Tuesday, December 24 2019
"Collecting More Taxes Than is Absolutely Necessary is Legalized Robbery." Calvin Coolidge
In September of 2018, the IRS sent approximately 700,000 delinquent tax debt accounts to private debt collectors. See, TIGTA Semiannual Report to Congress. For those of you who owe back taxes, you may have been able to slide under the radar prior to now with IRS backlog and the federal government shutdown. The day of reckoning has come. The private debt collectors are motivated and it is likely that outstanding and old tax debt accounts will soon be getting attention.
The new IRS private debt collection program provides for four private debt collection agencies across the country to handle inactive, older, and overdue tax accounts. Previously the IRS lacked the funds and manpower to work on these old and inactive accounts; but not anymore. The four new private debt collection companies are located in Iowa, California, and two are in New York.
Ten types of delinquent tax accounts will remain with the IRS. The types of accounts that will not be sent to the private collection agencies are special cases, such as taxpayers who reside in officially declared disaster areas, victims of identity theft, and innocent spouse cases. See, IRS Private Debt Collection.
Taxpayers may request, in writing, to be transferred to the IRS for debt collection. The request is to be made to the private debt collection agencies. The private debt collectors, as a condition of receiving a government contract, must abide by the Fair Debt Collection Practices Act. Two notices will be sent advising the taxpayer of the transfer to private debt collectors; no phone calls will be placed until several notices have been sent. The debt collection companies will not ask for payment on a prepaid debit card, iTunes card, or gift card. Payments should be made directly to the U.S. Treasury and sent directly to the IRS, not the private collection agency.
It is important to note that these old and inactive delinquent tax accounts are subject to the statute of limitations. If you are one of the unfortunate who received the dreaded notice from the private debt collectors, it is important to immediately contact your tax resolution attorney. Your tax resolution attorney can ensure that the only tax debt you pay is what is actually owed under current law and that the amount you pay is the correct amount to be paid. Penalty abatements, installment agreements, and offers in compromise are still offered through the private debt collection agencies.
Saturday, December 21 2019
You achieved your dream. You bought a beach house in the Caribbean; or perhaps you bought a vacation home in Costa Rica or Mexico; you may even have been lucky enough to inherit a villa in Tuscany or a home in Greece. You opened a foreign bank account to pay the bills, have access to cash, or even just to deposit money from vacation rentals. You now have foreign reporting requirements.
Foreign reporting requirements were put in place to prevent U.S. taxpayers from hiding money overseas and to uncover what has already been hidden to avoid paying U.S. taxes. There is no place you can hide from the IRS! If you believe that you might be non-compliant, call us. We are here to help.
The key is to get compliant BEFORE you get any warnings or notification of potential non-compliance. Once you are on the radar, no penalty mitigation is possible.
Foreign Bank Account Reporting (FBAR)
It is interesting to note that FBAR form 114 is not part of the U.S. tax return. FBAR is a separate requirement with distinct and direct electronic filing requirements with the Financial Crimes Enforcement Network (FinCen). Further, there is no statutory authority to extend the time for filing and all requests for extensions are denied.
How Extensive is FBAR?
FBAR extends to U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States and trusts or estates administered under the laws of the United States.
FBAR applies annually to any U.S. taxpayer with a financial interest in, or a signature authority over any and all foreign financial accounts with the aggregate value exceeding ten thousand U.S. ($10,000) dollars in one day of a tax year even if it is only for one minute.
FBAR form 114 filing deadline for the year of 2018 is April 15, 2019, which coincides with the federal income tax filing season. The April 15, 2019 filing date is mandated by Public Law 114-41, section 2006(b)(11). Extensions of time to file a U.S. tax return DO NOT extend the time to file form 114.
Non-Willful Failure to Comply - $10,000 Penalty
Non-willful failure to comply with the FBAR filing requirement can result in a civil penalty not to exceed ten thousand ($10,000) dollars per year.
Willful Failure to Comply - $100,000 Penalty & Possible Felony Charges
Willful failure to comply with the FBAR filing requirement can result in a civil penalty of the greater of one hundred thousand ($100,000) dollars or fifty (50) percent of the balance in the account at the time of the violation, for each violation. Criminal penalties may also apply.
One simple “X” can cause financial ruin! In Kimble v. The United States, No. 17-421 (December 27, 2018), the United States Court of Federal Claims held that a taxpayer is deemed WILLFUL when the Schedule B (Form 1040) “No” box is checked, even if the taxpayer never read the tax return prior to signing and submitting. In Kimble, the FBAR penalty assessed for one year was $697,229 for willfully failing to disclose the family’s Swiss bank account and a French account.
Foreign Account Tax Compliance Act - FATCA
You are going to need a sip of your beverage for this one. Not only is there FBAR, there is also a Statement of Specified Foreign Financial Assets known as FATCA. FACTA applies to taxpayers with foreign financial assets, that exceed the threshold. FACTA is reported using Form 8938 and attaching it to the U.S. tax return.
The value of the financial asset is the maximum fair market value reached during the entire tax year reported.
How far does FATCA Extend?
FATCA includes foreign accounts reported on the FBAR. FATCA applies to all accounts owned, even if the financial assets of the account do not generate taxable, reportable income.
FATCA extends to U.S. persons including citizens, resident aliens, nonresident aliens who have elected to be treated as a resident for the purposes of filing a joint tax return, and nonresident aliens who are bona fide residents of American Samoa or Puerto Rico.
The reporting threshold, valued in U.S. dollars, is different for married, unmarried taxpayers and depends on whether the taxpayer resides inside or outside of the U.S. The threshold value is the total value of the specified foreign financial assets, not the individual value of each asset.
Failure to File - $10,000 Penalty
The penalty for failure to file Form 8938 by the due date for your annual return (see below), including extensions, is ten thousand ($10,000) dollars. Continued failure to file within ninety (90) days after IRS notification earns a penalty of ten thousand ($10,000) dollars for each thirty (30) day period up to a total of fifty ($50,000) dollars.
An annual return includes the following returns:
Forms: 1040, 1040NR, 1041, 1041-N
Forms: 1065, 1020, 1020-S
Forms: 1020, 1020-S
Covered Over a Beverage
Foreign reporting requirements are complex. The snippet of information here is what can be covered over a beverage. We are here to help.
Please contact Kelly should you require assistance in these areas. 407.704.7152 or email us at firstname.lastname@example.org