Professional Tax Services

Report of Foreign Bank and Financial Accounts (the “FBAR”), is used to report a financial interest in or signature authority over a foreign financial account. The FBAR must be received by the Department of the Treasury on or before June 30th of the year immediately following the calendar year being reported. The June 30th filing date may not be extended.

Who Must File an FBAR?

A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.

Financial Account:

A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).

Foreign Financial Account:

A foreign financial account is a financial account located outside of the United States. For example, an account maintained with a branch of a United States bank that is physically located outside of the United States is a foreign financial account. An account maintained with a branch of a foreign bank that is physically located in the United States is not a foreign financial account.

Financial Interest:

A United States person has a financial interest in a foreign financial account for which:
(1) The United States person is the owner of record or holder of legal title, regardless of whether the account is maintained for the benefit of the United States person or for the benefit of another person; or
(2) The owner of record or holder of legal title is one of the following:
(a) An agent, nominee, attorney, or a person acting in some other capacity on behalf of the United States person with respect to the account;
(b) A corporation in which the United States person owns directly or indirectly: (i) more than 50 percent of the total value of shares of stock or (ii) more than 50 percent of the voting power of all shares of stock;
(c) A partnership in which the United States person owns directly or indirectly: (i) an interest in more than 50 percent of the partnerships profits (e.g., distributive share of partnership income taking into account any special allocation agreement) or (ii) an interest in more than 50 percent of the partnership capital;
(d) A trust of which the United States person: (i) is the trust grantor and (ii) has an ownership interest in the trust for United States federal tax purposes. See 26 U.S.C. sections 671-679 to determine if a grantor has an ownership interest in a trust;
(e) A trust in which the United States person has a greater than 50 percent present beneficial interest in the assets or income of the trust for the calendar year; or (f) Any other entity in which the United States person owns directly or indirectly more than 50 percent of the voting power, total value of equity interest or assets, or interest in profits.

Person:

A person means an individual and legal entities including, but not limited to, a limited liability company, corporation, partnership, trust, and estate.

Foreign corporation (Form 5471)

U.S. citizens and U.S. residents who are officers, directors, or shareholders in certain foreign corporations are responsible for filingForm 5471 Information Return of U.S. Persons with respect to Certain Foreign Corporations. The form and attached schedules are used to satisfy the reporting requirements of transactions between foreign corporations and U.S. persons under sections 6038 and 6046 of the Internal Revenue Code. Substantial penalties exist for U.S. citizens and U.S. residents who are liable for filing Form 5471 and who failed to do so.
The categories of U.S. persons potentially liable for filing Form 5471 include:
· U.S. citizen and resident alien individuals,
· U.S. domestic corporations,
· U.S. domestic partnerships, and
· U.S. domestic trusts.
Form 5471 should be filed as an attachment to the taxpayer’s federal income tax return. Form 5471 may be filed electronically.

Foreign Assets (Form 8938)

he foreign assets that have to be disclosed are the specified foreign financial asset as follows:

Ø Any financial account maintained by a foreign financial institution

Ø Other foreign financial assets held for investment not in an account maintained by a US or foreign financial institution

Ø Stock or securities issued by someone other than a U.S. person

Ø Any interest in a foreign entity

Ø Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person

Form 8938 has to be attached to form 1040 if the total value of the specified foreign financial assets is more than:

A. Living in USA:

1. Single or Married filing separately: $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year

2. Married filing jointly: $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year

B. Living Abroad:

1. Single or Married filing separately: $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year

2. Married filing jointly: Single or Married filing separately: $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year