Foreign Bank Accounts Reporting 2013 Tax Updates Open Questions

 Underreporting = 84% $376 billion  Underpayment = 10% $46 billion  Non-Filing = 6% $28 billion

FBAR FATCA

 Required as part of Bank Act Since 1970s  US taxpayer with foreign accounts have two obligations: 1. answer “ Yes” on Form 1040, Schedule B 2. File Form TD F

 Required to be filed annually by 6/30  Mail to Detroit Service Center or drop off to IRS office  No extensions  Mailbox rule does not apply

 U.S. taxpayer  U.S. person has a financial account in a foreign country  U.S. person has as financial interest in, or signature of other authority over the financial account  The aggregate account balance > $10,000 (USD) at any time during the calendar year

 Bank account  Security and stock account

 Criminal penalties for willful violation: -- up to 5 years imprisonment and $250K fine  Civil penalties --non-willful violation : up to $10,000 for each violation --Willful violation: greater of $100K or 50% of the balance in the account at the time of violation  Both Civil and criminal penalties can be imposed

 Form 2004 and 2009, increased to 145%  FBAR related examinations increased 96%  FBAR penalty assessments increased from $4.2 million  2010 – increased to 173%  increased to 184%

 “The FATCA is an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts.”  FATCA was enacted in 2010

 U.S. taxpayer with specified foreign financial assets that exceed thresholds must reports those assets to IRS.  Beginning in 2013, foreign financial institutions will be requires to report directly to the U.S. government information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayer hold a substantial ownership interest

 File with U.S. income tax return  You have an interest in specific foreign financil assets  The aggregate value of your specific foreign financial assets in more than the reporting threshold that applies to you.

 Foreign bank accounts  Foreign mutual funds  Foreign hedge funds  Foreign private equity funds  Certain foreign insurance products

 Stock or securities issued by someone other than U.S. person  Any interest in a foreign entity  Any Financial instrument or contract that has an issuer that is other than a U.S. person  Foreign pensions and deferred compensation plans  Foreign trust and estates

 Unmarried taxpayer living in the U.S. - $50,000 on the last day of year or $75,000 at any time during the year  Married taxpayers-MFJ -$100,000 or $150,000  Married taxpayers- MFS -$50,000 or $75,000

 File with income tax return – Form 1040  If you do not have to file an income tax for the tax year, you do no need to file form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold.

 May result $10,000 civil penalty + $10,000 continuation penalty for each 30 days period after the taxpayer is notified by IRS (max $50K)  Exception if failure is due to reasonable cause and not willful neglect  Criminal penalties may apply

American Taxpayer Relief Act of 2012

Filing Status Married Individuals Filing Joint Returns and Surviving Spouses $20,000 Heads of Households$16,770 Unmarried Individuals/ Single$10,000 Married Individuals Filing Separate Returns $10, years older or Blind Additional $1,200 –MFJ $1,500 - Single

Tax RateMarried Filing Joint 10% up to $ %$17,851- $72,500 25%$72,501 - $146,400 28%$146,401- $223,050 33%$223,051 - $398,350 35%$398,351 -$450, %over $450,000 **Single =39.6% over $225,000

 Long term capital gain and qualified dividend = 15% tax rate  Capital loss deduction = $3000

 American Opportunity Tax Credit – max $2500  Tuition and Fee Deduction - $4000  Extended for five years to 2017

 1/1/2014 all American must have health insurance  Penalty  2014 is greater of $95 or 1% of household income  2015 is greater of $325 or 2% of household income  2016 is the greater of $695 or 2.5% of household income  Children = 50% of normal penalty up to $2250 for all children