IRS Streamlined Filing Compliance Procedures explained by Richard S. Leh...

OVDP IRS Streamlined Offshore Voluntary Disclosure Program

IRS removes Cuba from list of countries with foreign tax restrictions

IRS removes Cuba from list of countries with foreign tax restrictions
The IRS has removed Cuba from the so-called “IRC §901 blacklist” of foreign countries from which US taxpayers may not be entitled to a foreign tax credit. Removal of Cuba from this list means that US taxpayers are now entitled to the benefit of a foreign tax credit to any income attributable to Cuba. Income earned in Cuba through a controlled foreign corporation will no longer be Subpart F income barred from deferral treatment under IRC §952(a)(5).

The restrictions are lifted as of December 21, 2015, based upon certification by the Secretary of State that Cuba is no longer a country described in IRC §901(j)(2)(A). That section applies to any country with whom the US does not maintain diplomatic relations or that is designated by the State Department as a country that supports international terrorism.

FBAR Deadlines Changed

FBAR Deadlines Changed

• On July 31, 2015, President Obama signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, which modifies the due date for Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN Form 114) for any American living abroad and any American with a foreign financial account(s). 
• Any US person holding a financial interest in or having signatory authority over a foreign financial account, must file FBAR, when the aggregate value of their foreign account(s) exceeds $10,000 at any time during the year. FBAR includes any account which a person has signature authority, regardless of ownership interest.
• New due date for the FBAR is April 15th, with a maximum 6-month extension until October 15th. For US citizens living abroad, the deadline is June 15th. New deadlines are effective for 2016 tax returns, due in 2017. 

See FBAR details here: blog post.

New FBAR Extension and Due Dates: Surface Transportation and Veterans Health Care Choice Improvement Act

New FBAR Extension and Due Dates:

• Surface Transportation and Veterans Health Care Choice Improvement Act changes the deadline for FBAR Reporting from June 30th to April 15th, the same due date as an individual tax return. 
• Under new law FBAR (FinCEN Form 114) can be extended for a period of six months ending October 15th, just as an Individual tax return. 
• IRS and/or FinCEN need to provide further clarification on the format or forms for such extensions, which may be similar to Form 4868, the form used to request extensions on Individual tax returns. There may be a requirement that these extensions be filed on the BSA E-filing Website as in the case of the FBAR forms. 
• For those who are not resident in the United States and have to file a US tax return, there is an automatic 2-month extension until June 15th, under §1.6081-5. Under new law, this extension is available to any FBAR filing as well. 
• For those who are filing an FBAR for the first time, new law specifically states that, "for any taxpayer required to file [an FBAR] for the first time, any penalty for failure to timely request or file an extension, may be waived by the Secretary." 
• The above due dates are applicable for returns filed after December 31st, 2015.

Due dates for Trust returns: Foreign trusts with US Owners and transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, Form 3520-A and Form 3520.

• Form 3520 and Form 3520-A Deadlines: 
• The due date for Form 3520-A is March 15th with a maximum 6-month extension until September 15th. Form 3520 is due with the tax returns on April 15th and the maximum extension allowed is 6-months ending October 15th.
• file a Form 3520, if the following apply:
1. Gifts or bequests more than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate); or
2. Gifts more than $15,102 (for 2014) from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships).
• The due date for Form 3520 tax return is the same as the individual tax filing date (April 15th) including extensions (October 15th). You need to include copies of appraisals; copies of documents showing transfer; documentation of unusual items.
• file a Form 3520-A 
• Any foreign trust with a US owner must file Form 3520-A in order for the US owner to satisfy its annual information reporting requirements under IRC §6048(b). Each US person treated as an owner of any portion of a foreign trust under §§671 through 679 is responsible for ensuring that the foreign trust files Form 3520-A and furnishes the required annual statements to its US owners and US beneficiaries. 

New Form 1099 draft instructions include FATCA update

New Form 1099 draft instructions include FATCA update
The IRS recently released draft instructions for several 1099 forms, which include a change related to the Foreign Account Tax Compliance Act (FATCA). The update was made for Form 1099-MISC, Miscellaneous Income; Form 1099-DIV, Dividends and Distributions; Form 1099-OID, Original Issue Discount; and Form 1099-INT, Interest Income.

The change is the addition of a checkbox for foreign financial institutions (FFIs). It refers to the FFIs chapter 4 filing requirements.

"Beginning in 2014, an FFI with a chapter 4 requirement to report a US account maintained by the FFI that is held by a specified US person may satisfy this requirement by reporting on Form(s)1099 under the election described in Regulations section 1.1471-4(d)(5)(i)(A)," the instructions read.

