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FATCA COMPLIANCE & FBAR FILING

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International taxation has recently become an important part of the tax law. Every year, new tax regulations are enacted by the government. A U.S. citizen or green card holder whether living in the U.S. or outside the U.S. and holding account or asset offshore may be subject to report those assets to the IRS. The IRS is enforcing and is very strict on the application of the FATCA law especially after it’s enactment back in 2010, and after introducing the TCJA (Tax Cuts and Jobs Act) in 2017 in order to minimize the tax evasion caused by owning foreign financial assets.

The government has introduced voluntary disclosure programs known as “Streamlined Foreign Offshore Procedures” for expats taxpayers, and “Streamlined Domestic Offshore Procedures” for the taxpayers residing in the U.S. Such programs are intended for individuals who have compliance problems. These programs provide the majority of taxpayers who are in noncompliance of the law a less expensive, safer, and quicker way to get into compliance. Otherwise, noncompliance penalty is devastating and, in some cases, noncompliance may lead to criminal investigations.

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EXPERIENCED CPA | FBAR FILING AND FATCA COMPLIANCE SERVICES

We are experts in international tax preparations, FATCA Compliance, and FBAR reporting. Our mission is not only to resolve you tax issues and compliance problems but to provide insight and guidance on international tax law, in order to prevent non-compliance issues in the future.
Form 8938 (Statement of Specified Foreign Financial Assets):
  • Purpose of the Form: As discussed above, FATCA require U.S. taxpayer or green card holders who have financial assets outside the U.S., to report those assets. There are two sets of reporting requirements for those assets, one to the IRS under Form 8938 and the other is to FINCEN under the Form 114 or FBAR (discussed below).
  • Threshold: Under the Form 8938, a U.S. Citizen or green card holder must report their foreign financial assets attached to the tax return if the aggregate amount of those assets had reached a certain threshold. This threshold differs if the taxpayer was residing inside the U.S. or outside the U.S.
  • For Taxpayers Living Abroad. You must file Form 8938 if: The total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year for married filing jointly.
    Or if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year for any status other than married filing jointly.
  • For Taxpayers is Living in the United States: You must file Form 8938 if: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the year for married filing jointly.
    Or if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the year for any status other than married filing jointly.
  • Non-Compliance Penalty: Non- Compliance with the Form 8938 penalty is devastating, taxpayer may be subject a $10,000 failure to file penalty, also a penalty of up to $50,000 for failure to comply after receiving the IRS notice, and a 40% penalty on the tax attributable to the undisclosed assets.

Instruction of Form 8938

  • Understanding the form and filling it out is not easy. Tax Avenger is your go to tax expert to help you understand your tax situation and file Form 8938 for you.

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FBAR & FATCA Tax Services

There are many different types of tax problems that can be faced with the IRS and each has a unique process and procedure to resolve it. Tax Avenger has mastered all these processes and is here to help you.

Additional Reporting Forms For Offshore Financial Assets

FBAR (Report of Foreign Bank and Financial Account) / FINCEN Form 114
  • Who is Subject to FBAR?: U.S. persons residing inside or outside the U.S., which include U.S. citizens, resident aliens, estates and trusts, and domestic entities that have an interest in foreign financial accounts and meet certain reporting threshold.
  • Reporting Threshold: The reporting threshold is more $10,000 which represent the aggregate value of the foreign financial accounts at any time during the calendar year. In other words, if the person has more than one account and the value of the combined accounts had reached more than $10,000 at any one time during the year, than this person will be subject to the FBAR compliance requirement.
  • Signature Authority and Indirect Interest: If the financial assets are under another name and you have a signature authority on the account, or if you have an indirect interest on that account, in a way that your name is not legally on the account , but you are the one who makes the decisions on that account. Then you will be treated the same as the true legal owner of the account for the purposes of the FBAR.
  • Non- Compliance Penalty: Non-willful penalty is up to $10,000; willful penalty, up to the greater of 50% of the balance of the account or $100,000. These penalties are subject to inflation adjustments annually. In more advanced willful cases, the taxpayer may be subject to criminal procedure.

