who enters 2012 OVDP also has undisclosed domestic tax liability and the question arises with respect to how to handle this additional liability.

As was the case with the 2009 OVDP and the 2011 OVDI, the 2012 OVDP is available to taxpayers who have both offshore and domestic issues to disclose. The Voluntary Disclosure Practice requires an accurate and complete disclosure. Consequently, if there are undisclosed income tax liabilities from domestic sources in addition to those related to offshore accounts and assets, they must also be disclosed in the 2012 OVDP.

Therefore, when applying for the 2012 OVDP, the taxpayer should indicate on the Offshore Voluntary Disclosure Letter that he is also making a domestic voluntary disclosure.

However, these domestic tax liabilities are not going to be covered by the same IRS agent who will be in charge of your 2012 OVDP. Rather, such voluntary disclosures will go through the traditional IRS voluntary disclosure program and another agent will be assigned to the case to deal specifically with domestic issues. This further means that there is a separate application process for acceptance into the traditional IRS voluntary disclosure program in addition to applying to the 2012 OVDP.

Contact Sherayzen Law Office for Legal Help with Domestic and Offshore Voluntary Disclosures

If you have undisclosed offshore accounts and foreign income in addition to undisclosed U.S.-source income, contact Sherayzen Law Office for help. Our experienced international tax firm will thoroughly review your case, determine your options with respect to foreign and domestic voluntary disclosures, prepare all of the necessary legal documents and tax forms, and vigorously represent your interests during your negotiations with the IRS.

Posts

FBAR Financial Accounts Definition | International Tax Lawyer & Attorney

FBAR Financial Accounts Definition: FBAR Background Information

FBAR Financial Accounts Definition: Determining Reportable Accounts

FBAR Financial Accounts Definition: Broad Scope

FBAR Financial Accounts Definition: Bank, Securities and Investment Accounts

FBAR Financial Accounts Definition: Debit Cards and Prepaid Credit Cards

FBAR Financial Accounts Definition: Other Financial Accounts

FBAR Financial Accounts Definition: Retirement Plans

FBAR Financial Accounts Definition: Exceptions

Contact Sherayzen Law Office for Professional FBAR Help

Amato Case: 5-Years in Prison for Secret Russian Bank Accounts | FBAR News

The Amato Case: Factual Background

The Amato Case: IRS investigation and Criminal Prosecution

The Amato Case: Tax Evasion and FBAR Criminal Sentence

Contact Sherayzen Law Office for Professional Help With the Reporting of Your Undisclosed Foreign Bank and Financial Accounts

Adding Children to a Foreign Account and FBAR Issues | IRS FBAR Lawyer

FBAR Background

Common Four Patterns of Adding Children to a Foreign Account

How Adding Children to a Foreign Account Can Cause FBAR Problems

Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts and Foreign Income

Miami FBAR Lawyer | Foreign Accounts Tax Attorney

Miami FBAR Lawyer Definition: Legal FBAR Services Provided in Miami, Florida

Miami FBAR Lawyer Must Be an International Tax Lawyer

Miami FBAR Lawyer: the Local Ease-of-Communication Myth

Sherayzen Law Office is a Preferred Choice for Your Miami FBAR Lawyer

2012 OVDP and Domestic Voluntary Disclosure

International Tax Law Websites

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Posts

FBAR Financial Accounts Definition: FBAR Background Information

FBAR Financial Accounts Definition: Determining Reportable Accounts

FBAR Financial Accounts Definition: Broad Scope

FBAR Financial Accounts Definition: Bank, Securities and Investment Accounts

FBAR Financial Accounts Definition: Debit Cards and Prepaid Credit Cards

FBAR Financial Accounts Definition: Other Financial Accounts

FBAR Financial Accounts Definition: Retirement Plans

FBAR Financial Accounts Definition: Exceptions

Contact Sherayzen Law Office for Professional FBAR Help

The Amato Case: Factual Background

The Amato Case: IRS investigation and Criminal Prosecution

The Amato Case: Tax Evasion and FBAR Criminal Sentence

Contact Sherayzen Law Office for Professional Help With the Reporting of Your Undisclosed Foreign Bank and Financial Accounts

FBAR Background

Common Four Patterns of Adding Children to a Foreign Account

How Adding Children to a Foreign Account Can Cause FBAR Problems

Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts and Foreign Income

Miami FBAR Lawyer Definition: Legal FBAR Services Provided in Miami, Florida

Miami FBAR Lawyer Must Be an International Tax Lawyer

Miami FBAR Lawyer: the Local Ease-of-Communication Myth

Sherayzen Law Office is a Preferred Choice for Your Miami FBAR Lawyer

International Tax Law Websites

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Recent Posts