| Report
Your Foreign Bank Accounts Or Go To Jail? |
| By Don
D. Nelson, Attorney at Law, C.P.A. |
| 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. |
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| 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. |
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| 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. |
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| 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. Check out his website
for a wealth of useful information at www.TaxMeLess.com
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