The instructions went on to say US payors can fulfill their chapter 4 obligations using the check box.

Bibliography: convey.com, irs.gov

Foreign Financial Asset Disclosures

Foreign Financial Asset Disclosures

• In IR-2014-73 the IRS has announced changes in two of its programs related to offshore accounts. 
• The IRS has modified the terms of the Offshore Voluntary Disclosure Program (OVDP), which allows individuals to avoid criminal prosecution if they disclose their foreign accounts and pay a substantial penalty. 
• The IRS has expanded the streamlined filing compliance process, or “streamlined procedures,” which are aimed at US taxpayers who have failed to disclose their foreign accounts but who are not willfully evading their tax obligations. These programs are part of a wider effort to stop offshore tax evasion, which includes enhanced enforcement, criminal prosecutions, and implementation of third-party reporting via the Foreign Account Tax Compliance Act (FATCA). 

Changes include:

• Additional taxpayer information requirements. 
• Taxpayers are no longer exempt due to a "risk" questionnaire and unpaid taxes of less than $1,500. Treasury Department and Department of Justice have pledged to pursue every non-compliant person. 
• Taxpayers must submit all account statements and pay the offshore penalty at the time of the OVDP application. 
• Taxpayers are allowed to submit voluminous records and supporting documents electronically rather than on paper. 
• To be in compliance when submitting an OVDP Application, accounting must be complete and accurate and payments must be made in full. 
• US Taxpayers residing in the US can be subject to a special 5% OVDP asset penalty. 
• US taxpayers living abroad may apply to have OVDP asset penalties waived. 
• Increased penalties, (27.5% to 50%), incentive for holders of hidden assets to come in sooner if they are concerned about the possibility of an investigation, for taxpayers who invest in institutions that are under DOJ federal investigation. 
• A non-willful conduct testament can assist some taxpayers with compliance. 
• Penalties can be eliminated for some non-willful taxpayers. 
• The 50% penalty is comprehensive and applies to foreign partnerships, stock holdings and all other investments. 

Foreign Account Reporting Requirements

• There are a number of reporting requirements for taxpayers with foreign accounts. 
• Affected taxpayers must fill out and attach to their 1040 tax return, Schedule B, which asks about the existence of foreign accounts, (check "Box B" Yes or No). 
• Some taxpayers have to fill out Form 8938, Statement of Foreign Financial Assets. 
• Other filing requirements apply to foreign trusts. 
• Taxpayers with foreign accounts whose aggregate value exceeds $10,000, at any time during the year, must file a Form 114, Report of Foreign Bank and Financial Accounts (FBAR) electronically through the Financial Crimes Enforcement Network’s (FinCEN) BSA E-Filing System. 
• Failure to comply with applicable reporting requirements can result in civil and criminal penalties.

On July 1, 2014, the new information reporting regime instituted by FATCA will go into effect. Thousands of foreign financial institutions will begin to report to the IRS the foreign accounts held by US persons.

Courtesy:  MaSEA

References: CCH

IRS Offshore Voluntary Disclosure Efforts Produce $6.5 Billion; 45,000 Taxpayers Participate

Tax Implications of Internet Currencies

Tax Implications of Internet Currencies

Not surprisingly in IRS Notice 2014-21 the IRS concluded that virtual currency transactions for services and goods had tax consequences. Virtual currency is a growing digital phenomenon where internet users trade real currency for board game dollars, like Monopoly. BitCoin has the most virtual currency activity. Refer to: weusecoins.com for background about internet currency.

The IRS clearly determined this digital currency activity is a property transaction that is measured by the FMV equivalent in US Dollars. The notice contains several key declarations.

• No foreign currency gain or loss is allowed
• 1099 reporting requirements exist
• A business/hobby determination is required
• Payroll and self-employment taxes are required for services and compensation
• Sections 6662, 6721, and 6722 penalties can be applied.

