delinquent FBARs

FBARs Are Due on April 15th This Year. Not the Income Tax Filing Deadline of May 17th!

April 13, 2021 | by Dennis N. Brager

UPDATE: You have until October 15th.

The Internal Revenue Service issued a notice on April 9^th reminding U.S. citizens, resident aliens and any domestic legal entity that the deadline to file their annual Report of Foreign Bank and Financial Accounts (FBAR) is still April 15, 2021. The extension of the federal income tax filing due date and other tax deadlines for individuals to May 17, 2021, does not affect the FBAR requirement.

This could cause many Taxpayers to inadvertently file their FBAR late. The deadline to file the FBAR was changed several years ago to coincide with the deadline for filing individual tax returns in an effort to assist with compliance. With this most recent extension, however, it puts individuals at risk of late filing, since the deadlines are no longer on the same date. Interestingly, in past years the IRS granted an automatic extension of time to file FBARs to October 15^th for FBARs, but there is no mention of the automatic extension in the IRS notice.

Dennis Brager Published on Bankrate.com

May 15, 2020 | by Dennis N. Brager

Recently, Dennis was interviewed by Bankrate.com on his thoughts on tax implications of a cash-out mortgage refinance. Below is an excerpt of the quote:

“Capital improvements must substantially improve your home,” explains Dennis Brager, a certified tax specialist with Los Angeles-based Brager Tax Law Group. “Kitchen and bathroom remodels, room additions, modifications for an elderly parent would all qualify…” This is in regards to answering how to use your cash-out refinance money so it’s tax-deductible

Read full article here

Not Just Another Covid-19 Announcement (Part II)

March 19, 2020 | by Dennis N. Brager

On Tuesday evening our tax lawyers sent out an announcement discussing some of the tax filing and payment implications of the Covid-19 virus. We indicated that Secretary of Treasury Mnuchin had announced payment and filing extensions for the 2019 income tax returns.

Mnuchin was quoted as saying “We encourage those Americans who can file their taxes to continue to file their taxes on April 15,” Mnuchin said. “Because for many Americans, you will get tax refunds.”

We took that to mean that the filing deadline as well as the payment deadline was extended. This is the problem with tax guidance by Tweet and press conference. On Wednesday morning the IRS issued an announcement which states that there is no filing extension.

Not Just Another Covid-19 Announcement

March 17, 2020 | by Dennis N. Brager

Some of you may be concerned about the impact of the Coronavirus aka Covid-19 outbreak on your taxes, and those of your clients. The news from the IRS has been slow in coming. On Friday of last week President Trump declared a National Emergency. At the same time, he directed Treasury Secretary Mnuchin to provide relief from “tax deadlines” to Americans who are adversely impacted by the emergency. This allows the IRS to extend various deadlines for up to a one-year period. This authority is not, however, self-executing. That is, the IRS must specify exactly which due dates, and for how long they are being extended.

Prior to President Trump’s announcement Secretary Mnuchin had told reporters that most deadlines would be extended for “small businesses” and most individuals other than the “super rich.” Our tax lawyers couldn’t find a definition of super rich anywhere in the Internal Revenue Code. Finally, this morning, Tuesday March 17^th, after partnership and certain LLC returns were already due, Mnuchin stated in a press conference that the filing deadline for the 2019 income tax return would be extended by 90 days. For individuals that would mean July 14^th. Presumably, the IRS will actually extend the date to July 15^th just to make things a touch easier. Individuals living overseas already have an extension to June 15^th so presumably they would have until September 15^th to file.

In addition to stating that the income tax filing deadline would be extended, Mnuchin also stated that the 2019 payment deadline for income taxes owed of less than $1 million dollars for individuals or $10 million for corporations. This would be an interest and penalty free extension. For those who are over the thresholds it is unclear whether the entire amount due would be subject to interest and penalties or just that amount over the threshold. It is also not clear whether the filing extension would apply to those who owe taxes in excess of the cut-off amount.

Are Dual Citizens Required to File FBARs?

