May 1, 2014
While most people are aware of the importance of the April 15th tax deadline, another important deadline, June 30th is approaching. Taxpayers with a financial interest in foreign bank and financial accounts with an aggregate value over $10,000 at any time during the year must file FinCEN Form 114, Report of Foreign Bank and Financial Accounts by this date. An extension of time to file an income tax return does not extend the time to file this form, extensions are not allowed. While the purpose of the provisions for this report were to enable the IRS to pursue taxpayers whose intent was to avoid paying taxes by using various offshore transactions and accounts, the reality is that many everyday, average United States citizens are surprisingly caught by the need to complete the FinCEN Form 114 by June 30. The requirements apply to “U.S persons” which includes those living in the United States, U.S. citizens living abroad, even if they do not owe any taxes, corporations, partnerships, trusts, limited liability companies, and estates. Penalties for not filing can be severe, even for an innocent mistake.
The following are financial accounts subject to FinCEN 114 reporting if the total of all accounts are greater than $10,000 at any point during the year:
Financial interest in the above accounts entails being the owner of record or holder of legal title, having financial interest in the entity that is the owner of record or holder of legal title, having signature authority to control the disposition of the assets in the account by direct communication with the financial institution, or the owner of record or holder of legal title acts as your agent or representative.
Under certain circumstances, a taxpayer may be subject to Financial Crimes Enforcement Network (FinCEN) filing requirements without being aware of or giving much consideration to the reasons:
The penalties for failure to file the required FinCEN 114 are up to $10,000 for a non-willful violation, while a willful violation can subject the taxpayer to fines up to $100,000 or 50% of account balances along with possible criminal penalties.
In addition, Form 8938, Statement of Specified Foreign Financial Assets, may have been required with the filing of an individual’s 1040 tax return due April 15th if aggregate fair market values of foreign financial assets exceeded $50,000 on the last day of the year or $75,000 at any time during the tax year ($100,000 and $150,000 for taxpayers filing as married filing jointly.)
If you have questions, please contact a professional tax advisor.
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