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Foreign Inheritances & Gifts

Reporting Foreign Assets: It Pays to do the Right Thing

April 29, 2013 by Admin

Two recent verdicts involving unreported foreign asset reporting highlight the same moral: do the right thing (or go to jail).

In one case, Michael Canale, a physician, pleaded guilty in New York federal court last December to willful failure to notify the IRS about Swiss bank accounts that in 2010 held nearly $1.5 million. While acknowledging that Canale “made a serious mistake,” attorney Robert Fink wrote that his client inherited the account from his father, who gave orders to keep it a secret. The defense lawyer characterized Canale as “a genuine American hero, who served his country selflessly as a combat military doctor”. The Manhattan U.S. Attorney’s office argued, however, that he evaded at least $216,000 in federal taxes on income form the Swiss accounts and “he could have, at any time, ceased his criminal conduct by disclosing the account or even simply closing the account.” Canale was sentenced to six months in federal prison, fined $100,000, ordered to pay more than $216,000 in restitution and perform 400 hours of community service. [Read more…] about Reporting Foreign Assets: It Pays to do the Right Thing

Filed Under: BUSINESS FORUM, LITIGATION SUPPORT, MEDICAL PRACTICES, TAX TIPS FOR INDIVIDUALS, Taxes, Taxes Tagged With: Foreign Account Tax Compliance Act, Foreign Accounts, Foreign asset reporting, Foreign Inheritances & Gifts

Got Unreported Assets Overseas? June 2013 Deadline Approaching

April 26, 2013 by Admin

The FBAR: Who Should File?

Do you have income overseas you forgot to report? Did Grandpa leave you his foreign bank account when he passed away? If you have foreign bank accounts holding more than $10,000 in the aggregate anytime during the year, you are required to file an FBAR (Report of Foreign Bank Accounts)  by June 30th of the following year. It doesn’t matter whether the foreign accounts generate income or not; just owning them, or having signature authority, requires you to file.

 What’s the Big Deal?

Failure to file can result in serious consequences. The sanctions for not completing the FBAR include numerous severe civil penalties and potential prosecution followed by a term in federal prison.

 New in 2011: Form 8938

Beginning in 2011, the IRS has added Form 8938 to the individual 1040 tax return, further tightening the noose on taxpayers failing to report ownership of overseas accounts.

If you fail to file Form 8938 or fail to report a specified foreign financial asset that you are required to report, the statute of limitations for the tax year may remain open for your income tax return (Form 1040) until three years after the date you file a complete and accurate Form 8938.

 What Can I do Now?

In order to encourage taxpayers to correct previously filed returns that were false, or to remedy past failures-to-file tax returns, the IRS created in the early 1950s the “Voluntary Disclosure Policy” – a policy under which no criminal prosecution will be initiated if the taxpayer comes forward before the IRS is onto

him. In 2009, as the IRS became aware of increased offshore tax abuse, it initiated the formal Voluntary Disclosure Program for offshore accounts. While making a voluntary disclosure doesn’t guarantee immunity from prosecution, taxpayers making truly valid disclosures are rarely, if ever, prosecuted.

 Time is Running out

It’s important to realize that the Voluntary Disclosure Program essentially sets up a race between you and the IRS. In order to avoid criminal prosecution you must come forth before the IRS comes knocking, so time is of the essence. Many experts are expecting dozens of banks worldwide to turn over the names of U.S. taxpayers within the next year, including Credit Suisse Group, Julius Baer Group, HSBC Holdings, and the three Israeli banks, Bank Hapoalim, Bank Leumi, and Mizrahi-Tefahot.

 

 Better Safe than Sorry

While the current voluntary disclosure program is currently running indefinitely, the rules can change at any time. The FBAR penalty has been raised in 2012 to 27.5% of the largest balance during the period covered by the voluntary disclosure. Sounds like a steep price to pay? The penalties are far greater if you don’t “get with the program” and then get caught. In addition, disclosing now allows you to transfer the money to your American accounts as well as to implement gifting and other estate planning strategies. Finally, for a “Get Out of Jail Free Card” it’s a pretty good deal. Now you will be able to sleep at night!

  

Filed Under: BUSINESS FORUM, TAX TIPS FOR INDIVIDUALS Tagged With: Foreign Account Tax Compliance Act, Foreign Accounts, Foreign asset reporting, Foreign Inheritances & Gifts

Do I Have To Report My Foreign Inheritance?

March 13, 2012 by Admin

While the recent IRS crackdown has increased awareness of filing requirements for foreign assets and income, the requirements regarding foreign inheritances are much less well known. As a rule, there is never a recipient income tax liability on foreign inheritances.  Estate tax (for which the estate is liable), is a different matter. If the person leaving the foreign inheritance is a U.S. citizen then it would be subject to estate tax. If not, there is no estate tax liability. [Read more…] about Do I Have To Report My Foreign Inheritance?

Filed Under: BUSINESS FORUM, Estate Taxes, ESTATE, TRUST, GUARDIANSHIP, TAX TIPS FOR INDIVIDUALS, Taxes Tagged With: Estate Taxes, Foreign Inheritances & Gifts, Gift Taxes

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