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In the past, US Residents with foreign bank accounts and foreign interest 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.
The New law
Recently things changed when The U.S. Department of Treasury created form TDF 90-22.1 for reporting on foreign financial, bank and other investment accounts and told Congress lately that 300 billion of tax dollars is not being collected from cash that businesses in the US and Americans living abroad and not reporting it on their tax returns.
So now, 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.
Financial accounts include 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.
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.
Penalties
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
***Arik Rozen, CPA www.Tax-Usa.net
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