Posts Tagged ‘FBAR’

The FBAR Has Changed

Thursday, October 3rd, 2013

Tax professionals can now file FBARs (Form TD F 90-22.1) for clients. We have to have our client sign Form 114a authorizing the preparer to efile the FBAR. Today, when I went to file an FBAR for a client, I was greeted with a very colorful new FBAR. The form also has a new number: FINCEN Form 114.

The form has seven pages (groan). The data-entry portions are the same; however, there is now a pull-down menu on page 1 for the reason for late filing (where applicable):

Page 1 of New FBAR

Not shown on the pull-down menu is “Other Explanation.” You can then enter a lengthy explanation if need be.

There’s now also a place for tax professionals to enter their information when we file the form for clients; this is on page 7 of the form:

Page 7 of New FBAR

Unfortunately, many of the entry boxes uses pull-downs which don’t allow you to just type, say, “NV” for Nevada. Instead, you type an N (or an O) and then move the slider bar down or up to select Nevada. This is definitely annoying when you enter countries for foreign financial accounts.

FINCEN has said that they are working with the IRS and eventually we’ll be able to file FBARs through tax software. I’m likely going to take the over on anyone’s bets for when that will happen….

I Haven’t Filed my FBAR. What Should I Do?

Sunday, July 7th, 2013

It’s July 7th, and you suddenly realize that you haven’t filed your FBAR. You print it up, and have a letter of explanation, but:

  • You can’t file an FBAR using paper (it must be electronically filed using the BSA efile system); and
  • You need to attach a letter of explanation but the BSA efile system doesn’t allow that.

Jack Townsend of the Federal Tax Crimes Blog has a post that is directly on point as to what to do. You can efile, keep the back-up documentation (the letter of explanation), and wait for the IRS to contact you; or you can call the FINCEN BSA resource center (800-949-2732) and ask for an exemption from efiling and mail the form (once the exemption is granted). You would then attach the letter of explanation to the FBAR.

In any case, if you forgot your FBAR filing take care of this immediately. Penalties on the FBAR are draconian; this is not something to put off until tomorrow.

Mandatory efiling of FBARs Effective July 1st

Friday, June 28th, 2013

Effective July 1st, all FBARs–Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts–must be efiled. You must use the BSA efile system to efile FBARs. This includes amended FBARs.

(One exception would appear to be individuals coming into compliance within the Offshore Voluntary Disclosure Initiative or the Streamlined Disclosure; those required FBARs to be submitted on paper. Of course, this is the government making rules, so anyone looking into those programs at this date should likely get their tax professional to find out the answer. I sent an inquiry to the IRS but haven’t received a response yet. I’ll update this post when the IRS responds.)

One other current rule about the FBAR: Tax professionals currently cannot file an FBAR for clients; it’s against the rules. FINCEN (the Financial Crimes Enforcement Network), the government agency that handles FBARs, is looking into allowing 2013 FBARs (filed in 2014) to be filed by tax professionals. Until then, we can create the information that you need for the FBAR, but we cannot file it for you.

One piece of good news requiring the BSA efile system: It appears that it now works with most Internet browsers.

FBAR Deadline Is Now

Monday, June 24th, 2013

Almost every tax form uses a postmark deadline. For example, if you mail your tax return on April 15th (using certified mail, return receipt requested, of course), and the post office sends your return to Fresno via Fargo so it doesn’t get there for two weeks, your return is still timely filed. It was mailed by the deadline. Unfortunately, for every rule there’s an exception. The FBAR is where the exception can be very, very nasty.

What’s an FBAR? The FBAR is shorthand language for the Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1). If you have $10,000 in one or more foreign financial accounts, you must file an FBAR. This is determined by taking the maximum balance of each account at any time during 2012, summing the maximums, and comparing that sum to $10,000. If you reach that $10,000 number, you must file an FBAR.

Some examples of foreign financial accounts include bank accounts, securities accounts, and third-party payment accounts (e.g. Moneybookers/Skrill and Neteller). Online gambling sites are not considered foreign financial accounts.

You have two choices as to completing the FBAR. You can electronically file it using the BSA efile system or you can print the form and mail it to the Department of the Treasury. This form needs to be received by June 30th (for reporting 2012), and there are no extensions.

