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Remember to File Your 2015 FBARs | FBAR Tax Attorney

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On June 17, 2016, the IRS again reminded U.S. taxpayers with foreign accounts to file their 2015 FBARs by Thursday, June 30, 2016. U.S. taxpayers have to file 2015 FBARs if they had financial interest in or signatory authority (or other authority) over foreign accounts with values which, in the aggregate (i.e. all accounts added together), exceeded $10,000 at any time during the calendar year 2015. The taxpayers who satisfied the FBAR threshold, should e-file their 2015 FBARs through the BSA E-Filing System website.

It is important to note that the number of FBAR filings has grown exponentially. According to FinCEN data, on average, there has been a seventeen percent increase per year during the last five years. In fact, in 2015, FinCEN received a record high 1,163,229 of 2014 FBARs. We can reasonably expect that the number of 2015 FBARs will beat last year’s record.

The growth in the number of FBARs is mainly caused by two factors. First, the greater awareness of the FBAR requirement is due to a series of IRS legal victories against foreign banks and offshore jurisdictions, starting with 2008 UBS case through a complete destruction of the Swiss bank secrecy in the Swiss Bank Program and even more recent criminal conviction of two Caymanian banks.

Second and probably the most important reason is the implementation of the Foreign Account Tax Compliance Act (FATCA) which requires foreign financial institutions to report foreign accounts owned by U.S. persons. Additionally, FATCA created a new filing requirement, IRS Form 8938. Unlike the FBAR, Form 8938 has to be filed with U.S. individual tax returns (the implementation of Form 8938 for business returns still has not occurred). This new requirement created a much greater awareness of the FBAR among the accountants who generally do not file FBARs for their clients due to the fact that FBARs carry criminal penalties.

Both of these factors will continue to play a great role in 2016 when the 2015 FBARs have to filed. Additionally, by June 30, a much greater of foreign banks will have delivered FATCA letters, further promoting FBAR awareness among U.S. persons who have to file 2015 FBARs.

Contact Sherayzen Law Office for FBAR Help

If you have undisclosed foreign accounts for which delinquent FBARs have to be filed or you need help with determining what needs to be filed for 2015 FBAR, contact the experienced international tax law firm of Sherayzen Law Office. Our talented team of tax professionals, headed by a highly-experienced FBAR tax attorney, Mr. Eugene Sherayzen, has helped hundreds of U.S. taxpayers around the world and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Foreign Life Insurance Policies – FBAR Reporting

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Foreign Life Insurance Policies are very popular around the world, especially in India, Germany and France (Assurance Vie accounts). Yet, very few U.S. taxpayers (especially H-1B holders and U.S. permanent residents) are aware of the fact that these policies may be subject to numerous and complex IRS tax reporting requirements in the United States. In this article, I would like to generally discuss the FBAR requirements applicable to foreign life insurance policies.

I will not be discussing here the requirements for a qualified foreign life insurance policy, because it is mostly irrelevant since the great majority of foreign life insurance policies would not be qualified policies.

Types of Foreign Life Insurance Policies

Before we start exploring which foreign life insurance policies (also known as Life Assurance Policies) are subject to the FBAR requirement, it is important to distinguish three general categories of foreign life insurance policies.

In the order of rising complexity, the first category of foreign life insurance policies consists of simple, straightforward life insurance policies with no cash surrender value, no income payments and no income accumulations. The taxpayer simply makes the required premium payments and he expects a fixed-amount payout at death.

The second category of foreign life insurance policies has a cash-surrender value, but no income. The taxpayer pays a premium and expects a certain payout when the policy is surrendered or matures. The cash surrender value grows over time mostly through premiums and bonuses which would be paid out when the policy is surrendered. There is also a potential death benefit.

Finally, the third category of foreign life insurance policies has a cash-surrender value with investments and/or income. There is a large variety of investment life insurance policies. The most common arrangement, though, is where the taxpayer pays a relatively large initial premium which is invested in foreign mutual funds; the growth in mutual funds will usually determine the cash-surrender value. Oftentimes, the cash-surrender value in these policies is tax-free if certain requirements are met (for example, Assurance Vie policies in France or certain life insurance policies in India).

In some cases (for example, in Malaysia), an investment foreign health insurance policy may be tied into a life insurance policy.

FBAR – FinCEN Form 114

FinCEN Form 114 – Report of Foreign Bank and Financial Accounts (commonly known as FBAR) is the most important US tax information return. FBAR must be filed by a US tax resident if the aggregate value of foreign financial accounts (in which this US person has financial interest and/or over which this US person has signatory authority) exceeds $10,000 at any time during the calendar year. The 2015 FBAR must be received by the IRS by June 30, 2016 without any extension possible; however, starting the reporting for the calendar year 2016 (i.e. 2016 FBAR) the FBARs are due on April 15 with an extension possible.

The importance of FBAR stems from the draconian FBAR penalties. Unlike many other information returns, FBAR imposes penalty not only on the willful non-filing, but also on the non-willful failure to file the FBAR. The willful FBAR penalties range from criminal penalties with up to 5 years in prison to up to $100,000 penalty per account per year. The FBAR statute of limitations is six years, which means that up to six years maybe subject to a penalty (though, usually it would be 2-4 years).

