The penalties for failing to report Offshore Financial Accounts, Foreign Trusts and Corporations, and Specified Foreign Financial Assets (“Foreign Accounts”) have become quite severe. Therefore, we wish to highlight the importance of taking the time to assess whether or not the requirement to report Foreign Accounts may apply to you.
Generally speaking, there are two areas of concern for most individuals:
First, there are income tax concerns. The United States taxes foreign source income of its citizens, subject to the provisions of the respective tax treaty with each foreign country. For example, interest earned on a Canadian joint account opened with a Canadian relative for convenience, in which the individual has Signature Authority to control the funds on deposit, may be subject to U.S. Income Tax, as well as other reporting requirements.
Second, there are non-tax considerations. The United States government requires certain forms to be filed annually, requiring disclosure of certain information, such as bank and brokerage account balances, account numbers, foreign corporation stock certificates, foreign pensions and foreign life insurance policies, to name but a few.
Not only are personal accounts and personal assets affected by these laws, non-personal accounts, such as those owned by a foreign trust or a foreign corporation in which the individual has more than a 50% beneficial or controlling interest, must also be reported annually.
We bring this to your attention at this time due to the severe penalties associated with improper reporting.
• Failure to file certain forms in connection with controlled Foreign Entities may result in a civil penalty up to $10,000 per year per entity.
• Failure to disclose Foreign Accounts may result in a civil penalty equal to the greater of $100,000 or 50% of the balance in that account at the time of the violation.
• Willful violators may also be subject to criminal penalties.
At Rynkar, Vail & Barrett, we are able to advise you properly and prepare the proper forms for you if you have Foreign Accounts or controlled Foreign Entities.
Additionally, if you have failed to meet these reporting requirements in the past, we can advise you regarding qualification for the Offshore Voluntary Disclosure Program.
If you have any questions regarding your potential reporting liability, we will be pleased to discuss your situation with you.