Friday, April 11, 2014

IRS News Release Reminding / Warning U.S. Taxpayers with Foreign Assets (4/11/14)

The IRS has used its bully news pulpit to remind U.S. persons subject to return reporting of their obligations arising from foreign assets.  IR-2014-52, April 11, 2014, here.

In part most relevant to the discussions on this blog, the release says:
Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets. 
Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located. 
Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details. 
Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2013 must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). This form replaces TD F 90-22.1, the FBAR form used in the past. It is due to the Treasury Department by June 30, 2014, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR).


  1. Swiss Bank
    Accounts .---April.

    Is your monies safe
    in these accounts ---- definitely NOT.

    Would you get your
    money back if every body decided to withdraw all their accounts –
    NO WAY.

    Economic Experts
    say that there would only enough money to repay 50% of their clients.

    Are you going to be
    in the 50% --- that loose your money.-- Get it out NOW.

    2012 -- - June.
    -- Published in Anglo INFO .Geneva.--- USA Trust Fund Investors were
    sent false and fraudulent documents by Pictet Bank.Switzerland. in
    order to collect large fees. ( Like MADOFF) ---Even after the SEC in
    the USA uncovered the fraud Pictet continued to charge fees and drain
    whatever was left in these accounts. Estimated that $90,000,000
    million lost in this Pictet Ponzi scheme.

    2012 - - - July.
    -- De – Spiegel. -- states – Pictet Bank uses a letterbox
    company in

    and a tax loophole involving investments in London to gain

    millionaires as clients.

    - - - August ---- German Opposition Leader accuses Swiss Banks of
    "organised crime."

    the fines that crooked Swiss banks have incurred in the last few
    years exceeds £75.Billion.

    is also calculated that the secrecy " agreements" with
    regards to tax evation by their clients will cost the banks another
    £450 Billion.( paid out of your monies.)

    banks are panicking --- the are quickly restructuring their banks
    ---- from partnerships --

    " LIMITED COMPANIES." ----- this will probably mean that
    in the future --- they could

    you only 10% of your monies " if you are one of the lucky ones"
    ---- and it be legal.

  2. Am a resident of the US but am European and have an account in my country there, for which I have paid taxes to that government. (It holds retirement money and accrues interest.) If I were to go ahead with OVDI, does the 27.5% apply to the entire account ? Or does the fact that I have paid some taxes to that government (on this account) impact this figure for the better ?

  3. Those that do not imagine that they might owe taxes to the US are unlikely to look at the IRS website. Ditto for those the vast majority of US persons resident abroad that don't owe taxes but don't imagine they might owe the tedious complicated nonsensical paperwork showing they don't owe taxes to the US.

    And does the IRS really imagine that non-US media will pick up this pronouncement? That would be the only way to get through to those that don't know.

  4. Dear student 1922:

    The real answer -- at least the answer that I can give on the sparse facts you offer -- is maybe. I know that is not very helpful. Let me break it down a bit, though.

    If you join OVDP 2012 (the current iteration of the program), there is the miscellaneous or in lieu of 27 1/2% penalty calculation. The standard for inclusion is whether there was U.S. tax noncomplliance. So the question is whether there was U.S. tax noncompliance with respect to the account. Treaty qualified retirement plans will be excluded because there is no U.S. tax noncompliance. From your sparse description of the plan, I doubt that it is a treaty qualified retirement plan. If it is not, then there are current U.S. income tax consequences for the build-up in the plan and, consequently, if you did not report that build-up, it is not US tax compliant and, at least in theory, should be included. Having said that, I have submitted the calculations showing this type of plan and backed it out with an explanation that it more closely resembles a real retirement plan (no withdrawals until retirement, etc.). So far I have had reasonable success in excluding them from the penalty calculation. But that is limited and anecdotal. From a straight-forward application of the OVDP as the IRS articulates it, I think the account of that type might be included.

    And, of course, you face the same issue on opt out.

    I would encourage you to focus on the characteristics of the plan. Some of those are: Can you withdraw any of it before retirement? Who contributed to the plan -- employer or employee? If the employer, were you taxed on it in your country of citizenship contemporaneously with the employer's contribution? Does it more closely resemble a savings plan with deferred benefits than a pension plan?

    Then, after you know the facts and characteristics of the plan, it might be helpful to consult with an attorney for the answer.

    Finally, if that were the only reason you are thinking about joining OVDP and the characteristics of the plan are right, you may have options other than OVDP -- specifically QD or GF.

    I know there is nothing definite but those are the matters I would consider.

    I wish you the best.

    Jack Townsend

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