FBAR lawyers Orlando Archives - Sherayzen Law Office

Posts

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.

2020 FBAR Deadline in 2021 | FinCEN Form 114 International Tax Lawyer & Attorney

February 3, 2021/in FBAR Lawyers, Legal Notes /by Manager

The 2020 FBAR deadline is one of the most important deadlines for US taxpayers this calendar year 2021. What makes FBAR so important are the draconian FBAR penalties which may be imposed on noncompliant taxpayers. Let’s discuss the 2020 FBAR deadline in more detail.

2020 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.

2020 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. Due to the six-year FBAR statute of limitations, however, it is important to remember this history for the purpose of offshore voluntary disclosures and IRS FBAR audits. The 2015 FBAR’s statute of limitations will expire only on June 30, 2022.

2020 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 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.

2020 FBAR Deadline

Based on the current law, the 2020 FBAR deadline will be April 15, 2021. However, it is automatically extended to October 15, 2021.

The 2020 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 undisclosed 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!

2020 FBAR Criminal Penalties | FBAR International Tax Lawyers

November 28, 2020/in FBAR Lawyers, Legal Notes /by Manager

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!

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!

Does Location Matter? Retaining Orlando International Tax Attorney

December 3, 2013/in International Tax Attorney Minnesota Minneapolis, Legal Notes /by Manager

Retaining an international tax attorney is a very important decision. One of the frequent issues that my clients in Florida face is whether it is better to retain an international tax attorney in Orlando or in Minneapolis if you live in Orlando, Florida? If you were to search “Orlando international tax attorney”, Sherayzen Law Office, Ltd. (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in Orlando. The question is: should the geographical proximity of an international tax attorney play a role in the retainer decision?

The answer is “NO”! Obviously, in a case that involves a local matter, such as Florida sales tax issues, you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and an attorney familiar with local sales tax issues would be the best choice for handling a sales tax case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.

However, if you are searching for an Orlando international tax attorney because you have undeclared offshore accounts, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of offshore voluntary disclosures will become the most important factors in retaining an international tax attorney.

What if you have an international tax lawyer in Orlando, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax attorney in Minneapolis even if there is a lawyer in Orlando. Sherayzen Law Office provides professional legal expertise in international tax law that may be more helpful to you than a local attorney in Orlando.

Second, in addition to differences in personal qualities, the experience of the international tax attorney in the area of offshore voluntary disclosures and the ability to analyze the specific subject matter of the undisclosed accounts in the broader context of the voluntary disclosure (including potential strategies that may become available due to client’s specific facts) are very important factors in retaining the attorney and should override the attorney’s particular geography.

One of the most unique features about Sherayzen Law Office is that we can handle the entire case internally – both, the legal and the accounting sides of it. Most Orlando international tax attorneys in this area of law do not do that and rely on the outside accountant to provide such additional services. The outsourcing approach has various disadvantages, including potential leak of information, lack of close coordination between both sides of the case, increased possibility of missed opportunities and absence of the unity of goal among the professionals who are preoccupied with their respective areas only. The unique business model adopted by Sherayzen Law Office is aimed to reduce and eliminate such problems.

So, the next time you search for a Orlando international tax attorney, keep these issues in mind while retaining an attorney from Minneapolis or any other city.

Contact Sherayzen Law Office for Help With International Tax Issues

If you have any international tax issues with respect to undeclared foreign financial accounts or international tax compliance in general, please contact Sherayzen Law Office for comprehensive legal and tax help.

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

2020 FBAR Deadline in 2021 | FinCEN Form 114 International Tax Lawyer & Attorney

2020 FBAR Deadline: Background Information

2020 FBAR Deadline: Pre-2016 FBAR Deadline

2020 FBAR Deadline: Changes to FBAR Deadline Starting with the 2016 FBAR

2020 FBAR Deadline

Contact Sherayzen Law Office for Professional Help With Your FBAR Compliance

2020 FBAR Criminal Penalties | FBAR International Tax Lawyers

2020 FBAR Criminal Penalties: Background Information

2020 FBAR Criminal Penalties: Description

Contact Sherayzen Law Office for Help With Past FBAR Violations

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

Does Location Matter? Retaining Orlando International Tax Attorney

Contact Sherayzen Law Office for Help With International Tax Issues

International Tax Law Websites

Categories

Recent Posts

Tag Archive for: FBAR lawyers Orlando

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

2020 FBAR Deadline: Background Information

2020 FBAR Deadline: Pre-2016 FBAR Deadline

2020 FBAR Deadline: Changes to FBAR Deadline Starting with the 2016 FBAR

2020 FBAR Deadline

Contact Sherayzen Law Office for Professional Help With Your FBAR Compliance

2020 FBAR Criminal Penalties: Background Information

2020 FBAR Criminal Penalties: Description

Contact Sherayzen Law Office for Help With Past FBAR Violations

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

Contact Sherayzen Law Office for Help With International Tax Issues

International Tax Law Websites

Categories

Recent Posts