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2018 FBAR Deadline in 2019 | FinCEN Form 114 International Tax Lawyer & Attorney

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The 2018 FBAR deadline is one of the most important deadlines for US taxpayers in the calendar year 2019. Since FBAR is not filed with the federal income tax return, many taxpayers may miss this deadline. This is why Sherayzen Law Office is publishing this notice to US taxpayers.

2018 FBAR Deadline: Background Information

FBAR is an acronym for 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 are filed separately from federal tax returns.

2018 FBAR Deadline: Pre-2016 FBAR Deadline

For the years preceding 2016, the US government chose a very strange deadline for FBARs – June 30 of each year. For example, 2012 FBAR was due on June 30, 2013. No filing extensions were allowed.

There was another surprising rule for FBAR deadlines. Prior to the mandatory e-filing of FBARs, taxpayers had to mail their FBARs to the specialized center in Detroit, Michigan. Unlike the rest of the tax forms, FBARs did not follow the “mailbox rule”. In other words, the filing of an FBAR was recognized by the IRS not upon the mailing of this form, but upon its receipt. For example, if FBAR was mailed on June 30, but received on July 1, it was not timely filed.

Federal tax returns, on the other hand, do follow the mailbox rule. This means that the IRS will consider the mailing date, not the date of receipt, as the date of the filing of a tax return. I should point out that, in practice, the IRS often confuses the rule and incorrectly issues failure-to-file penalties based on the date of receipt. This is why it is important to have a proof of mailing for your federal tax return.

The last FBAR that followed the June 30 deadline was 2015 FBAR; its due date was June 30, 2016. Nevertheless, due to the six-year FBAR statute of limitations, it is important to remember this history for the purpose of offshore voluntary disclosures and IRS FBAR audits. It will continue to be relevant as late as June 30, 2022.

2018 FBAR Deadline: Changes to FBAR Deadline Starting 2016 FBAR

Of course, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, taxpayers found it very difficult to timely comply with its requirements due to its very strange filing rules.

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.

2018 FBAR Deadline

Based on the current law, the 2018 FBAR deadline will be April 15, 2019. In other words, your 2018 FBAR has to be e-filed by and including that date. Automatic extension to October 15, 2019, is available.

Italian Bank Accounts | International Tax Lawyer & Attorney New York New Jersey

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US tax requirements concerning Italian bank accounts can be quite burdensome and complex. The chief three US reporting requirements applicable to Italian bank accounts are: worldwide income reporting, FBAR and FATCA Form 8938. Let’s discuss each of these requirements in more depth.

Italian Bank Accounts: US Tax Residents and US Persons

Before we delve into the discussion of these requirements, we need to identify who is required to comply with these requirements. This task is complicated by the fact that each of aforementioned three requirements has its own definition of a required filer.

Nevertheless, we can readily identify the categories of required filers shared by all three requirements. These categories correspond most closely, but not exactly to the concept of US tax residents. “US tax residency” is a broad term which includes US citizens, US permanent residents, residents who satisfy the Substantial Presence Test and individuals who declare themselves as US tax residents.

This definition of a US tax resident is fully applicable to the worldwide income reporting requirement and very closely corresponds to the concept of the Specified Person of Form 8938. FBAR’s concept of “US Persons”, however, does differ more significantly from the definition of a “US tax resident”, but only in more unusual circumstances. The most common differences arise with respect to the treaty “tie-breaker” provisions to escape US tax residency and persons who declare themselves tax residents of the United States.

Additionally, I wish to caution the readers that even the definition of US tax residents which I just stated has a number of important exceptions, such as visa exemptions (for example, an F-1 visa five-year exemption for foreign students) from the Substantial Presence Test.

In other words, the issue of who the required filer is, requires careful analysis of the facts and circumstances of an individual. This is definitely the job of your international tax attorney; it is just too dangerous to attempt to do it yourself.

Italian Bank Accounts: Worldwide Income Reporting

All US tax residents must report their worldwide income on their US tax returns. In other words, US tax residents must disclose both US-source and foreign-source income to the IRS. In the context of the Italian bank accounts, foreign-source income means all bank interest income, dividends, royalties, capital gains and any other income generated by these accounts.

Italian Bank Accounts: FBAR Reporting

The official name of the Report of Foreign Bank and Financial Accounts (“FBAR”) is FinCEN Form 114. FBAR requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over Italian bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000.

