DIRECTIONS FOR FILING FBAR (FORM 114) FOREIGN FINANCIAL ACCOUNT REPORT ON LINE - THIS IS DUE 6/30/15 FOR 2014

You can download step by step directions for filing the Form 114 (FBAR) to report your foreign financial accounts HERE   If you need help filing this form or want a CPA/Attorney  to file the form for you email us at ddnelson@gmail.com.   Also if you have questions on whether or not you should file the form or need to file ones for past years (the statute of limitations is six years which means if you are required to file the form you should file the past six years) please contact us. www.expatattorneycpa.com 

This means if you had combined highest balances in your Mexican Bank and Stock accounts of $10,000 US (when converted from Pesos) or more in 2014 you must file this form.  This includes accounts you own and those you just sign on but do not have any interest in!  Penalty for not filing this form is $10,000 or more per year and possible criminal penalties up to five years in prison.

NEW IRS TACTIC WILL LOCATE HIDDEN FOREIGN FINANCIAL ACCOUNTS IN MEXICO

Most expats in Mexico understand that under US FATCA law the banks in Mexico will be reporting the the foreign bank accounts held by US taxpayers and green card holders to the IRS.  Many have felt that their accounts with INTERCAM, MONEX and other non bank financial institutions in Mexico are safe from IRS scrutiny. Suddenly,  that is no longer the case.

The IRS has started to issue John Doe Court Subpoena's to US Banks that act as clearing houses (or correspondence banks) for foreign financial companies including stock brokers, money exchange companies, etc ordering them. to provide the IRS with records that will identify US taxpayers with

foreign financial accounts.

The IRS will then match the documents received pursuant to the subpoena with those who have filed FBAR forms (TDF 90-22.1) and for those who have not reported those foreign financial accounts will impose penalties of $10,000 or more and possibly seek criminal prosecution.  Recently the IRS convicted an 89 year old lady for not reporting her foreign bank accounts.

It does not appear the IRS has yet  started this procedure on Mexican accounts but no doubt they will begin soon. Therefore there is still time to file your FBAR forms for current and past years under the existing Offshore Disclosure Program or other methods that are available to avoid or reduce penalties.

We have helped well over a hundred expats living in Mexico catch up and successfully avoid or reduce penalties. We can also help you.  Visit our website at www.TaxMeLess.com  for more information and for help.

Remember your 2012 FBAR form must be received by the IRS prior to 6/30/13.  It cannot be extended.  In many situations you may have to also report those accounts on Form 8938 filed with your personal tax return also.

IRS Issues Explanation of When it will not charge Penalites for filing FBARs (TDF 90-22.1 forms) Late

FBAR filing requirement

As a United States citizen, you may be required to report your interest in certain foreign financial accounts on Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).  For information about FBAR reporting requirements, including reporting exceptions, seeForm TD F 90-22.1 and the IRS FBAR Frequently Asked Questions.

 How to file an FBAR

For information about how and where to file an FBAR, see Form TD F 90-22.1 and the IRS FBAR Frequently Asked Questions.

If you learn you were required to file FBARs for earlier years, you should file the delinquent FBARs and attach a statement explaining why they are filed late.  You do not need to file FBARs that were due more than six years ago, since the statute of limitations for assessing FBAR penalties is six years from the due date of the FBAR.  As discussed below, no penalty will be asserted if IRS determines that the late filings were due to reasonable cause.  Keep copies, for your record, of what you send.

  Possible penalties for failure to file FBAR

If you fail to file an FBAR, in the absence of reasonable cause, you may be subject to either a willful or non-willful civil penalty.  Generally, the civil penalty for willfully failing to file an FBAR can be up to the greater of $100,000 or 50 percent of the total balance of the foreign account at the time of the violation.  See 31 U.S.C. § 5321(a)(5).  Note that this penalty is applicable only in cases in which there is willful intent to avoid filing.  Non-willful violations that the IRS determines are not due to reasonable cause are subject to a penalty of up to $10,000 per violation.  There is no penalty in the case of a violation that IRS determines was due to reasonable cause.  For more information about the FBAR penalty, see Form TD F 90-22.1.  For information about the reasonable cause exception to the FBAR penalty, see IRM 4.26.16, Report of Foreign Bank and Financial Accounts (FBAR).

Example 3:  Same facts as Example 1, except that the highest balance in Taxpayer’s checking account exceeded $10,000 and, after reading recent press and thus learning of his FBAR filing obligations, Taxpayer filed an accurate, though late, FBAR.  The FBAR was accompanied by a written statement explaining why Taxpayer believed the failure to file the FBAR was due to reasonable cause.  The IRS will determine whether the violation was due to reasonable cause based on all the facts and circumstances.  Taxpayer’s explanation for why he failed to timely file an FBAR appears reasonable in view of the facts and circumstances of the case.  Since the IRS determined that the FBAR violation was due to reasonable cause, no FBAR penalty will be asserted.