Instruction to report FBAR

     

  • Complying with the FATCA law and reporting your financial assets to FINCEN is the essence of our expertise. Get the peace of mind and let us handle it for you.
Form 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations):
  • Who is subject: This IRS has classified who must file the Form 5471 into five categories detailed in the instructions of the Form 5471 provided by the IRS. Generally, these categories include, U.S. Citizens and resident aliens, as well as U.S domestic corporation, partnerships, and trusts.
  • Purpose of the Form: The purpose of the form and its schedules is to report the financial figures of foreign corporations owned by U.S. taxpayers. The form is comparable to form 1120 (Tax form for C Corporation), which includes the statement of Profit and Loss, Balance Sheet, and Owners equity. In addition, the form reflects the transaction between the taxpayer and the corporation.
  • Non- Compliance Penalty: Failure to file or to comply with the Form 5471 is subject to substantial penalties. Which includes a $10,000 penalty imposed for each annual accounting period for the foreign corporation.
    The penalties can go up to a maximum of $60,000 if filing requirements are not compliant within 90 days after receiving a notice from the IRS.
    Also the exemption from filing are not available for U.S. taxpayers living outside the U.S.
  • Reporting your foreign business financials to the IRS using the Form 5471 is not a walk in the park. Tax Avenger has the accounting and tax experience to accurately comply with all the applicable tax regulations surrounding this form.
Form 14653 (Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures):
  • Purpose of the Form: A streamlined Filing compliance procedure is available for U.S. persons residing outside the U.S.. The purpose of this procedure is for the taxpayer to show that the noncompliance within the offshore is resulting from Non-willful act, so the taxpayer will report the unreported forms, and pay all the tax dues.
  • Eligibility Criteria of the SFOP ( Streamlined Foreign Offshore Procedures): : The streamlined procedures are only available to U.S. citizens residing outside the U.S., and who meet the Non Residency requirement.
    Non Residency Requirement:is defined as living outside the U.S. for at least 330 full days in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, and you must not have had a U.S. abode (a place of residence).
  • Filing Requirements for the Form 14653: Taxpayers must file three years back of the most recent delinquent tax return, and 6 years back of the FBAR.
  • Non- Compliance Penalty: A taxpayer who is eligible to use these Streamlined Foreign Offshore Procedures and who comply with all the instructions of the offshore procedures below, will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.
  • If you are an expat and are looking for an international tax expert in Michigan to accurately and correctly file your taxes. Tax Avenger is here to walk you through the compliance offshore procedure and fix all your noncompliance issues and file all unfiled taxes. Protecting you from possible substantial penalties and interest.
Form 14654 (Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures):
  • Purpose of the Form: the purpose of this form is to enable the taxpayer living inside the U.S. to report their foreign assets and clean their record by complying with the offshore compliance procedure. They need to show that the noncompliance within the offshore is resulting from Non-Willful act, so the taxpayer will report the unreported forms, and pay all the tax due. One important Note, is that the SDOP (Streamlined Domestic Offshore Procedures) is not available for delinquent tax return or non-filers, it is only available for amended  tax returns.
  • Filing Requirement for the Form 14654: Taxpayer must file 3 years back of the most recent delinquent tax return, and 6 years back of the FBAR.
  • Miscellaneous Offshore Penalty: The difference here is even though the taxpayer who has corrected their previous non-compliance situation and are now in compliance with all of the instructions of the offshore procedure and are not subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties. However, the taxpayer who are residing in the U.S. are subject to the miscellaneous offshore penalties.
    These miscellaneous offshore penalties are equal to 5% of the highest combined end of year balance of each year the taxpayer’s foreign financial assets that are subject to the miscellaneous offshore penalty.
  • Tax Avenger is proud to be one of the best tax firms in Wayne County in dealing with international tax requirements for U.S. taxpayers residing in the U.S. . The IRS is treating the U.S. taxpayer residing in the U.S. much more strictly than those residing outside the U.S. regarding offshore procedure compliance, we are here to help you, give us a call.

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