September 21, 2017 | by Dennis N. Brager

Dual citizens, along with all other “United States persons”, must file a Report of Foreign Bank Accounts (FBAR) if the aggregate value of their foreign financial accounts exceeds $10,000 at any time during the year. This requirement applies to U.S. citizens, residents, green card holders, and those who must file taxes because they are substantially present in the United States. It also applies to legal entities, including corporations, partnerships, and trusts.

While other countries only tax their citizens on income earned within the country’s borders, the United States taxes its citizens—and other individuals who have a filing requirement—on all worldwide income from any source. This requirement, along with the FBAR filing requirements, can create problems for expatriates, immigrants, and anyone else with offshore bank accounts.

Expats who move abroad are still responsible for complying with U.S. tax law as long as they remain U.S. citizens. Even if you live abroad for the entire year, and none of your income would be taxable, you may still have to file a tax return. If you open a bank account in a foreign country, and the aggregate value of all of your foreign accounts exceeds $10,000 during the year, you must file an FBAR.

The Tax Consequences of Inheriting Foreign Assets

September 18, 2017 | by Dennis N. Brager

U.S. taxpayers who inherit foreign assets must handle the tax consequences of their inheritances with great care. In addition to taxing all worldwide income, the U.S. also includes foreign assets in the gift and estate tax calculation, which determines whether estate tax will be assessed. Heirs who receive foreign assets also have to consider their Foreign Bank Account Report (FBAR) and other foreign account reporting requirements, or risk facing significant penalties.

What Happens When You Inherit a Foreign Account?

If you are a “United States person”—including citizens, permanent residents,(individuals who hold green cards) or must file taxes due to their substantial presence in the United States—you may suddenly have an FBAR filing requirement if you inherit a foreign financial account. If the aggregate of all of your foreign financial accounts exceeds $10,000 at any point during the year, you must file an FBAR.

What are Foreign Asset Reporting Requirements?

August 8, 2017 | by Dennis N. Brager

Taxpayers with foreign financial accounts may have several different reporting requirements, depending the type of account and the amount of funds in the accounts. The first of these requirements comes from the 1040 tax return, specifically Schedule B.

Schedule B requires the disclosure or any interest or dividends received by the taxpayer, including interest from foreign accounts. Part III specifically asks about foreign accounts, including whether the taxpayer had an interest in signature authority over any foreign financial accounts, and whether the taxpayer has a Foreign Bank Account Report (FBAR) filing requirement or received a distribution from a foreign trust. A failure to answer these questions honestly could result in tax fraud penalties, and possibly lead to other penalties related to a failure to file FBARs.

Foreign Bank Account Reports (FBARs)

Avoid These Mistakes When Filing FBARs

May 22, 2017 | by Dennis N. Brager

Some taxpayers are not aware of the requirement that they file a Foreign Bank Account Report (FBAR) if the value of their foreign financial accounts exceeds $10,000 at any time during the year. Even taxpayers who are aware of their obligation to disclose offshore bank accounts may not understand every situation that will trigger an FBAR filing requirement, or the methods for disclosing a previously unreported foreign account.

The following are some of the most common mistakes when filing FBARs:

Failure to file FBARs

Considerations When Submitting Delinquent International Information Returns

May 12, 2017 | by Dennis N. Brager

The IRS procedure for submitting delinquent international information returns such as Forms 3520, 3520A, Form 5471, or Form 8938, along with a reasonable cause statement is one of four options the IRS allows for taxpayers wish to come into compliance with their offshore filing requirements. This procedure has some benefits over the Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Filing Procedures, but it also has its drawbacks.

The main benefit is that if the IRS accepts your reasonable cause statement and submission of delinquent international information returns, you will have all penalties waived. Both the OVDP and the Streamlined Procedures (at least for domestic taxpayers) involve paying penalties, with the OVDP requiring much higher penalties and eight years of tax returns.

The drawback is that if your reasonable cause statement is rejected, you may be responsible for the full amount of the international reporting forms penalties.