As most Americans are aware the standard tax filing deadline for citizens, legal permanent residents, and others living in the United States and with sufficient connections must file and pay their taxes by April 15 each year. However for American expatriates and other U.S. taxpayers living abroad, your filing deadline was not for another two months – June 15, 2015, to be precise. Furthermore, the June 30 FBAR deadline for filing is quickly approaching. If you have already filed taxes making sure to disclose all sources of income and all foreign accounts where a FATCA or FBAR disclosure was necessary, you should be compliant. But, if you have failed to file taxes or you suspect that you may have made incomplete disclosures, you may face a tax audit and a civil or criminal tax investigation.
U.S. taxpayers who are living outside of the U.S. and Puerto Rico and with a “main place of business or post of duty” outside of these areas or those serving active military duty are automatically qualified for an automatic extension of the their tax filing deadline. While the new deadline was June 15, that date has also passed. Taxpayers who were cognizant of this date were eligible to file IRS Form 4868 for an additional four month extension to October 2015, but this extension is no longer available. Furthermore, even if one filed for the four month extension of time to file, such an extension does not extend the time to pay.
Both the failure to file taxes and the failure to pay taxes can be punished separately. Furthermore, because even a single day in a month is considered to be a full month by the IRS, fines and penalties can accrue rapidly. If your failure to file also includes a FATCA account disclosure failure, your tax situation can become fraught with significantly more danger.
Under the terms of FATCA and the more than 110 international agreements intended to encourage compliance, American taxpayers must disclose the existence of foreign assets and foreign accounts if the balance or aggregate account balances exceeds certain reporting thresholds. The thresholds are computed on the basis of the taxpayer’s filing status and whether they live within the U.S. or in a foreign nation. In general, married taxpayers filing jointly from a foreign country can hold the most income or assets before they must disclose it. By contrast, taxpayers filing individually and living within the United States may hold the least amount of assets before they must disclose. An experienced tax professional can help you identify applicable reporting thresholds, value your foreign assets, and maintain reporting compliance.
FBAR or Report of Foreign Bank & Financial Accounts is a yearly filing obligation for all U.S. taxpayers. Unlike FATCA which considers the taxpayer’s status in computing disclosure thresholds, FBAR imposes a $10,000 reporting threshold for all taxpayers. That is, if you hold covered foreign accounts or foreign assets where the balance or aggregate balance of these accounts exceeds $10,000 you must file FBAR. FBAR can only be filed online via FinCEN Form 114. For each tax year where there is an obligation to file, the FBAR must be filed by June 30. The failure to file by this deadline can open the taxpayer up to the possibility of severe tax consequences. If the IRS agent believes that the failure to file was merely an accident or an oversight, a $10,000 penalty can be imposed for each year where the account went unreported. If the agent believes the failure to disclosure was intentional or voluntary, however, the penalty becomes significantly more severe. Penalties for a willful FBAR violation includes the greater of a fine of $100,000 or 50% of the original account balance. Because penalties can be imposed for multiple tax years, the fine can quickly exceed the original account balance.
Meet the June 30 FBAR deadline, and reduce your exposure to penalties, interest and even criminal tax evasion risk. The Tax Law Offices of David W. Klasing is comprised of experienced attorneys and CPAs. Our tax professionals are dedicated to working to mitigate the consequences of tax mistakes, tax filing errors, and FBAR and FATCA disclosure issues that taxpayers can experience. To schedule a reduced-rate tax consultation for expat tax issues, call us at 800-681-1295 today or contact us online.