Factors that might weigh in favor of a determination that an FBAR violation was due to reasonable cause include reliance upon the advice of a professional tax advisor who was informed of the existence of the foreign financial account, that the unreported account was established for a legitimate purpose and there were no indications of efforts taken to intentionally conceal the reporting of income or assets, and that there was no tax deficiency (or there was a tax deficiency but the amount was de minimis) related to the unreported foreign account.  There may be factors in addition to those listed that weigh in favor of a determination that a violation was due to reasonable cause.  No single factor is determinative.

Factors that might weigh against a determination that an FBAR violation was due to reasonable cause include whether the taxpayer’s background and education indicate that he should have known of the FBAR reporting requirements, whether there was a tax deficiency related to the unreported foreign account, and whether the taxpayer failed to disclose the existence of the account to the person preparing his tax return.  As with factors that might weigh in favor of a determination that an FBAR violation was due to reasonable cause, there may be other factors that weigh against a determination that a violation was due to reasonable cause.  No single factor is determinative.

Current IRS procedures state that an examiner may determine that the facts and circumstances of a particular case do not justify asserting a penalty and that instead an examiner should issue a warning letter.  See IRM 4.26.16, Report of Foreign Bank and Financial Accounts (FBAR).  The IRS has established penalty mitigation guidelines, but examiners may determine that a penalty is not appropriate or that a lesser (or greater) penalty amount than the guidelines would otherwise provide is appropriate.  Examiners are instructed to consider whether compliance objectives would be achieved by issuance of a warning letter; whether the person who committed the violation had been previously issued a warning letter or has been assessed the FBAR penalty; the nature of the violation and the amounts involved; and the cooperation of the taxpayer during the examination.

Example 4:  Taxpayer is a United States citizen who lives and works in Country B as a computer programmer.  Taxpayer has checking and savings accounts with a bank that is located in the city where he lives.  The aggregate balance of the checking and savings accounts is $50,000 during the tax year.  Taxpayer complied with Country B’s tax laws and properly reported all his income on Country B tax returns.  Taxpayer failed to file federal income tax returns and failed to file FBARs to report his financial interest in the checking and savings accounts.  After reading recent press and thus learning of his federal income tax return and FBAR reporting obligations, Taxpayer filed delinquent FBARs, reporting both foreign accounts, and attached statements to the FBARs explaining that he was previously unaware of his obligation to report the accounts on an FBAR.  Taxpayer also filed federal income tax returns properly reporting all income and no tax was due.  The IRS will determine whether the FBAR violation was due to reasonable cause based on all the facts and circumstances.  Taxpayer had a legitimate purpose for maintaining the foreign accounts, there were no indications of efforts taken to intentionally conceal the reporting of income or assets, and no tax was due.  Taxpayer’s explanation for why he failed to timely file an FBAR appears reasonable in view of the facts and circumstances of the case.  Since the IRS determined that the FBAR violation was due to reasonable cause, no FBAR penalty will be asserted.

 New reporting requirement for foreign financial assets

A new law requires U.S. taxpayers who have an interest in certain specified foreign financial assets with an aggregate value exceeding $50,000 to report those assets to the IRS.  This reporting will be required beginning in 2012.  Taxpayers who are required to report must submit Form 8938 with their tax return.  See Notice 2011-55  for additional information about this reporting requirement under IRC section 6038D.

Mexican Bankers May Give IRS Information on American's Financial Assets in Mexico

Read below the Reuters story explaining how the IRS is getting foreign bankers to disclose the details of all of their American depositors.  This process is likely to be followed in Mexico which has the world's second largest number of American taxpayers living, working and owning property there.  Past cases reveal that the IRS will pay substantial whistle blower finders fees to foreign bankers and financial professionals to reveal all data on their American clients. It will only get tougher in the future in Mexico to hide both financial assets and Mexican real estate and business interests.  READ ARTICLE HERE

What the article does not state, is the very probable possibility that this Banker is being paid huge whistle blower fees for revealing all of the information on his ex bank clients.  Those finders fees are large enough to allow the recipients to retire in luxury for the rest of their lives. Turning Americans with assets abroad into the IRS is extremely profitable.  See IRS Form 211 for the form used to turn in Taxpayers in exchange for handsome finders fees.

The IRS has special forms for reporting Mexican corporations, Mexican Fideicomiso Property Ownership, Mexican Bank Account and other Mexican Financial Assets which must be filed with your US tax return. Failure to file those forms  or filing them late can result in penalties of $10,000 or more and possible criminal prosecution. The "good old days" of not disclosing your income or property in Mexico and disappearing fast.