Foreign Life Insurance Policies and FBAR Reporting

Foreign life insurance policies must be reported on the FBAR if they have a cash-surrender value. Therefore, foreign life insurance policies that fall into categories two and three described above are always reportable. Investment foreign life insurance policies promoted by national governments (such as Assurance Vie accounts in France) are reportable even if they are considered to be held by a foreign trust (such as Superannuation Accounts in Australia).

The first category of foreign life insurance policies I listed above (i.e. life insurance policies without any cash-surrender value) are not likely to be reportable, but there are exceptions.

The determination of whether your foreign life insurance policies are reportable on the FBAR should be made by an international tax attorney; I strongly discourage any attempt by US taxpayers to make this determination without legal assistance.

Foreign Life Insurance Policies and Other Reporting Requirements

It is important to note that other US reporting requirements may apply to foreign life insurance policies. Examples include FATCA Form 8938, PFIC compliance, foreign trust reporting, et cetera.

Contact Sherayzen Law Office for Help With Foreign Life Insurance Policies

If you have foreign life insurance policies, contact Sherayzen Law Office for assistance as soon as possible. Foreign life insurance policies can be extremely complex and the US reporting requirements associated with them vary from country to country. Sherayzen Law Office has accumulated tremendous experience in dealing with foreign life insurance policies from Australia, Canada, New Zealand, Europe and Asia. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

No FBAR Penalty Option

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No FBAR Penalty is the result that every taxpayer wishes to achieve. Indeed, having no FBAR penalty is a realistic objective, but only in certain situations. One of such situations is currently offered by the IRS through Delinquent FBAR Submission Procedures.

History of the IRS Procedures Regarding No FBAR Penalty Option

There is a relatively long history behind the option that taxpayers with delinquent FBARs would be charged no FBAR penalty. It comes from the traditional link between income tax noncompliance and the imposition of an FBAR penalty. Prior to 2009 OVDP, the No FBAR Penalty option was unofficial, but very much part of the IRS tradition in situations where a taxpayer would not have any additional U.S. tax liability as a result of his voluntary disclosure of foreign accounts.

The rules for the 2009 IRS Offshore Voluntary Disclosure Programs (“2009 OVDP”) finally officially recognized the No FBAR Penalty option in the answer to Question #9. The FAQ #9 also for the first time properly stated the legal philosophy behind the No FBAR Penalty option: “The purpose for the voluntary disclosure practice is to provide a way for taxpayers who did not report taxable income in the past to voluntarily come forward and resolve their tax matters.” Hence, if a taxpayer “reported and paid tax on all taxable income but did not file FBARs, do not use the voluntary disclosure process.” Rather, the taxpayer was urged to file the FBARs directly with the explanation of why the FBARs were filed late.

Both, the 2011 IRS Offshore Voluntary Disclosure Initiative (“2011 OVDI) and 2012 Offshore Voluntary Disclosure Program (“2012 OVDI) again reinforced the No FBAR Penalty with FAQ #17: “The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.”

On June 18, 2014, with the creation of 2014 Offshore Voluntary Disclosure Program (“2014 OVDP”), the IRS removed the 2014 OVDP FAQ #17 and replaced it the modern official No FBAR Penalty option called Delinquent FBAR Submission Procedures.

No FBAR Penalty Option under the Delinquent FBAR Submission Procedures

Under the Delinquent FBAR Submission Procedures, the IRS promises not to impose FBAR penalties for the failure to file the delinquent FBARs if three requirements are met: (1) the taxpayer properly reported on his U.S. tax returns (and paid all tax on) the income from the foreign financial accounts reported on the delinquent FBARs; (2) the IRS has not contacted the taxpayer previously regarding an income tax examination (civil or criminal) for the years for which the delinquent FBARs are submitted; and (3) the IRS has not previously requested from the taxpayer the FBARs for the years for the years for which the delinquent FBARs are submitted.

If all three requirements are met, the taxpayers can pursue Delinquent FBAR Submission Procedures by filings the delinquent FBARs with FinCEN directly. A statement explaining why the FBARs are filed late must be provided to the IRS.

Contact Sherayzen Law Office to Explore Your No FBAR Penalty Options

Delinquent FBAR Submission Procedures is probably one of the most popular No FBAR penalty options, but it is a limited one because it is not always possible to comply with all three of the formal requirements of the Procedures. Thankfully, these Procedures are not the only No FBAR Penalty Option offered by the IRS.

This is why, if you have undisclosed foreign accounts, you should contact the experienced international tax law firm of Sherayzen Law Office. We will thoroughly explore your case, analyze your No FBAR penalty and voluntary disclosure options, choose the disclosure route that best balances your risks and rewards, prepare all of the required legal documents and tax forms, and defend your case against the IRS. We have helped hundreds of U.S. taxpayers around the world and we can help You!

Contact Us Today to Schedule Your Confidential Consultation!

