If you own an account in a foreign bank, make sure you are in compliance with your reporting responsibilities. The penalties are VERY high for reporting failures. If the balance in a bank account(s) is greater than $10,000 then you need to file a FBAR or FinCen (Financial Crimes Enforcement Network) Report 114. The civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50% of the total balance of the foreign account per violation. Non-willful violations are subject to a $10,000 penalty per violation.

You may also have a reporting requirement to file Form 8938 with your return if you have an interest in specified foreign financial assets exceeding $50,000 (Single) or $100,000 (Married) on the last day of the year or more than $75,000 (Single) or $150,000 (Married) at any time during the tax year. Specified foreign financial assets include financial accounts, foreign securities, and interest in foreign entities. Penalties for failure in filing this form can approach a maximum of $50,000 per return.

There are also complex reporting requirements relating to ownership in any foreign corporations or partnerships or if you are the beneficiary of a foreign trust.

Be smart when you file your taxes and disclose all of your foreign holdings to your tax professional no matter how big or small to insure that you are meeting all of your reporting requirements to avoid this potentially very costly area of legislation.

~ Debby Jacobs, CPA

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