Since June 30th falls on a Sunday, the deadline is really Monday, July 1st, right? Wrong. This deadline isn’t extended, so if it is received at the PO Box in Detroit where FBARs are sent on Saturday, June 29th, it would likely be timely filed. It definitely will be considered timely filed if it is received on Friday, June 28th. That makes the true mailing deadline tomorrow, June 25th.

You can send it via FedEx, DHL, or UPS overnight; that would give you until Thursday, June 27th.

The good news is that many of my clients who file the FBAR have been able to use the BSA system without any problems this year. It appears that the system now works in most browsers (last year, it only worked in Internet Explorer). You get a receipt when you efile (which you should save, of course).

The penalties for willfully not filing the FBAR start at $100,000 per account or half the value of the account, whichever is greater. So if you have an FBAR filing requirement, this is something to take care of now. The form is not particularly odious, but the penalties are.

Kudos to Kenneth Ryskamp

Saturday, April 27th, 2013

Who is Kenneth Ryskamp? He’s a Senior Judge in the United States District Court for the Southern District of Florida. Judge Ryskamp was born in 1932, and has been a US District Court Judge since 1986 (and a Senior Judge since 2000). Why am I noting Judge Ryskamp? Because of a sentence he imposed on Thursday.

Mary Curran of Palm Beach, Florida inherited Swiss bank accounts from her husband. Those accounts had not been reported (and likely the interest not reported on tax returns). Her attorney, Roy Black, tried to get Mrs. Curran into the Offshore Voluntary Disclosure Program (OVDP) but her name had already been given to the IRS. She paid a large fine ($26 million); the Department of Justice brought criminal charges. She pleaded guilty to two false tax return charges. Judge Ryskamp wondered why:

Based on these facts, did it ever occur to the government to dismiss these charges. Instead, the government decided it had to make a felon out of this woman?

Judge Ryskamp gave Mrs. Curran one year of probation. Given Mrs. Curran could have faced six years at ClubFed, that sentence in itself was a huge win. But she got more good news a few moments later: The judge immediately revoked it! Her probation lasted all of five seconds. Judge Ryskamp noted:

This is really a tragic situation…It seems to me the government should have used a little more discretion.

The judge also suggested that Mrs. Curran request a presidential pardon, which he would endorse.

As Joe Kristan noted, the government goes after the accidental offenders with shotguns while slapping the wrists of some big-time offenders. Perhaps the IRS and DOJ will use some discretion in the future…but that’s probably asking too much.

News Coverage: Palm Beach Daily News, ABA Journal

When the IRS Changes the Rules Midstream in a Legal Matter…

Thursday, March 7th, 2013

Janet Novack has an interesting post in Forbes. It revolves around the Offshore Voluntary Disclosure Program.

The idea behind the OVDP is that a taxpayer who the IRS doesn’t know about who has (for example) secreted away funds in a foreign bank account (or accounts) overseas comes clean. He files amended tax returns, FBARs, pays a fine but does not face criminal prosecution. As Ms. Novack notes, the way it normally works is that a tax attorney will send a name and social security number to the IRS; the IRS will tell the attorney to go ahead or not to. The client (through the attorney) sends the IRS a detailed questionnaire; the IRS then sends a formal letter approving entry into the program.

All should go smoothly then, right?

Well, apparently not so for certain individuals who used Bank Leumi. The IRS has apparently sent rescission letters to some individuals who used Bank Leumi for hiding their funds. A tax attorney who I’ve met and highly respect, Robert McKenzie, is quoted in the piece, “I’m upset that I gave advice, relying on the government letter, only to find I couldn’t rely on my government to do it properly.’’

I suspect there will be significant legal ramifications from this. Consider if you are one of those individuals, and you are subsequently a subject of a criminal prosecution. I’m certain an argument will be made that the IRS cannot rescind the acceptance; that constitutes some form of “double jeopardy.” I’m not an attorney, so once again I’m sailing into waters I should avoid (well, I’m definitely not giving legal advice here). At minimum, how many tax attorneys are going to trust the IRS the next time?

