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April 20, 2015

When if Failing to File an FBAR (form 114 - foreign account report) WillFul or Unwillful

The penalty for willfully failing to file the FBAR is the greater of $100,000 or 50% of the account balance at time of violation.  The penalty for a non-willful violation is up to $10,000.  The documents released in late 2014 by the IRS list some of the items that the IRS considers when determining whether an FBAR violation was willful:
Factors supporting a willful FBAR penalty:
  • Opened the foreign bank account
  • Owner of, or a financial interest in, the foreign account
  • Tax non-compliance
  • Did not seek advice, or relied upon the advice of a promoter, foreign banker, or other unqualified tax professional.
  • Violations persist after notification of FBAR reporting requirements
  • Foreign account not disclosed to return preparer
  • No business reason for the foreign account
  • No family or business connection to the foreign country
  • An offshore entity owns the account
  • Previously-filed FBARs do not include all foreign accounts
  • Illegal income in the foreign account
  • Participated in an abusive tax avoidance scheme
Factors not supporting a willful FBAR penalty:
  • Inherited the foreign bank account
  • Only signature authority over the foreign bank account
  • Tax compliance
  • Relied upon the advice of a tax return preparer, a CPA, an attorney, or another
    qualified tax professional.
  • Full compliance after notification of FBAR reporting requirements
  • Foreign account disclosed to return preparer
  • Business reason for the foreign account
  • Family or business connection to the foreign country
  • Person owns the account in his name
This week a district court held that the $10,000 per year penalty was valid and did not result in excessive penalties or denial of due process when the taxpayer had originally marked the Schedule B with a NO stating he had no foreign bank accounts when he actually did and had them for some time.  The amount kept abroad  in foreign banks was approximately $300,000.  The Court apparently felt that marking the box on Schedule B with a NO  was not unwillful.
The FBAR statute does not define what constitutes a separate FBAR "violation."  See 31 U.S. Code § 5321(a)(5).  Therefore,  the IRS could impose multiple FBAR penalties per year.  The documents released by the IRS use the example of an individual who failed to file the FBAR for three years to report two foreign accounts.  The IRS examiner would have the discretion to assert either (i) 6 violations, one per account per year, (ii) 3 violations, one per FBAR, or (iii) one violation for the entire three year period. The document  does state that "assertion of multiple penalties and the assertion of separate penalties for multiple violations with respect to a single FBAR form should only be taken in the most egregious cases." 

April 16, 2015


IRS  2014 Investigative Priorities: Criminal Investigation’s highest priority is to prosecute the following tax crimes:

  Identity Theft Fraud
  Return Preparer Fraud ; Questionable Refund Fraud
  International Tax Fraud
  Fraud Referral Program
  Political/Public Corruption
  Organized Crime Drug Enforcement Task Force (OCDETF)
  Bank Secrecy Act and Suspicious Activity Report (SAR) Review Teams
  Asset Forfeiture
  Voluntary Disclosure Program
  Counterterrorism and Sovereign Citizens FY14 Business Results:

In 2014 there were only 4,297criminal investigations initiated by the IRS and out of this there were only 3,110 criminal convictions..  This is from a total US population of approx 330 million people. Therefore, you have to be a pretty bad person or a special target for the IRS to even bother with seeking criminal prosecution.

April 13, 2015


The Internal Revenue Service  today reminded U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2014, that they may have a U.S. tax liability and a filing requirement in 2015.
Most People Abroad Need to File
A filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the foreign earned income exclusion or the foreign tax credit , that substantially reduce or eliminate their U.S. tax liability. These tax benefits are not automatic and are only available if an eligible taxpayer files a U.S. income tax return.
The filing deadline is Monday, June 15, 2015, for U.S. citizens and resident aliens whose tax home and abode are outside the United States and Puerto Rico, and for those serving in the military outside the U.S. and Puerto Rico, on the regular due date of their tax return. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for details.
Nonresident aliens who received income from U.S. sources in 2014 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 15 depending on sources of income. See Taxation of Nonresident Aliens on
Special Reporting for Foreign Accounts and Assets
Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014 must file with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). It is due to the Treasury Department by June 30, 2015, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR).
In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets.  Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.
IRS Simplifies Reporting for Canadian Retirement Accounts
The IRS has eliminated a special annual reporting requirement that has long applied to taxpayers who hold interests in either of two popular Canadian retirement plans. This is part of an IRS change announced in October making it easier for taxpayers with these plans to get favorable U.S. tax treatment. As a result, many Americans and Canadians with registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) no longer need to file Form 8891 each year reporting details on these plans. This change does not affect any other reporting requirements that may apply, such as FinCEN Form 114 and Form 8938.
Report in U.S. Dollars
Any income received or deductible expenses paid in foreign currency must be reported on a U.S. return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.
Both Form 114 and Form 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction.  Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.
Expatriate Reporting
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2014 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.
For more and help go to  Email

