Schedule B of the 1040(A) tax forms gets right to the heart of FBAR and the issues facing foreign born individuals living and working in the United States on a green card, US Expats, and Wealthy foreign nationals who have an interest in foreign businesses, bank or investment accounts. Part III of Schedule B, question 7a asks “At any time during 2013, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country?” If your answer to that question is “yes” for any reason, it should raise an immediate red flag for you.
The IRS wants to know where the account is located and how much was in it. If the amount of any single account or the cumulative total of all of your offshore accounts ever exceeds $10,000 in a single year a second and larger red flag goes up. Income and account balances come and go, and it is not unusual for our clients to have accounts that exceed the $10,000 threshold at any point in time, while quickly returning to a lower number as bills are paid and life goes on. The IRS will look back up to 8 years, and any unreported foreign accounts can result in a 27.5% penalty on the “highest value” of the aggregate ccounts at any point over the past 8 years.
So, a client could have saved money for a down payment, accumulated $100,000.00 for that purpose, and accomplished their acquisition goal. Now, even though the account balance is far below $10,000.00, however the IRS can look back over the past history of that account, levy a penalty on unreported accounts of 27.5% at the highest balance ($100,000) resulting in a penalty of $27,500 on that $100,000 balance for an account or accounts that have a total value of less than $3,000.00 today.
Many clients are struggling to work through the aftermath of recent agreements between the IRS and international banking and tax authorities. Previously hidden assets are now “visible” to the IRS and there is a substantial exposure as a result. You need the accounting, tax and legal expertise of Allen Barron to help you work through these challenges to accomplish the best possible outcome for your unique situation.