When I see Mr. McKenzie later this year (he’s usually an instructor at a continuing education seminar I take), I’ll ask him about this. I suspect the words I hear will be the ones he uses to excoriate White Sox fans.


Sunday, February 24th, 2013

We get mail:

I moved to California in 2012, and earned just $5,000 while in California versus a lot of money outside of the state. Yet those robbers want me to pay based on my overall income. This can’t be right.

Each state has a different formula for part-year income tax. California calculates your tax based on all the income having been earned in California, and then multiplies this by the ratio of California income to total income. So if 5% of your income was earned in California, and the “total” tax would be (say) $100,000, your California tax would be $5,000. It’s not as simple as that–exemptions and deductions also figure into this–but that’s the general idea.

In any case, that’s how California determines the tax, so assuming your tax professional is doing it right you have to live with the results.

I am retired (70) & play poker as a hobby. I recently traveled to Oregon to play in Money added tournaments @ Wild Horse Casino. I won the first tourn played & received a W2G for just under $6000. This is a “first” for me (W2G). When paying my taxes, will I be able to write losses which are “not” proven w/ receipts (both online & casinos)? I am from neighbor Washington state (no state income tax).

Congratulations. If you keep a gambling log (a written gambling log should be kept for your live play; you can use an electronic log for online), you will be able to take your gambling losses up to the amount of your winnings as an itemized deduction on Schedule A. Note also that you may need to file an Oregon tax return for your winnings that are Oregon-source.

A written gambling log should contain the date, casino name, game played, table number (not needed for tournaments), start time, end time, and result. It should be contemporaneously written.

I play online poker from outside of the United States but will not qualify for the Foreign Earned Income Exclusion for 2012. I had over $60,000 in my Moneybookers account but never had $10,000 in any other account. Do I need to file an FBAR?

Moneybookers is considered a foreign financial account. Not only must you file an FBAR, it’s probable you will need to file Form 8938, too. This is a complex area of tax law; make sure you discuss this with your own tax professional. Note that the FBAR is filed separately from your tax return and is due by June 30th. There are no extensions allowed for filing an FBAR.

eFile an FBAR? Use Internet Explorer, Not Firefox or Chrome

Thursday, June 28th, 2012

Some of my clients have had problems efiling the FBAR on the BSA system. The FINCEN support group have confirmed that the system works only using Internet Explorer. So if you need to file an FBAR, use Internet Explorer, not Firefox or Chrome (or any other browser).

As a reminder, if you need to file an FBAR you have until Saturday, June 30th to file the form. Note that is a receipt deadline, so if you’re putting it in the mail do it now, not later.

IRS Announces New Procedure on RRSPs; Jaywalkers Apparently No Longer Subject to Firing Squad

Wednesday, June 27th, 2012

The IRS announced yesterday a new procedure to deal with “low compliance risk” taxpayers who have innocently not filed FBARs or tax returns noting their RRSPs (a Canadian retirement account similar to a 401(k) or IRA). While the full details have not been released (the plan will go into effect on September 1st), it appears that the IRS has heard the complaints from tax professionals and others regarding the “one size fits all” voluntary disclosure plan.

Of course, the devil is in the details but they look reasonable at this point:
- Taxpayers will need to submit delinquent tax return for the last three years;
- Taxpayers will need to submit delinquent FBARs for the last six years; and
- Pay any tax and interest due with the submission.

Note that to qualify for the plan your unpaid taxes will need to be less than $1,500 per year.

Once the full details are announced (probably in late August) I’ll report on them.

More: Roth Tax Updates, Janet Novack

FBAR Due Next Saturday, June 30th

Sunday, June 24th, 2012

Anyone with $10,000 in one or more foreign financial accounts (determined by taking the maximum balance of each account at any time during the year, summing the maximums, and comparing the sum to $10,000) must file Form TD F 90-22.1 (the FBAR). The form must be received on or before June 30th, so that means you need to take care of this now if this reporting requirement applies to you. There are no extensions available for the FBAR.

You can file the FBAR electronically; you start by registering here.

There are very large penalties for not filing an FBAR when you are required to do so. If you need to file an FBAR, this needs to be on your to-do list now, not later.

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