IRS Notice 2014-21 was written by the division of self-employment taxes within the Chief Counsel's Office. When reviewing your internet activity keep in mind the requisites of bartering activities and retain an internet money transaction log as part of your recordkeeping.
Courtesy: Massachusetts Society of Enrolled Agents

• BitCoin received in connection with a trade or business or received as wages is subject to ordinary income treatment at time received. BitCoin held for less than a year prior to disposition may be declared short-term capital gains or foreign exchange gains, receiving ordinary income treatment. BitCoin held more than one year prior to disposition, may be declared long term capital gains (with proper records) or foreign exchange gains.
• Don’t forget to include BitCoin activity when calculating your net investment income tax (NIIT).  If you are fortunate enough to have MAGI over the threshold amounts ($200,000 Single/$250,000 MfJ), BitCoin gains may be subject to NIIT. The statutory definition for net investment income includes interest, dividends, capital gains, rental and royalty income, income from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to a taxpayer. BitCoin could fall into several of these categories, depending on your personal circumstances. Non-passive business income is not subject to the NIIT tax.
• Declare foreign banking activity by filing a Foreign Bank Account Report (FBAR), if necessary. US persons (citizens, residents and entities created in the US) must file the FBAR if, at any time during the year, they had a financial interest or signature authority over a foreign financial account with a value of more than $10,000. A wallet with an exchange located in a foreign country, such as Mt. Gox, (Mt. Gox was a BitCoin exchange based in Tokyo, Japan) would cause the taxpayer to be subject to the FBAR rules. Note that the reporting threshold applies to your account balance on every day of the year, not the average balance or balance on just the last day. The FBAR threshold is also crossed when multiple foreign financial accounts have an aggregate value of greater than $10,000.

FBAR Reporting

FBAR Reporting

• "Signature authority"... needs to be reported on electronic-FBAR even if another entity holds the assets. e.g. Fred & Wilma own an LLC 50%/50%. LLC has foreign account over $10K. Because Fred & Wilma have signature authority over account (even though neither one of their ownership's exceeds 50%) they need to file an FBAR disclosing signature authority. And of course, the LLC needs to file its own FBAR as owner of a foreign account over $10K.
• Beneficiaries of a Defined Benefit (DB) plan (pension plan) do not need to file FBAR.
• Beneficiaries of a Defined Contribution (DC) plan DO need to file FBAR.
• It doesn't matter how you acquire the funds (inheritance), if its a foreign account, needs FBAR reporting.
• Gold coins in a foreign safety deposit box do NOT need FBAR reporting. these are considered personal assets and not a foreign account.
• FBAR is not a report of income or assets, simply a report of foreign accounts.
• BitCoin (virtual currency), is reportable on FBAR -- stay tuned...
• Declare foreign banking activity by filing a Foreign Bank Account Report (FBAR), if necessary. US persons (citizens, residents and entities created in the US) must file the FBAR if, at any time during the year, they had a financial interest or signature authority over a foreign financial account with a value of more than $10,000. A wallet with an exchange located in a foreign country, such as Mt. Gox, (Mt. Gox was a BitCoin exchange based in Tokyo, Japan) would cause the taxpayer to be subject to the FBAR rules. Note that the reporting threshold applies to your account balance on every day of the year, not the average balance or balance on just the last day. The FBAR threshold is also crossed when multiple foreign financial accounts have an aggregate value of greater than $10,000.
• You do not have to have a US SSN to file an FBAR. alternatively, you can use Block 4 for Passport # or Gov't issue ID with explanation... (use Block 3 for US SSN or Tax ID).
• Canadian RSP accounts (IRAs) and Mexican AFORE accounts (IRAs) are FBAR reportable.
• If you don't have all necessary foreign account info by June 30th, file the FBAR with what you have, and come back later and amend once info is available. No extensions, June 30th deadline.
• FinCEN is responsible for FBAR under Title 31USC, BSA. IRS examines for FBAR compliance.
• BSA laws say; any foreign account over $10K at anytime during the year requires FBAR. FBAR attempts to track illicit foreign accounts used for money laundering, terrorism...

Question: When a preparer is willing to help clients with filing their FBAR (FinCEN Report 114) through FinCEN's BSA E-Filing System, can the preparer fill out the information online for the taxpayer?

Answer: Yes, provided the preparer registers as an institution on the BSA website. When you go to File the Report of Foreign Bank and Financial Accounts (FBAR) as an Individual, there is a note that says, “A non-individual FBAR filer, such as an attorney, CPA, or an enrolled agent filing the FBAR on behalf of a client must register to Become a BSA E-Filer and file as an institution rather than an individual.” You must Become a BSA e-Filer to register and submit forms as a business.

Furthermore, a taxpayer will use Form 114a, Record of Authorization to Electronically File FBARs, to give the preparer authority to file the FBAR on behalf of the taxpayer.

FBAR: Form FinCEN 114 replaces TD F 90-22.1

FBAR: Form FinCEN 114 replaces TD F 90-22.1 replaced

• On September 30th, 2013, the Financial Crimes Enforcement Network (FinCEN) made a very important change to the FBAR form which will effect it's filing for 2014. 
• Form FinCEN 114 reporting threshold (total value of foreign assets) is $10,000 at any time during the calendar year.

