FBAR, Foreign Income Questions – Ask True Experts -Tax Attorneys, Lawyers, Former IRS

March 27, 2013
Written by: Fresh Start Tax


 

FBAR, Foreign Income Questions – Ask True Experts -Tax Attorneys, Lawyers, Former IRS    1-866-700-1040

 
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Tips for Taxpayers with Foreign Income

 
Fresh Start Tax LLC a professional tax firm wants to reminds U.S. citizens and residents who lived or worked abroad in 2012 that they may need to file a federal income tax return.
If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship.
 
Here are  tips taxpayers with foreign income should know:
1. Report Worldwide Income.
The  federal law requires U.S. citizens and resident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.
2. File Required Tax Forms.
In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Some taxpayers may need to file additional forms. For example, some may need to file Form 8938, Statement of Specified Foreign Financial Assets, while others may need to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, with the Treasury Department.
See Publication 4261, Do You Have a Foreign Financial Account?, for more information.
3. Consider the Automatic Extension.
U.S. citizens and resident aliens living abroad on April 15, 2013, may qualify for an automatic two-month extension to file their 2012 federal income tax returns. The extension of time to file until June 17, 2013, also applies to those serving in the military outside the U.S. Taxpayers must attach a statement to their returns explaining why they qualify for the extension.
4. Review the Foreign Earned Income Exclusion.
Many Americans who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $95,100 of their wages and other foreign earned income they received in 2012.
See Forms 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion, for more information.
5. Don’t Overlook Credits and Deductions. Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country.
This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income.
6. Use IRS Free File. Taxpayers who live abroad can prepare and e-file their federal tax return for free by using IRS Free File.
People who make $57,000 or less can use Free File’s brand-name software. People who earn more can use Free File Fill-able Forms, an electronic version of IRS paper forms. Free File is available exclusively through the IRS.gov website.
 

FBAR Overview

 
The Financial Crimes Enforcement Network (FinCEN) delegated to IRS its enforcement authority for penalties imposed under Title 31, Sections 5314 – 5321 for the failure to file Form TD F 90-22.1 Report Of Foreign Bank And Financial Accounts (FBAR).
 

Filing Procedure

 
Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, must be filed by US persons who have a financial interest in, signature authority, or other authority over one or more financial accounts in foreign countries with an aggregate value exceeding $10,000 at any time during the calendar year.
Failure to file this form may result in civil and/or criminal penalties.
These civil penalties may be appealed.
 

Where to File FBAR

 
FBAR reports are filed at the Enterprise Computing Center (ECC) in Detroit, Michigan. Filings can be researched on the Currency and Banking Retrieval System (CBRS) or on FBAR penalties may come to Appeals as stand-alone cases or together with a related income tax or international penalty.
FBAR penalties are an Appeals Coordinated Issue (Category of Case) and require a referral to International Operations prior to holding the first conference. International issue guidelines are available from the Appeals International Technical Specialist (ITS).
The FBAR penalty case will usually be received in Appeals pre-assessment. However, upon request, Appeals will also conduct post-assessment hearings as provided in Title 31 CFR 5.4 and 900 to consider FBAR penalty liability and collection.
 
Call us today and learn more about foreign income and any Fbar procedures you need to learn about.
All initial tax consultations are free.
 
FBAR, Foreign Income Questions – Ask True Experts – Tax Attorneys, Lawyers, Former IRS
 

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