Are You An Expat with Late Tax Filing Problems?
Do you have questions about filing late tax returns? Do you have questions about FBAR and Foreign Account Reporting? If so, we can help. We have decades of experience helping people get in compliance with the IRS, and resolving complex FBAR and offshore account issues. With offices across the country, we will handle all filings and communication with the IRS and other governmental agencies.
FBAR (the Report of Foreign Bank and Financial Accounts) can be a confusing and difficult topic to understand. The attorneys and accountants at Freeman Tax Law will review your financial holdings, and help determine the best course of action for your specific situation.
Find out more about our Tax and FBAR services below - or contact us now to schedule a free, totally confidential consultation.
Where to Start if You Haven't Been Filing US Tax Returns
You should start by talking with us to identify how many years of back taxes you are going to need to file and what documentation you need in order to complete the necessary reports and returns to become compliant with the US tax authorities. Be aware that you may owe penalties for filing late or failing to pay taxes on time. Generally speaking, this will only be the case if you owed money on your US taxes, which will cause interest and penalties to accrue on the underpayment.
If you have not declared your foreign bank accounts, you may also need to file FBAR forms for the years you have missed. It is better to come forward first, rather than have the IRS find you through their own means.
The Penalties for Late Filers
There are two penalties for late filing. The failure to file penalty is 5% of unpaid taxes for each month after your filing due date up to a maximum of 25% of total unpaid taxes. In addition, the failure to pay penalty is an interest charge of 0.5% per month of total unpaid taxes and continued until it reaches 25% of your total unpaid taxes.
As another point, 90% of your expected taxes due must be paid by the mid-April filing deadline even if you are planning on filing taxes late via the automatic two-month extension.
Further, you could lose entitlement to the Foreign Earned Income Exclusion (FEIE). This could be a major issue, especially for those residing in a country where there are no taxes or with insufficient foreign tax credits. As a consequence of filing late, the IRS may deny the exclusion. The IRS has the authority to revoke this exclusion, and once revoked, it cannot be claimed for five years thereafter.
Do I Need to File FBAR?
FBAR FORM FILING
The U.S. requires certain taxpayers who have a financial interest in, or signature authority over foreign financial accounts to report these accounts on an annual basis to the Department of Treasury. FinCEN Form 114, Report of Foreign Bank and Financial Accounts - commonly called FBAR - has to be electronically filed through FinCEN's BSA e-filing system. Accounts that must be reported includes bank accounts, mutual funds, trusts, and brokerage accounts.
WHO MUST FILE FBAR?
A U.S. taxpayer or resident is required to file an FBAR if:
The person had a financial interest in or signature authority over (or any other authority over) at least one financial account located outside of the United States and, the aggregate value of all foreign financial accounts exceeded $10,000 at any time during a calendar year.
For tax purposes, U.S. persons include U.S. citizens and residents. It also includes entities, such as corporations, partnerships, and limited liability companies created or organized in the United States.
A person with "signature authority" is a person who can control the disbursement of money or other property in the account using his or her signature. A person with "other authority over an account" is a person who can exercise power over an account by communicating directly, orally or otherwise, to the financial institution or other person maintaining the account.
PENALTIES FOR NOT FILING FBAR
People required by law to file an FBAR who do not do so, or who do not do so accurately, may be subject to civil penalties for negligence, nonwillful violations, and willful violations. Below are the penalties that may be executed for willful and nonwillful violations:
Nonwillful violations - A penalty, not to exceed $10,000, may be imposed on any person who violates or causes any violation of the FBAR filing and recordkeeping requirements that are not due to reasonable cause (Internal Revenue Manual (IRM) §22.214.171.124.4).
Willful violations - Persons who willfully fail to report an account may be subject to a penalty equal to the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation, under 31 U.S.C. Section 5321(a)(5) (IRM §126.96.36.199.5). Willful violations may also be subject to criminal penalties under 31 U.S.C. Section 5322(b) or 18 U.S.C. Section 1001.
IRS Revoking US Passports
If you owe more than $50,000 in back taxes (including penalties), the US State Department could revoke your passport. If you are issued a Certification of Individuals with Seriously Delinquent Tax Debt and are unable to pay the debt in full, you could set up an installment agreement or an offer in compromise to have the certification reversed.
Getting Expats Back into Compliance with the IRS
The attorneys and accountants at Freeman Tax Law have decades of experience helping Expats with their tax filing and compliance responsibilities. Please contact our office to schedule a confidential, no-obligation consultation to discuss your personal tax situation.
Expat Late Tax Filing Help
Freeman Tax Law is a comprehensive international tax firm, comprised of a full-service team of Attorneys, CPA's and former IRS agents.
We have handled hundreds of late expat tax filing cases and offshore disclosure cases, and will help you understand your obligation in regards to late tax filing. We will clearly explain your options in making all necessary disclosures to the IRS.
CONTACT FREEMAN TAX LAW
Tax Office of Freeman Tax Law
Federal and state laws change frequently. For current tax or legal advice, an attorney or CPA should be consulted. The information contained in this article is not exhaustive, and is not a substitute for competent legal advice. If you have a question concerning a foreign account or offshore holdings, please contact us. The initial consultation is always free, and of course all communication will be confidential.
ATTORNEY - CLIENT PRIVILEGE
The attorney-client privilege is one of the oldest American privileges for confidential communications. All communications with Freeman Tax Law regarding a legal issue will be treated with the strictest confidence and protected under the attorney client privilege.