Our team of International Tax experts are experienced and knowledgeable in the rules and procedures pertaining to global tax laws. We are well-equipped to assist clients with:
- Enrolling in the Voluntary Disclosure Program
- Applying for The Foreign Tax Credit
- Maximizing business finances through International Tax Planning
To do this, Avant Tax employs the use of four strategies designed to retrieve accurate information to avoid any legal troubles with the IRS.
Voluntary Disclosure Program
The IRS initiated voluntary disclosure programs so that law-abiding citizens could enroll to get back into the reporting system and avoid legal penalties. Compliance with this system helps the IRS distinguish between law-abiding citizens and individuals engaging in illegal activities within foreign countries. Even if you are not committing tax crimes, failure to file or filing through false statements is technically considered criminal. Knowledgeable international tax attorneys can best assist we in filing accurate and correct information to avoid any legal complications.
The Foreign Tax Credit
All U.S. citizens, resident aliens, and individuals who comply with the substantial presence test must report any sources of income, including money which is earned in another part of the world. Any monies earned through international interaction must be reported to the IRS if you are a citizen or permitted resident of the United States.
These earnings will be taxed by the IRS, but we can avoid double taxation by the foreign country and the U.S. if we apply for the Foreign Tax Credit. As per the foreign tax credit equation, we owe the IRS the difference between the U.S. tax rate on the income minus the amount we paid for foreign tax rates placed on our income. Our international tax attorneys have years of experience in helping clients sort out the Foreign Tax Credit equation and assist clients in arranging their payment to the IRS without hassle.
FinCen Form- 114 FBAR
Preparing FinCen Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Every year, under the law known as the Bank Secrecy Act, we must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and keep certain records of those accounts. We report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114.
Who Must File
A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report. A financial interest in or signature or other authority over at least one financial account located outside the United States if the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
Generally, an account at a financial institution located outside the United States is a foreign financial account. Whether the account produced taxable income has no effect on whether the account is a foreign financial account for FBAR purposes.
But, you don’t need to report foreign financial accounts that are:
- Correspondent/Nostro accounts,
- Owned by a governmental entity,
- Owned by an international financial institution,
- Maintained on a United States military banking facility,
- Held in an individual retirement account (IRA) you own or are beneficiary of,
- Held in a retirement plan of which you are a participant or beneficiary, or
- Part of a trust of which you are a beneficiary, if a U.S. person (trust, trustee of the trust or agent of the trust) files an FBAR reporting these accounts.
You don’t need to file an FBAR for the calendar year if:
- All our foreign financial accounts are reported on a consolidated FBAR.
- All our f foreign financial accounts are jointly owned with spouse
- We completed and signed FinCEN Form 114a authorizing spouse to file on our behalf, and spouse reports the jointly owned accounts on a timely-filed, signed FBAR.
Note: Income tax filing status, such as married-filing-jointly and married-filing- separately has no effect on your qualification for this exception
When to File
FBAR is an annual report, due April 15 following the calendar year reported. One is allowed an automatic extension to October 15 if we fail to meet the FBAR annual due date of April 15. We don’t need to request an extension to file the FBAR.
If we are affected by a natural disaster, the government may further extend FBAR due date. For certain employees or officers with signature or other authority over, but no financial interest in certain foreign financial accounts, the 2018 FBAR due date is deferred to April 15, 2020.
How to File
We must file the FBAR electronically through the Financial Crimes Enforcement Network. If we want to paper-file FBAR, we must call FinCENs Regulatory Helpline to request an exemption from e-filing.
We must keep records for each account we report on an FBAR that establish:
- Name on the account,
- Account number,
- Name and address of the foreign bank,
- Type of account, and
- Maximum value during the year.
Exception: An officer or employee who files an FBAR to report signature authority over an employer’s foreign financial account doesn’t need to personally keep records on these accounts. The employer must keep the records for these accounts.
We may be subject to civil monetary penalties and/or criminal penalties for FBAR reporting and/or recordkeeping violations. Assertion of penalties depends on facts and circumstances. Civil penalty maximums must be adjusted annually for inflation. Current maximums are as follows:
Form 8938, Statement of Specified Foreign Financial Assets
Certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return. Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad (see below).
Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010. For most individual taxpayers, this means they will start filing Form 8938 with their 2011 income tax return.
For tax years beginning after December 31, 2015, certain domestic corporations, partnerships, and trusts that are formed or availed of for the purpose of holding, directly or indirectly, specified foreign financial assets (specified domestic entities) must file Form 8938.
- If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold.
- If you are required to file Form 8938, you do not have to report financial accounts maintained by:
- a U.S. payer (such as a U.S. domestic financial institution), /li>
- the foreign branch of a U.S. financial institution, or
- the U.S. branch of a foreign financial institution.
Refer to Form 8938 instructions for more information on assets that do not have to be reported.
You must file Form 8938 if:
You are a specified person (either a specified individual or a specified domestic entity).
A specified individual is:
- A U.S. citizen
- A nonresident alien who makes an election to be treated as resident alien for purposes of filing a joint income tax return
- A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico (See Publication 570 for definition of a bona fide resident)
A specified domestic entity is:
- A domestic corporation that is closely held by a specified individual and where at least 50 percent of the corporation is gross income is passive or at least 50 percent of its assets produce or are held for the production of passive income (see Passive income and Percentage of passive assets held by a corporation or partnership, in Form 8938 instructions).
- A domestic partnership that is closely held by a specified individual and where at least 50 percent of the partnership is gross income is passive or at least 50 percent of its assets produce or are held for the production of passive income (see Passive income, and Percentage of passive assets held by a corporation or partnership, in Form 8938 instructions).
- A domestic trust described in section 7701(a)(30)(E) that has one or more specified persons (a specified individual or a specified domestic entity) as a current beneficiary.
You have an interest in specified foreign financial assets required to be reported.
A specified individual is:
- Any financial account maintained by a foreign financial institution, except as indicated above
- Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely:
- Stock or securities issued by someone other than a U.S. person
- Any interest in a foreign entity, and
- Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person.
Refer to the Form 8938 instructions for more information on the definition of a specified foreign financial assets and when you have an interest in such an asset.
The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you:
- Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year
- Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year
- Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
- Taxpayers living abroad.
You are a taxpayer living abroad if:
- You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or
- You are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days.
If you are a taxpayer living abroad you must file if:
- You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
- You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
Specified Domestic Entities: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Refer to the Form 8938 instructions for information on how to determine the total value of your specified foreign financial assets.
Reporting specified foreign financial assets on other forms filed with the IRS.
If you are required to file a Form 8938 and you have a specified foreign financial asset reported on Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, or Form 8891, you do not need to report the asset on Form 8938. However, you must identify on Part IV of your Form 8938 which and how many of these form(s) report the specified foreign financial assets.
Even if a specified foreign financial asset is reported on a form listed above, if you are a specified individual, you must still include the value of the asset in determining whether the aggregate value of your specified foreign financial assets is more than the reporting threshold that applies to you. If you are a specified domestic entity, exclude the value of any specified foreign financial asset reported on another form listed in Part IV, to determine if you satisfy the applicable reporting threshold.