2015 FBAR (FinCEN Form 114) Due on June 30, 2016

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2015 FBAR is one of the most important tax information returns required by the IRS this year. While the 2015 FBAR is not the most complicated form, it is definitely the one that is associated with the most severe penalties.

2015 FBAR History

The FBAR is an abbreviation for the Report of Foreign Bank and Financial Accounts (the “FBAR”). The current official name of the FBAR is FinCEN Form 114 (prior to mandatory e-filing, Form TD F 90-22.1 was the name of the FBAR).

Many of my clients are surprised to learn that FBAR is a tax information return with a long history, dating back to the late 1970s. Its origin lies in the Bank Secrecy Act (31 U.S.C. §5311 et seq.) and it was originally meant to combat money laundering. However, after September 11, 2001, the FBAR enforcement was turned over to the IRS and it became a tax-enforcement tool of heretofore unimaginable power due to its heavy penalties.

Who is Required to File 2015 FBAR

The Department of Treasury (the “Treasury”) requires that an FBAR is filed whenever a US person has a financial interest in or signatory authority over foreign financial accounts and the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. If you had such a situation in 2015, then you must seek an advice from an FBAR lawyer on whether you need to file the 2015 FBAR.

2015 FBAR Deadline

2015 FBAR must be e-filed with the IRS by June 30, 2016; there are no extensions available – the 2015 FBAR must be received by the IRS no later than June 30, 2016. Note: FBAR due date now coincides with due dates for tax returns. 

Consequences of Failure to File Your 2015 FBAR Timely

If your 2015 FBAR is not timely filed, then it will be considered delinquent and might be subject to severe FBAR civil and criminal penalties, depending on your circumstances. It is also important to point out that an incorrect or incomplete 2015 FBAR will also be considered delinquent with the higher possibility of imposition of the FBAR’s draconian penalties.

Multiple Years of FBAR Delinquency

If you did not file the FBARs in the prior years and you were required to do so, this situation is extremely dangerous (especially in our FATCA-dominated world) and may result in imposition of multiple FBAR penalties. This is why you should seek advice of an experienced FBAR lawyer as soon as possible

Contact Sherayzen Law Office for Assistance with Your FBAR Compliance

If you have not filed your FBARs previously and you were required to do so, contact Sherayzen Law Office for help as soon as possible. Our team of experienced tax professionals, headed by attorney Eugene Sherayzen, has helped hundreds of US taxpayers around the world to lower and even eliminate their FBAR penalties. We can help You!

Contact Us NOW to Schedule Your Confidential Consultation

FBAR Attorney

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If you are looking for an attorney to help you with your FBAR issues, contact Sherayzen Law Office.

Sherayzen Law Office is an international tax and business law firm that specializes in FBAR compliance among other international tax issues. Our office is located in Minneapolis, but we have clients throughout the United States and overseas.

Helping U.S. taxpayers who have FBAR issues is one of our most important specializations. FinCEN Form 114 formerly Form TD F 90-22.1, the Report of Foreign Bank and Financial Accounts (commonly known as the “FBAR”), is not the most complex form in the Internal Revenue Code, but it is definitely one of the most severe forms when it comes to penalties. A lot of U.S. taxpayers either do not know about this form, do not realize how important it is, or they already realized that they should have filed the FBAR earlier and do not know how to get out of the vicious cycle of non-compliance.

Our international tax firm is highly experienced in these delinquent FBAR matters, including the voluntary disclosure process. We will analyze your case thoroughly, determine your FBAR liability and identify your voluntary disclosure options. Once you make your choice with respect to your voluntary disclosure option, we will create and implement a customized case strategy, including preparation of all of the necessary tax forms and legal briefs.

Clients of Sherayzen Law Office enjoy the personal attention of Mr. Eugene Sherayzen, the firm’s owner, who will be working with you throughout the process in order to make sure that your case proceeds efficiently. He is easily accessible by phone and email throughout the case.

We believe that each case is unique, especially in such complex matters as FBAR voluntary disclosure. Our international tax law firm will be looking for the unique features in your particular fact pattern to determine the most expeditious and favorable manner to proceed with your case.

One the biggest problems facing U.S. taxpayers in finding the right FBAR representation at this point is the tendency among some accounting firms and even law firms to disregard the special circumstances of a case and automatically channel their clients into the 2012 OVDP (Offshore Voluntary Disclosure Program) at the highest penalty rates with the idea that they will figure out later what the strategy of the case will be and whether the taxpayer needs to opt-out of the program.

We believe that this is an incorrect approach which completely disregards the individual circumstances of each taxpayer and may subject them to an unnecessarily high penalties and additional legal and accounting fees. Each case should be thoroughly analyzed at the beginning of the process before the taxpayers enters the 2012 OVDP, not in the middle or even at the end of the voluntary disclosure.

Contact Sherayzen Law Office for Help with FBARs

If you have any undisclosed foreign financial accounts, contact Sherayzen Law Office as soon as possible for an individual, comprehensive, creative and ethical approach to your voluntary disclosure process.