Michael Bolton sings an Emotional Song to the IRS

Go to the last 1/2 of this Video to see Michael Boltons emotional IRS song.

March 30, 2015

Expats - Retirement Costs Many Do Not Think About

Click here to see retirement costs you may not have considered in your retirement plan   If you plan to retire abroad, planning will help since every year various foreign locations become more expensive and the cost to retire may increase. Let help with your estate or retirement plan abroad (taking into account US tax and estate law) call us at

March 26, 2015

IRS International Tax Topic Index Will Answer Most Expat and International Tax Questions

The International Tax Topic Index is a gateway into IRS Tax Map specifically designed for taxpayers with international filing requirements. IRS Tax Map gathers all information about a topic in one place and contains topics from across the IRS.
You can find international topics using search or the  link below below. Use the search box on the left navigation bar to search all topics in Tax Map including international topics.
If you need further help with any question or assistance contact  our firm Kaufman Nelson LLP for assistance from an Attorney, CPA with over 30 years experience.  Ask for a mini consultation.  Email us at 

March 23, 2015

Six IRS Tax Tips about Reporting Foreign Income

Are you a U.S. citizen or resident who worked abroad last year? Did you receive income from a foreign source in 2014? If you answered ‘yes’ to either of those questions here are six tax tips you should know about foreign income:
1. Report Worldwide Income.  By law, U.S. citizens and residents must report their worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.
2. File Required Tax Forms.  You may need to fileSchedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts. See for more information.
3. Review the Foreign Earned Income Exclusion. If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $99,200 of your wages and other foreign earned income in 2014. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.  On top of that amount you may also be eligible for the foreign housing exclusion or deduction if you earn in excess of the foreign earned income exclusion.
4. Don’t Overlook Credits and Deductions.  You may be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.
5. Tax Filing Extension is Available.  If you live outside the U.S. and can’t file your tax return by April 15, you may qualify for an automatic two-month extension of time to file. That will give you until June 16, 2015, to file your U.S. tax return. This extension also applies to those serving in the military outside the U.S. You will need to attach a statement to your return explaining why you qualify for the extension.
6. Get  Tax Help.  Check the international services Web page for the types of help the IRS provides. 
For more on this topic refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. 
If you are preparing your own return and have questions, we can provide you with the answers in a mini consultation. Or if you want your return reviewed prior to filing with the IRS, we can do that too.  And of course, we also prepare expatriate, nonresident and international tax returns.  We have over 30 years experience preparing expatriate and nonresident tax returns. We are the experts you need.
Email for assistance at 

Additional IRS Resources:

March 17, 2015

Only 11% of Americas Living Abroad Are Filing the FBAR form 114 to Report their Foreign Financial Accounts

The U.S. State Department estimates that 7.2 million U.S. citizens live abroad, many of whom surely have reportable bank accounts, yet only a total of 825,000 FBAR reports were filed for 2012.  We can help you catch up by entering special programs such as the IRS Streamlined Program or Offshore Disclosure program which will reduce or eliminate your penalties for failing to file FBAR forms (114) or forms 5471, or 8865, etc.

Once the foreign banks and insurance companies start sending in data to IRS reporting their US account holders, you may be subject to penalties of $10,000 per year or more for your failure to file. Take action now before it is too late. They will not reduce penalties if they catch you first.  There are also criminal penalties up to five years in jail in addition to the failure to file penalties.