I wish to emphasize again that, while the term “US persons” is very close to “US tax residents”, it is not the same. The term “US tax residents” is slightly broader than “US persons”. I encourage you to search our website – sherayzenlaw.com – for articles concerning the definition of a US Person.

One aspect of the FBAR requirement, however, deserves a special mention here – the definition of an “account”. The FBAR definition of an account is substantially broader than how this word is generally understood in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.

Finally, no discussion of FBAR can be considered complete without mentioned the much-dreaded FBAR penalty system. It is complex and severe to an astonishing degree. The most feared penalties are criminal FBAR penalties with up to 10 years in jail (of course, these penalties come into effect only in the most egregious situations). The next layer of penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Finally, FBAR imposes penalties even on non-willful taxpayers.

All of the civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. One of the most important factors is the size of the Italian bank accounts subject to FBAR penalties. Additionally, since 2015, the IRS has added another layer of limitations on the FBAR penalty imposition. These self-imposed limitations of course help, but one must keep in mind that they are voluntary IRS actions and may be disregarded under certain circumstances (in fact, there are already a few instances where this has occurred).

Italian Bank Accounts: FATCA Form 8938

FATCA Form 8938 has been in existence since 2011. Unlike FBAR, it is filed with a federal tax return and considered to be an integral part of the return. This means that a failure to file File 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.

Form 8938 requires “Specified Persons” to disclose on their US tax returns all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency. For example, if he is single and resides in the United States, he needs to file Form 8938 as long as the aggregate value of his SFFA is more than $50,000 at the end of the year or more than $75,000 at any point during the year.

The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to do duplicate reporting on FBAR and Form 8938.

Specified Persons consist of two categories: Specified Individuals and Specified Domestic Entities. You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.

Finally, Form 8938 has its own penalty system which has far-reaching consequences for income tax liability (including disallowance of foreign tax credit and imposition of higher accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.

Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Italian Bank Accounts

Worldwide income reporting, FBAR and Form 8938 do not constitute a complete list of US reporting requirements that may apply to Italian bank accounts. There may be many more.

This is why, if you have Italian bank accounts, should contact Sherayzen Law Office. We have a highly knowledgeable international tax compliance team headed by an experienced international tax attorney, Mr. Eugene Sherayzen. We have helped hundreds of US taxpayers with their US international tax issues, including reporting Italian bank accounts, and We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

FBAR United States Definition | FBAR Lawyer & Attorney Minneapolis MN

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The United States is defined differently with respect to different parts (and, sometimes even within the same part) of the United States Code. There is a specific definition of the United States for FBAR Purposes. In this brief essay, I would like to discuss the FBAR United States Definition and explain its importance to FBAR compliance.

Importance of FBAR United States Definition to FinCEN Form 114

Before we discuss the FBAR United States Definition, we need to the context in which it is used and why it is important for US international tax purposes. FBAR is a common acronym for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114. It used to be known under a different name – TD F 90-22.1.

FBAR is part of Title 31, Bank Secrecy Act, but the IRS has administered FBAR since 2001. The IRS primarily uses FBAR not to fight financial crimes (which was its original purpose), but for tax enforcement. In particular, the IRS found that FBAR is an extremely useful tool for combating tax evasion associated with a strategy of hiding money in secret foreign bank accounts.

FBAR’s draconian penalties is what makes this form the favorite with the IRS, but much hated by US taxpayers. The penalties range from a jail sentence to civil willful penalties and even civil non-willful penalties which may exceed a taxpayer’s net worth.

It is precisely these penalties which make it absolutely necessary for US taxpayers to understand when they need to file FBARs. One of the aspects of this understanding is the FBAR United States Definition, which allows one to determine two things. First, the FBAR United States Definition is used to define the United States for the purposes of the Substantial Presence Test. Second, the FBAR United States Definition allows one to classify bank accounts as foreign or domestic for FBAR compliance purposes.

FBAR United States Definition

31 CFR 1010.100(hhh) contains the FBAR United States Definition. Under this provision, the United States is defined as: the States of the United States, the District of Columbia, the Indian Lands (as defined in the Indian Gaming Regulatory Act) and the territories and insular possessions of the United States. As of February 3, 2019, the US territories and insular possessions refer to: Puerto Rico, Guam, American Samoa, US Virgin Islands and Northern Mariana Islands.

Contact Sherayzen Law Office for Professional FBAR Help

If you have undisclosed foreign accounts, contact Sherayzen Law Office for professional help. We have successfully helped hundreds of US taxpayers around the world with their FBAR issues, and We can help You! Contact Us Today to Schedule Your Confidential Consultation!

