What You Need to Tell the IRS About Your Offshore Investments The U.S. Offshore Tax Vendetta Offshore Investments: Multiple Reporting Obligations Penalties for n-disclosure What s Reportable? What s Signature or 'Other' Authority? Who Must File? What Are the Filing Thresholds? Reporting Income from Offshore Investments Types of Foreign Assets and Reportability The "Offshore Voluntary Disclosure Program
The U.S. Offshore Tax Vendetta U.S. Taxes Global Income of Citizens and Permanent Residents, Wherever They Live Must Report Offshore Accounts and Much More Offshore Bank Secrecy from the Taxman Qualified Intermediary Rules UBS and Its Aftermath Global Network of Tax Information Exchange Agreements FATCA Forces Foreign Financial Institutions to Enforce U.S. Tax Rules FATCA Brought Largest-Ever Expansion in Offshore Reporting Obligations IRS Offshore Voluntary Disclosure Programs
Offshore Investments: Multiple Reporting Obligations Report Interests in, or Authority Over All Foreign Accounts with Aggregate Value of $10,000 or More (Form TD F 90-22.1 and Schedule B). Additional Reporting Regime for Foreign Financial Assets with Aggregate Value of $50,000 or More (Form 8938) Separate Reporting Obligations for U.S. Taxpayers with Interests in Foreign Trusts, Corporations, Mutual Funds, etc.
Penalties for n-disclosure: Form TD F 90-22.1 Negligent Violations: $500 To $10,000 Civil Penalty per Unreported Account per Year. Possible Exception if Income Reported and Account Later Reported. Civil Penalty for Willful Violations: Up to $100,000 Fine or 50% Balance of Unreported Accounts Willful Violations: $500,000 Fine, Five Years Imprisonment, or Both Standard to Prove Willfulness is High
Penalties for n-disclosure: Form 8938 Civil Penalty: $10,000 Failure to File by Due Date of Tax Return (Including Extensions) or for Incomplete or Inaccurate Form 8938 Additional Penalties of $10,000 Monthly up to $50,000 if IRS Provides Formal tice of Violation Penalties Waived for Reasonable Cause for not Reporting Asset on Form 8938
Form TD F 90-22.1 t a Tax Return FBAR Must Be Received by June 30. Extensions. FBAR Must Be Sent to the Treasury Department, t the IRS FBAR Penalties Can't Be Contested In Tax Court. Must Pay Penalty and Sue for Refund in U.S. District Court. FBAR Penalties Can't Be Discharged in Bankruptcy FBAR Shared With State, Local, or Foreign Law Enforcement Agencies
What s Reportable on Form TD F 90-22.1? Any Foreign Bank, Securities, or Other Financial Accounts with Aggregate Value of $10,000 or more, Including: Savings, Demand, Checking Deposit, Mutual Fund, Time Deposit, Precious Metals, Debit Card, or Prepaid Credit Card Accounts Life Insurance or Annuity Contracts with Cash Value Any Other Account with a Financial Institution or Person Engaged as a Financial Institution
Form TD F 90-22.1: What s Signature or 'Other' Authority? Signature Authority. You Control the Disposition of Money or Other Property in Account with Your Signature (Singly or in Combination with Others) Other Authority. You Control the Account without Signature Authority or a Financial Interest. Example: Power Of Attorney, minee, or Holder of Legal Title
Who Must File Form TD F 90-22.1? U.S. Citizens or Permanent Residents ("Deemed Residence" Rules) A Domestic or Foreign Partnership, Corporation, or LLC (50% Rule) A Domestic Estate or Trust (50% Rule) A Foreign Disregarded Entity Domestic and Foreign Entities Must Also Disclose Foreign Accounts on Respective Tax or Information Returns (e.g., Form 1120)
Form 8938 Filing Requirements "Specified Foreign Financial Assets" U.S. Taxpayers Must Report: Financial Accounts Maintained at Foreign Financial Institutions Foreign Securities not Held Through Investment Account Any Interest in a Foreign Entity Any Financial Instrument or Contract with a Foreign Counterparty
. Filing Status Unmarried or Married Filing Separately Married Filing Jointly Unmarried or Married Filing Separately Married Filing Jointly Form 8938 Filing Thresholds Living In Value Last Day of Yr. Value Any Day of Yr. USA $50,000 $100,000 USA $100,000 $200,000 Foreign Country Foreign Country $200,000 $400,000 $400,000 $600,000
Reporting Income from Offshore Investments Schedule B: Interest and Ordinary Dividends Schedule D: Capital Gains or Losses Dividends / Capital Gains May Be Eligible for 15% Tax Applies to Income for Account in Your Name or Held by Legal Entity Taxed As Grantor Trust or Disregarded Entity. Reporting / Tax Treatment Varies for Foreign Corporation or Partnership
Types of Foreign Assets and Reportability. Financial (accounts at foreign financial institutions Financial account held at a foreign branch of a U.S. financial institution Financial account held at U.S. branch of foreign financial institution Form 8938 Form TD F 90-22.1
Types of Foreign Assets and Reportability [continued]. Foreign financial account for which you have signature authority Foreign securities in financial account at foreign financial institution Form 8938 Form TD F 90-22.1, unless you otherwise have a financial` interest in the account Account reportable but not contents of account, subject to exceptions Account reportable but not contents of account Foreign stock or securities not in a financial account
Types of Foreign Assets and Reportability [continued]. Foreign partnership interests Indirect interests in foreign financial assets through an entity Foreign mutual funds Domestic mutual fund investing in foreign securities Form 8938 Form TD F 90-22.1 if 50% beneficial owner
Types of Foreign Assets and Reportability [continued]. Foreign assets in IRA or tax qualified retirement plans Foreign accounts, other foreign investment assets held by grantor trust Foreign insurance or annuity contract with cash-value Foreign hedge & private equity funds Form 8938 Form TD F 90-22.1, both foreign accounts and foreign non-account investment assets, foreign accounts only
Types of Foreign Assets and Reportability [continued]. Foreign real estate held directly Foreign real estate held through foreign entity Foreign currency held directly Form 8938 Form TD F 90-22.1, but the foreign entity itself is a specified foreign financial asset and its maximum value includes the value of the real estate
Types of Foreign Assets and Reportability [continued] Precious metals held directly Personal property, held directly, such as art, jewelry, and other collectibles Social Security-type benefits provided by foreign government Form 8938 Form TD F 90-22.1 Source: http://www.irs.gov/businesses/article/0,,id=255986,00.html
The "Offshore Voluntary Disclosure Program Must Make Full Disclosure of All Offshore Accounts for Previous 8 Years Initial Examination Conducted by IRS Criminal Investigation Division Must File All Back Tax Returns / Required Disclosure Forms / Pay Any Unpaid Taxes for Those Years Must Pay 27.5% of Highest Aggregate Balance in Foreign Accounts in 8 Year Period Some Taxpayers Eligible for Lower Penalties Avoids Additional Civil and Criminal Penalties
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