March 15, 2015

IRS Required Withholding on Payments to Foreign Companies and Individuals

U.S. Tax Withholding on Payments to Foreign Persons U.S. source income paid to foreign individuals amounts to $140 billion each year. Most types of U.S. source income paid to a foreign person are subject to a withholding tax of 30%, although a reduced rate or exemption may apply if stipulated in the applicable tax treaty.
General Rule
In general, a person that makes a payment of U.S. source income to a foreign person must withhold the proper amount of tax, report the payment on Form 1042-S and file a Form 1042 by March 15 of the year following the payment(s).
Withholding Agent
The person making the payment is considered to be the withholding agent. You are a withholding agent if you are a U.S.or foreign person that has control of any item of income of a foreign person that is subject to withholding.
withholding agent may be an:
 As a withholding agent, the payer is personally liable for any tax required to be withheld and which the payer fails to withhold. 
A payment to a foreign person is subject to withholding if it is from sources within the United States, and it is either:
  • Fixed or determinable annual or periodical ( FDAP) income, or
  • Certain gains from the disposition of timber, coal, and iron ore or from the sale or exchange ofintangible property (such as patents or copyrights)
Examples of FDAP income subject to withholding include (but are not limited to):
Withholding Agent Obligations
When you make a payment of U.S. source income to a foreign person or entity you are normally required to withhold U.S. income tax at a rate of 30% and report it on Forms 1042-S and 1042 by March 15 of the year following the payment(s).
The penalty for not filing Forms 1042-S and1042 when due (including extensions) is usually 5% of the unpaid tax for each month or part of a month the return is late, but not more than 25% of the unpaid tax. Additional penalties apply for failure to provide complete and correct information or if you fail to provide a complete and correct statement to each recipient. The maximum penalty is $100,000 per year.
More detailed information on this subject can be found in the links below. Contact us if you need more information for your particular situation. 
1042   Annual withholding tax return for US Source income of foreign persons
1042-S.  Foreign persons U.S. source income subject to withholding
Non Resident Alien Withholding  Information from
Publication 515   Withholding of tax on nonresident aliens and foreign entities

March 9, 2015

The Best and Worst States to be a Taxpayer

Read this link to see the best and worst states to live in as a taxpayer. As an expat there is not law that says you must have a state of residency or file state tax returns. However, some states including California, Virginia, Alabama, New Mexico and others have state laws that make it very difficult to give up your state tax domicile even if you move abroad permanently.  We can help with this process of abandoning tax domicile in those states. 

15 Ways to Invite an IRS Audit

February 17, 2015

Filing From Abroad? Use DHL, Fed Exp, or UPS - Use the Following Street Addresses to Assure Delivery

Private Delivery Services should deliver returns to only the following Submission Processing Center street addresses:
Austin - Internal Revenue Submission Processing Center 3651 S IH35,
 Austin TX 78741
Cincinnati - Internal Revenue Submission Processing Center  201 West Rivercenter Blvd.,
 Covington, KY 41011
Fresno - Internal Revenue Submission Processing Center 5045 East Butler Avenue,
 Fresno, CA 93727
Kansas City - Internal Revenue Submission Processing Center 333 W. Pershing,
 Kansas City, MO 64108
Ogden - Internal Revenue Submission Processing Center 1973 North Rulon White Blvd.
 Ogden, UT 84404

Send your returns to the submission processing center designated for your type of return: Where to File Tax Returns - Addresses Listed by Return Type

February 16, 2015


The IRS has prepared several documents that help explain those requirements, including FS-2011-13 and the U.S. Citizens and Resident Aliens Abroad page on Situations of taxpayers with offshore compliance issues vary widely given the complexity of this area of tax law.  Taxpayers that recently learned of these tax requirements have many options are available outside of the normal filing process to help them get current with their tax obligations.  A number of the common situations and potential solutions are outlined below.
The IRS recommends taxpayers to consult with their professional tax advisor in determining which option is the most appropriate given their facts and circumstance.  We at have helped over a hundred clients catch up with the IRS.  If you need to talk about this email us at .  We are both attorneys and CPAs. As attorneys we can offer you  complete attorney client privilege (and all of its confidentiality and privacy) on all information we discuss. Regular accountants cannot provide you with that privilege and the IRS can force them to reveal information.

Situation Compliance Option 
Taxpayers who have properly reported all taxable income but recently learned that he/she should have been filing FBARs in prior years to report a personal foreign bank account or to report signature authority over bank accounts owned by an employer.
Taxpayers who reported, and paid tax on, all their taxable income for prior years but did not file FBARs, should file the delinquent FBAR reports according to the instructions (send to Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621) and attach a statement explaining why the reports are filed late.

