Leave No Asset Undeclared!
Foreign Bank Account Report (FBAR) SENDS WARNING TO INDIANS IN US
Perceiving that the United States has lost billions from tax evasion, the new and comprehensive tax law, the Foreign Account Tax Compliance Act or FATCA has been constructed to get back as much as it can. Taxpayers must utilize Form 8938, the Statement of Specified Foreign Financial Assets to comply with this Act. This resolve has been supplemented in an instrument called FBAR, an acronym for the Foreign Bank Account Report, an annual report that must be filed by appropriate taxpayers throughout the world including, of course, various categories by persons of Indian origin in the U.S., green card holders, resident aliens and U.S. citizens.
According to the IRS, people in the US are required to report if:
1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and,
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
Both Form 8938 and the Foreign Bank Account Report must be filled out and there are separate penalties for not filling out each form.
• DECLARE BEFORE YOU LEAVE: Declare assets acquired in India by NRI before moving.
• DECLARE AFTER YOU LEAVE: Declare assets acquired in India after moving.
• LEAVE NO RELEVANT ASSET UNDECLARED: Have a nice wide assortment of assets to declare: PFF accounts, mutual funds, shares held in demand account under FBAR; personal loans, or deposits in companies.
• DON’T FORGET THE UNEXPECTED FINANCIAL NICETIES: Don’t neglect any assets, inherited, received as a gift or family settlement
There can be criminal penalties for not reporting. According to a Forbes article on off-shore banking by Robert W. Wood, owners of offshore accounts must should realize that non-filing of FBAR form TD F 90-22.1 is particularly serious:
• CIVIL PENALTIES Not filing FBAR opens up larger penalties than ordinary non-filing penalties- up to $10,000 in civil penalties for non-“willful violation.” Willful penalties” can be $100,000 for each willful violation with the years of each counted as a separate infraction.
• CRIMINAL PENALTIES Jail sentences for false filing are possible since false filing is a felony. FBAR penalties are particularly strict- up to $5000 with a prison term up to ten years.
As a gentile gesture to the past, FATCA has granted taxpayers the privilege of disclosing unpaid tax on global income or undeclared foreign assets to their Offshore Voluntary Disclosure Program (OVDP). “Voluntary Disclosure” is possible to save yourself before prosecution begins. “Quiet Disclosure” is another remedy. This means you pay everything you didn’t pay. If you have reasons that you didn’t file FBAR (for instance, if you didn’t hear of it) – that could also be all right. Tax fraud and tax evasion are serious crimes.
FBAR is a behemoth lumbering towards every tax evader it can find. Taxpayers should be careful to leave no relevant asset undeclared!
Attorney and speaker, Seema Singh, is Managing Director, Singh Law LLC, with offices in Princeton, New Jersey and New York City. Her firm has more than 16 law practice areas including Business Law and Corporate Law. Ms. Singh blogs and speaks on business law issues like FATCA, FBAR, and other pressing financial trends. For more information, contact http://www.SSinghLaw.com