Sunday, January 18, 2015

Tax tips for those with money in foreign bank accounts

Holly Nicholson for NewsObserver.com writes Q. We are U.S. citizens but found work in another country late last year. We bought a house and to do so, we sold stock in our U.S. brokerage account, transferred money to our U.S. checking account and then to our foreign bank account. Then within a few days, the money went into an escrow account for our down payment.
While at my mom’s for Christmas my brother-in-law joked that we’d better make sure we report money in any foreign bank accounts valued at $10,000 or more or face criminal charges. He’s kind of a know-it-all, but I must admit that he is pretty smart. I acted like I knew what he was talking about but I haven’t a clue. Do we need to report this account even though it was only worth over $10,000 for a few days and is now under $2,000? We usually use a tax preparation software and had planned to continue to do so but maybe we need to hire a tax professional this year.
A. You probably wouldn’t face criminal charges for unknowingly not reporting a foreign bank account, but the penalties are stiff. A thank you to your b-in-law for the heads up may be good karma since you referred to him as a know-it-all, he probably saved you a lot of money. You will need to file a Foreign Bank Account Report for 2014 and in any year in which you have financial interest in or signature authority over a foreign account with an aggregate value of over $10,000 at any time during the calendar year. The report must state the highest value of the account during the tax year. You may also need to report these assets on IRS Form 8938. Form 8938 is to be filed with your tax return while the FBAR is filed separately and has a due date of June 30. There are no extensions for the FBAR and all FBARs must be filed electronically. Civil penalties for non-willful FBAR violations can be imposed up to an amount of $10,000 per violation. The penalty for willful violations can be up to the greater of $100,000 or 50 percent of the account balance per violation. Criminal penalties can result in fines of up to $500,000 and imprisonment of up to 10 years and may be imposed in conjunction with the civil penalties.
The FBAR filing requirement is part of the U.S. Financial Crimes Enforcement Network or FinCen and the actual form on which to file is FinCen Form 114. It’s fairly straightforward even though it has 19 pages of instructions, the form itself is only six pages in length. Part I is basic information about yourself (and spouse). Part II is where you will list any foreign assets held individually, and Part III is where you list any joint foreign assets. Part IV is used to list any assets in which you have no financial interest but have signature authority.
I agree that this would probably be a good year to hire a professional to assist with your 2014 tax preparation.  

Read more here: http://www.newsobserver.com/2015/01/17/4478523/money-matters-tax-tips-for-those.html?sp=/99/104/#storylink=cpy

0 comments:

Post a Comment