The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.
Taxpayers who only have certain delinquent information returns, but no tax due. 
A taxpayer who has failed to file tax information returns, such as Form 5471 for controlled foreign corporations (CFCs) or Form 3520 for foreign trusts but who has reported, and paid tax on, all their taxable income with respect to all transactions related to the CFCs or foreign trusts, should file delinquent information returns with the appropriate service center according to the instructions for the form and attach a statement explaining why the information returns are filed late. (The Form 5471 should be submitted with an amended return showing no change to income or tax liability.)
The IRS will not impose a penalty for the failure to file the delinquent Forms 5471 and 3250 if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.
Non-resident U.S. taxpayers with delinquent returns with low risk factors (including tax owed less than $1,500/year).Filing Compliance Procedures for Non-Resident U.S. TaxpayersNon-resident U.S. taxpayers should file delinquent tax returns, including delinquent information returns, for the past three years; delinquent FBARs for the past six years; and additional required information regarding compliance risk.  Payment of any federal tax and interest due must accompany the submission.
Taxpayers with undisclosed foreign accounts and unreported income.  Taxpayers seeking protection from criminal prosecution.   
 Offshore Voluntary Disclosure ProgramThe Offshore Voluntary Disclosure Program (OVDP) offers a civil settlement structure in which taxpayers pay an offshore penalty in lieu of a number of other penalties that may be assessed in cases of offshore noncompliance.  The OVDP also offers protection from criminal prosecution.  In order to participate in the OVDP, taxpayers must first request acceptance into the program.  Once they have been preliminarily accepted, taxpayers must submit certain information including eight years of amended tax returns, FBARs, and information returns as well as information about their offshore accounts.  In addition, taxpayers must submit full payment of the tax and interest due, and certain penalty amounts. 
Taxpayers who have entered OVDP who disagree with the application of the offshore penalty given the facts and circumstances of their case may elect to opt out of the civil settlement structure of the program.  In such situations, the IRS will determine if penalty mitigation is appropriate.

Additional Information


February 3, 2015

Heirs Can Be Left With Unpaid Tax Bills to IRS

If you inherit property from someone who owes taxes, you may be liable. Read more in the Forbes Article HERE  The problems are increased when the deceased benefactor has undisclose offshore accounts, etc.  Do your estate planning now, surface with the IRS and avoid this problem.  Email us at

January 31, 2015

Most Expata and Nonresidents May Be Exempt from US Health Care Tax or Required Insurance Coverage

Many  US taxpayers are exempt from Obama Care  (ACA) for 2014.   One exemption is expats who live and work abroad. See below:

Citizens living abroad and certain noncitizens - You are:
  • A U.S. citizen or resident who spent at least 330 full days outside of the U.S. during a 12-month period;
  • A U.S. citizen who was a bona fide resident of a foreign country or U.S. territory;
  • A resident alien who was a citizen of a foreign country with which the U.S. has an income tax treaty with a nondiscrimination clause, and you were a bona fide resident of a foreign country for the tax year; or
  • Not a U.S. citizen, not a U.S. national, and not an alien lawfully present in the U.S.

To read about the other exemptions  from the US ACA health care law, and tax read the following link

We are ready to help you with these complex rules.   We offer a mini consultation to give you answers to all of your expat and international tax questions. We also offer a service to review self prepared expat returns or foreign tax forms which is much less costly than having us prepare the returns.  Email. 

January 27, 2015

US Expatriates - Every Resource You Need to Know about filing Taxes When Living Abroad

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

When to File

If you are a U.S. citizen or resident alien residing overseas, or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an automatic 2-month extension to file your return without requesting an extension. For a calendar year return, the automatic 2-month extension is to June 15.  Note that you must pay any tax due by April 15 or interest will be charged starting from April 15.

Where to File

If you are a U.S. citizen or resident alien (including a green card holder) and you live in a foreign country, mail your U.S. tax return to:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215

Filing Requirements 


U.S. Residency Status








Other Taxes



 When you need more help go to our website at www.TaxMeLess or 

We offer a service to review your self prepared return or one prepared by another for correct application of the complex expat and international tax laws. Email for more