| In the historical past, Americans
living and working in abroad would open bank accounts with a local
bank in whatever country they were living and working, and if it earned
any interest at all would never show it on their U.S. income tax return.
This was part of the unofficial benefits of living in outside of
the U.S. and everyone thought it was fun.
Then things started to change.
The U.S. Department of Treasury created the form TDF 90-22.1 for
reporting on foreign financial, bank and other investment accounts but
never paid much attention to whether taxpayers living abroad filed it or
not. Then money laundering connected with drugs and terrorists became
items of concern. The IRS told Congress lately about the 300 billion of
tax dollars the IRS was not collecting from cash businesses in the
US and Americans living abroad who were not paying taxes on their taxable
investment and other income.
The TDF form must be filed
when you have at any time during a calendar year more than $10,000 in one
or more foreign bank and financial accounts. That means all foreign accounts
are combined on any day during the year to determine if the over $10,000
figure is reached. The IRS has held that financial accounts includes
bank accounts, certificates of deposit, stock market accounts, gold or
collectibles held by another for your benefit, and even credit balances
in offshore credit card accounts. The TDF form is not a tax form
and has no effect on your income taxes. You are already suppose to
be reporting the earnings of these investments on your US tax return.
When you fill out the form you must
list the name of the financial institution, country of location, highest
balance during the year, and the account number. For each account
you must also state the name and US tax identification number of any co-owner
of the account. If you sign on the account belonging to your employer,
your foreign corporation, trust, or LLC or another individual or entity,
you must also file the form and report all of the requested information
unless the accounts belong to a publicly traded corporation.
Though the TDF 90-22.1 form has existed
for many years prior to 2004 there were no serious penalties for failing
to file it that were enforced. In 2004 the law changed r when Congress
enacted a $10,000 penalty for “without regard for willfulness” for
failing to file the form by the June 30th deadline or not filing it for
any year when it was required. There are also even greater monetary
penalties and criminal penalties ( jail time) for failing to file the form
that the IRS may impose on anyone they catch that has not filed or filed
the form late.
This report on foreign bank accounts
and financial accounts is not filed with your personal US tax return, but
is mailed to the US Treasury at a separate address. It is not due
on April 15th, but must be filed on June 30th following the end of the
calendar year it is reporting. The due date of this form cannot be
extended for any reason. If you have not filed for past years, or
are filing late, you can get the penalty abated if you can show “reasonable
cause” for your late filing.
Don Nelson is a California licensed
attorney and C.P.A. For the past 31 years he has been assisting
U.S. Citizens living in over 31 countries with their international and
expatriate tax planning and filing returns with the IRS. He specializes
in helping taxpayers living in outside of the U.S. who have fallen behind
filing their U.S returns by preparing all of their past unfiled returns
most often with no adverse tax consequence to the client. His phone in
the U.S. Is (949) 481-4094. Email him at dondnelson@yahoo.com.
Check out his website for a wealth of useful information at www.TaxMeLess.com
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