Many American citizens are in the dark about the myriad of tax laws surrounding their finances. This is especially true when it comes to foreign financial accounts. The IRS has moved to combat banking secrecy abroad and is now in cooperation with foreign entities to ensure that citizens are above board with their tax status. Anyone that meets the minimum requirements and fails to submit the correct form can face monetary penalties. The Report of Foreign Bank and Financial Accounts (FBAR) form is technically a disclosure document that is separate from all tax forms. While you won’t face tax evasion penalties, the fine can cost citizens $10,000 a year for every foreign account. Wow! Many citizens are punished due to legal ignorance or for common mistakes.
Common FBAR Mistakes
Often times, people are assigned penalties due to mistakes and misunderstandings. As the premier group of tax attorneys in Maryland, JDKatz is here to help you navigate the complex minefield that is tax reporting. Our tax preparation services will ensure that these common mistakes don’t happen:
- Failing To File. The most major and avoidable mistake people make is not filing in the first place. Some citizens willfully commit tax fraud by concealing
their foreign accounts from the watchful eyes of our Internal Revenue Service. Most Americans, however, are simply unaware of their obligation to file FBAR. Most times, US citizens with foreign family members, recent immigrants, and so on are the violators of this disclosure. In 2004, Congress amended their laws to introduce more punitive consequences for people violating the FBAR requirements.
- Not disclosing everything. Many people will disclose foreign bank accounts, but that isn’t enough! Other entities such as mutual funds, life insurance policies, and more investment accounts. To figure out exactly what classifies as a foreign financial account, contact our professionals now! Another interesting development is the IRS’ policy declaring that virtual currency (such as Bitcoin) does not qualify for FBAR disclosure. However, this could change in the near future!
- Misunderstanding the minimum threshold. The requirements for disclosure are quite complicated and can often be the doom of many Americans. To start, the minimum value required for reporting is US$10,000. The IRS describes this amount as determined on an aggregate basis. Essentially, the highest amount of each of your accounts at any one time during the calendar year is counted. If one account held a top balance of $4,000 in February and another held $7,000 in October, that still meets the minimum requirements. Additionally, every account must be reported regardless of balance size. This means that:
- If you exceed US$10,000 in a calendar year, all accounts must be reported. Accounts with little monetary stock will still be required.
- If you have signature authority with corporate accounts that surpass the minimum threshold, your personal accounts will also need to be reported.
Many Americans take pride in their tax reporting abilities. However, when dealing with foreign accounts, things can quickly become too complicated to properly accomplish. When that happens, professional tax preparations can be life saving. If you’re in need of a top-notch tax attorney in Maryland, look no further! Our experts are ready to help you handle all of your finances to create a stress-free environment. Next week, we’ll look at more common FBAR mistakes that people make and cover the IRS’ stance on tax fraud. JDKatz is here to exceed your high expectations. Contact us today for a free consultation!