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FBAR and Offshore Voluntary Disclosure Initiative with
no filing deadline yet
Foreign Bank Account Reporting or FBAR requirements make it mandatory for a taxpayer to make appropriate disclosure
in Treasury Department Form, 114 by April 15th of the following year if he or she has one or more bank accounts in a
foreign country with a balance of more than $10,000 any time during a year. The penalty for not making the disclosure
can be as much as $10,000 per violation per year and can go up to 50% of the bank balance.
In addition to facing the risk of criminal prosecution and higher penalties up to 50% in many cases, the taxpayer may not
be able to remit the unreported funds back in USA, say in 5-10-20 years from now. So it is highly suggested that
taxpayers should make sure that they were not subject to FBAR requirements in the past and if they were, then they
should consider taking advantage of an amnesty program, that is, Offshore Voluntary Disclosure Initiative. Offshore
Voluntary Disclosure Initiative has been introduced to help such taxpayers (who have not complied with FBAR
requirements) comply with FBAR requirements and reduce the penalties to 12.5% or 27.5%. The penalty will be just 5%
for a taxpayer who is eligible for Streamlined OVDI. Taxpayers need to assess their situation and decide OVDI applicability
and if they should take advantage of it with just 5% penalty. Streamlined OVDI procedures include filing prior years
amended tax returns and delinquent FBARs.
In addition to the FBAR filing, Taxpayers with specified foreign financial assets that exceed certain thresholds must report
those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing
requirement does not replace or otherwise affect a taxpayer's requirement to file FBAR. This Form is part of the Tax
return and accordingly must be filed by the due date of Individual tax return in Form 1040.
If you are required to file Form 8938 but do not file a complete and correct Form 8938 by the due date (including
extensions), you may be subject to a penalty of $10,000.
IRS has introduced new procedures beginning year 2012 to apply for Individual Tax Identification Number (ITIN), thus
making it much more difficult for immigrants to obtain ITIN for the dependents, e.g., HIB visa holder applying ITIN for
dependents. Under new rules, passport copies have to be certified by Indian Consulate in USA, passport issuing authority
in India or IRS designated local offices instead of a Notary under old procedures. Just imagine that taxpayers now need to
send original passport to Indian Consulate or visit IRS office to get certified copies of passport which will involve time,
cost and unnecessary stress. Now ITIN has to be reapplied every 5 years.
Whether this is FBAR or ITIN, it seems immigrants are becoming subject to severe tax compliance rules.
This article was contributed by Manoj Gupta, CPA. Readers can contact Manoj at 614-344-4246 or MG@Gupta-CPA.com.
A copy of this article can be downloaded from www.Gupta-CPA.com. Office address is Gupta & Associates, CPA, LLC, 555
Metro Place North, Suite 100, Dublin, OH 43017.
no filing deadline yet
Foreign Bank Account Reporting or FBAR requirements make it mandatory for a taxpayer to make appropriate disclosure
in Treasury Department Form, 114 by April 15th of the following year if he or she has one or more bank accounts in a
foreign country with a balance of more than $10,000 any time during a year. The penalty for not making the disclosure
can be as much as $10,000 per violation per year and can go up to 50% of the bank balance.
In addition to facing the risk of criminal prosecution and higher penalties up to 50% in many cases, the taxpayer may not
be able to remit the unreported funds back in USA, say in 5-10-20 years from now. So it is highly suggested that
taxpayers should make sure that they were not subject to FBAR requirements in the past and if they were, then they
should consider taking advantage of an amnesty program, that is, Offshore Voluntary Disclosure Initiative. Offshore
Voluntary Disclosure Initiative has been introduced to help such taxpayers (who have not complied with FBAR
requirements) comply with FBAR requirements and reduce the penalties to 12.5% or 27.5%. The penalty will be just 5%
for a taxpayer who is eligible for Streamlined OVDI. Taxpayers need to assess their situation and decide OVDI applicability
and if they should take advantage of it with just 5% penalty. Streamlined OVDI procedures include filing prior years
amended tax returns and delinquent FBARs.
In addition to the FBAR filing, Taxpayers with specified foreign financial assets that exceed certain thresholds must report
those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing
requirement does not replace or otherwise affect a taxpayer's requirement to file FBAR. This Form is part of the Tax
return and accordingly must be filed by the due date of Individual tax return in Form 1040.
If you are required to file Form 8938 but do not file a complete and correct Form 8938 by the due date (including
extensions), you may be subject to a penalty of $10,000.
IRS has introduced new procedures beginning year 2012 to apply for Individual Tax Identification Number (ITIN), thus
making it much more difficult for immigrants to obtain ITIN for the dependents, e.g., HIB visa holder applying ITIN for
dependents. Under new rules, passport copies have to be certified by Indian Consulate in USA, passport issuing authority
in India or IRS designated local offices instead of a Notary under old procedures. Just imagine that taxpayers now need to
send original passport to Indian Consulate or visit IRS office to get certified copies of passport which will involve time,
cost and unnecessary stress. Now ITIN has to be reapplied every 5 years.
Whether this is FBAR or ITIN, it seems immigrants are becoming subject to severe tax compliance rules.
This article was contributed by Manoj Gupta, CPA. Readers can contact Manoj at 614-344-4246 or MG@Gupta-CPA.com.
A copy of this article can be downloaded from www.Gupta-CPA.com. Office address is Gupta & Associates, CPA, LLC, 555
Metro Place North, Suite 100, Dublin, OH 43017.
