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New Forms? New Filing Requirements? Did I Miss Something?
An Amazing Opportunity To Help You Become Compliant

By Heidi Scholz of Law Office of Heidi Scholz, P.A., Miami Beach, Florida

Editor's Note: Many of you are familiar with Michael Chatzky who has often written for us on various asset protection topics.

Michael has worked for decades with the very capable and experienced Heidi Scholz.

Today, we asked Heidi to update all of us on some recent developments regarding FBAR.

-- Rich Checkan

As promised, and with great enthusiasm, I am happy to provide ASI readers with an article on the current streamlined offshore voluntary disclosure program.

As an ASI reader, you are probably aware of the filing requirements relating to a foreign financial account (Fincen 114 previously known as the TDF 90-22.1 form and also known as an FBAR, Report of Foreign Bank and Financial Accounts), or the filing requirements relating to reporting a Statement of Specified Foreign Financial Assets (Form 8938).

For those readers unaware of the specific requirements relating to a foreign account, I will briefly set forth the standard requirements.

The Internal Revenue Service provides standard language identifying a person who must file a FBAR and states that an FBAR must be filed if:

A United States person has a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, and the aggregate value of all foreign financial accounts exceeds $10,000 AT ANY TIME during the calendar year.

Note: A United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Additionally, the FBAR requires the reporting of foreign financial accounts in which the taxpayer has signature authority.

Foreign stocks or securities held in a financial account at a foreign financial institution must also be reported, but the contents of the account do not have to be separately reported.

Furthermore, the FBAR requires indirect interests in foreign financial assets through an entity to be reported if the taxpayer retains sufficient ownership in the entity or a beneficial interest (i.e. greater than 50 percent interest).

The second most common reporting requirement is set forth on the Statement of Specified Foreign Financial Assets also known as Form 8938. The specific requirements relating to this reporting requirement are as follows:

Aggregate value of assets must generally exceed $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year, but higher threshold amounts apply to married individuals filing jointly and individuals living abroad.

This form is generally required to be filed with respect to the following foreign assets:

1. financial (deposit and custodial) accounts held at foreign financial institutions;
2. foreign stock and securities not held in a financial account;
3. foreign partnership interests;
4. foreign mutual funds;
5. foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust and you are the grantor;
6. foreign issued life insurance or annuity contracts with a cash value;
7. foreign hedge funds and private equity funds;
8. and, an interest in a foreign entity that owns foreign real estate.

Just because a taxpayer must file one of the above named forms does not necessarily mean that he or she must file the other form or vice versa. Each form has separate and distinct reporting requirements.

I Didn't Know I Was Supposed To File These Forms. What Happens Now?

Given the vast number of filing requirements and types of assets that must be reported, it is understandable the filing of a form can be overlooked.

Consequently, the Internal Revenue Service has implemented a Streamlined Filing Compliance Procedure to encourage United States persons with filing responsibilities to become compliant. The streamlined procedures require the filing of an original or amended tax return for the previous three (3) years that reports previously unreported income in each of the applicable tax years.

Special note: Under the Streamlined Filing Compliance Procedure, the Internal Revenue Service will generally waive all penalties for eligible United States taxpayers who reside outside the United States.

For eligible U.S. taxpayers residing in the United States, generally the only penalty assessed under the streamlined procedures will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets in the calendar year with the highest account value.

The taxpayer must be aware that by filing under the Streamlined Filing Compliance Procedure, the United States taxpayer is required to certify under penalties of perjury that the taxpayer's conduct was 'non-willful.'

For purposes of the streamlined procedures, non-willful conduct is defined as conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.[i]

Furthermore, the taxpayer must provide specific reasons for the failure to report all income, pay all tax and submit all required information returns, including FBARs.

If the taxpayer relied on a professional advisor, the taxpayer must provide the name, address and telephone number of the advisor and a summary of the advice.

If married taxpayers submitting a joint certification have different reasons, then the individual reasons for each spouse must be stated separately in the statement of facts.

Consequently, becoming compliant can be an easy and cost effective objective.

We assist the eligible taxpayer to enter the Streamlined Filing Compliance Procedure to become compliant. The taxpayer receives peace of mind, avoidance of potential civil and/or criminal penalties and a significantly reduced penalty!

Generally, it is advisable for the taxpayer to retain an attorney and an accountant who works under the attorney's direction to assist with participation in the Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedure.

If you have any questions or concerns regarding the proper information reporting or income tax reporting requirements we would be happy to be of assistance. We work with accountant Ariel Gamburg CPA in New York City, among other accountants.

The Internal Revenue Service also has an effective Offshore Voluntary Disclosure Program that might apply to your situation if the Streamlined Filing Compliance Procedure is inapplicable in your situation.

Please feel free to contact us and we can advise you as to the most suitable resolution for your situation.

[i] IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance, IR-2014-73, June 18, 2014.


Admitted to Practice in California and New York, not licensed in Florida.

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