Colombian Bank Accounts | International Tax Lawyer & Attorney Miami

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Even today many US owners of Colombian bank accounts remain completely unaware of the numerous US tax requirements that may apply to them. The purpose of this essay is to educate these owners about the requirement to report income generated by these accounts in the United States as well as the FBAR and FATCA obligations concerning the disclosure of ownership of Colombian bank accounts to the IRS.

Colombian Bank Accounts: Individuals Who Must Report Them

Before we discuss the aforementioned requirements in more detail, we need to determine who is required to comply with them. In other words, is every Colombian required to file FBAR in the United States? Or, does this obligation apply only to certain individuals?

The answer is very clear: only Colombians who fall within one of the categories of US tax residents must comply with these requirements. US tax residents include US citizens, US Permanent Residents, an individual who satisfies the Substantial Presence Test and an individual who properly declares himself a US tax resident. There are important exceptions to this general rule, but, if you fall within any of these categories, you need to contact an international tax attorney as soon as possible to determine your US tax obligations concerning your ownership of Colombian bank accounts.

Colombian Bank Accounts: Income Reporting

All US tax residents are subject to the worldwide income reporting requirement. In other words, they must disclose on their US tax returns not only their US-source income, but also their foreign income. The latter includes all bank interest income, dividends, royalties, capital gains and any other income generated by Colombian bank accounts.

The worldwide income reporting requirement also requires the disclosure of PFIC distributions, PFIC sales, Subpart F income and GILTI income. These are complex requirements which are outside the scope of this article, but US owners of Colombian bank accounts need to be aware of the existence of these requirements.

Colombian Bank Accounts: FinCEN Form 114 (FBAR)

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”) mandates US tax residents to disclose their ownership interest in or signatory authority or any other authority over Colombian bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. Every part of this sentence has a special significance and contains a trap for the unwary.

The most dangerous of these traps is the definition of an “account”. The FBAR definition of account is much broader than how this word is generally understood by taxpayers. For the purposes of FBAR compliance, this term includes checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, it is very likely that the IRS will find that an account exists whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset.

FBAR has its own intricate penalty system which is widely known for its severity. The FBAR penalties range from incarceration to willful and even non-willful penalties which may easily exceed the value of the penalized accounts. In order to circumvent the potential 8th Amendment challenges and make the penalty imposition more flexible, the IRS has implemented a system of self-imposed limitations, but it is a completely voluntary system (i.e. the IRS can, and in fact already did several times, disregard these limitations).

Colombian Bank Accounts: FATCA Form 8938

While Form 8938 is a relative newcomer (since tax year 2011), it has occupied a special place among the US international tax requirements. In fact, one could argue that it is currently as important as FBAR for US taxpayers with Colombian bank accounts.

The Foreign Account Tax Compliance Act (“FATCA”) gave birth to Form 8938, making it part of a taxpayer’s federal tax return. This means that a failure to file Form 8938 may render the entire federal tax return incomplete, and the IRS may be able to audit the return. Immediately, we can see the profound impact Form 8938 has on the Statute of Limitations for the entire tax return.

Given the fact that it is a direct descendant of FATCA, it is not surprising Form 8938’s primary focus is on foreign financial assets. Form 8938 requires a US taxpayer to disclose all Specified Foreign Financial Assets (“SFFA”) as long as he satisfies the relevant filing threshold. The filing thresholds differ depending on the filing status and the place of residence (i.e. inside or outside of the United States) of the taxpayer.

SFFA includes an enormous variety of foreign financial assets, including foreign bank and financial accounts. In fact, with respect to bank and financial accounts, Form 8938 is very similar to FBAR, which often results in double-reporting of the same assets. It is important to emphasize that Form 8938 does not replace FBAR, both forms must still be filed. In other words, US taxpayers should report their Colombian bank accounts on FBAR and disclose them again on Form 8938.

Form 8938 has its own penalty system which contains some unique elements. In addition to its own $10,000 failure-to-file penalty, Form 8938 directly affects the accuracy-related income tax penalties and the ability of a taxpayer to use foreign tax credit.

Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Colombian Bank Accounts

US international tax compliance is extremely complex. It is very easy to get yourself into trouble, and much more difficult and expensive to get yourself out of this trouble. If you have Colombian bank accounts, contact the experienced international tax attorney and owner of Sherayzen Law Office, Mr. Eugene Sherayzen. Mr. Sherayzen has helped hundreds of US taxpayers with their US international tax issues, and He can help You!

Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!