What Are The Changes:

• The FinCEN Form 114 supersedes TD F 90-22.1 as the official FBAR form. 
• The new FinCEN Form 114 is only available online on the BSA E-Filing System website. 
• A paper copy of the FinCEN Form 114 will not be accepted. 
• The system allows the filer to enter the calender reported, including past years on the online form. 
• The online form offers an option to explain a late filing. 
• It also lets you indicate if a filing is being made in conjunction with an IRS compliance program. 
• If you are filing FBAR with your spouse jointly or if you wish to have a third party preparer file your FBARs on your behalf, you can use the new FinCEN Form 114a. Form 114a is not filed with the Form 114 but maintained with the FBAR records by the filer. 

BSA E-Filing System

• The taxpayer has to go on the website and can download an Adobe PDF version of the FBAR, fill out the report, sign & save a copy & then submit the FBAR on the BSA Website. 
• Or the taxpayer can designate their EA, CPA or attorney to file on the BSA website on their behalf. 

Becoming a BSA Filer:

• An Enrolled Agent, CPA or Attorney can become a designated third-party filer. 
• The EA, CPA or attorney must make sure they have documented authority from the taxpayers required to file to sign & submit FBARs on their behalf through the BSA E-Filing System. 
• If such authority has been provided, the EA, CPA or attorney can file the FBARs through the single BSA account established for them. 
• Professional tax software programs may have included the FinCEN Form 114, enabling e-fling with the BSA Website. 

FBAR (Foreign Bank Account Report FinCEN 114) due no later than June 30th annually.

• The electronic version of the FBAR is currently available and must be filed electronically effective July 1, 2013.
• To file an FBAR report
• Line Item Instructions for completing the FBAR (Form 114)
• Record of Authorization to Electronically File FBARs (Form 114a) Click on the link to open the form to authorize spouse (if filing jointly) or a third party (individual or entity) to file the FBAR on your behalf. This form may be completed and saved electronically. Follow the instructions and complete all of the requested information. The filer and the account owner should maintain a copy of the completed form. The form must be made available upon request by FinCEN or the IRS. 
• Special notice for 2013 filings due by June 30, 2014

New Reporting Requirements by US Taxpayers Holding Foreign Financial Assets (Form 8938)

• Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. File Form 8938 if max value of account(s) exceeds $50,000 at any point during the year. Must use US Treasury FMS website Treasury Reporting Rates of Exchange to calculate foreign currency exchange rate. 
• The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web page.
• Attach Form 8938 Statement of Specified Foreign Financial Assets to Form 1040 if max value of account(s) is more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the tax year

Offshore Voluntary Disclosure Program

• On Jan 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

Net Investment Income Tax

Net Investment Income Tax
Starting in 2013, some taxpayers may be subject to the Net Investment Income Tax. You may owe this tax if you have income from investments and your income for the year is more than certain limits. Here are four things from the IRS that you should know about this tax:

1. Net Investment Income Tax.  The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.

2. Net investment income.  This amount generally includes income such as:

• interest
• dividends
• capital gains
• rental and royalty income
• non-qualified annuities

This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony. Net investment income also does not include any gain on the sale of your main home that you exclude from your income.

After you add up your total investment income, you then subtract your deductions that are properly allocable to this income. The result is your net investment income. Refer to the instructions for Form 8960, Net Investment Income Tax for more on how to figure your net investment income or MAGI.

3. Income threshold amounts.  You may owe the tax if you have net investment income and your modified adjusted gross income is more than the following amount for your filing status:

Filing Status	Threshold Amount
Married filing jointly	$250,000
Married filing separately	$125,000
Single	$200,000
Head of household (with qualifying person)	$200,000
Qualifying widow(er) with dependent child	$250,000

4. How to report.  If you owe this tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enough estimated taxes, you may have to pay an estimated tax penalty.

For more on this topic visit IRS.gov/aca. You can also get tax forms on IRS.gov or by mail by calling 800-TAX-FORM (800-829-3676)
Net Investment Income Tax FAQs
Tax Topic 559 - Net Investment Income Tax

Bitcoin News

Bitcoin

• New IRS guidance treats Bitcoins and other crypto-currencies not as money, but as property, for tax purposes and applies immediately to all returns. See the full text of Notice 2014-21. IRS Virtual Currency Guidance
• Regardless of what Bitcoin’s creators and promoters may say, as far as the IRS is concerned, bitcoin is not money or currency. The IRS will treat bitcoin holdings much like corporate stock or other property (IRS Notice 2014-21).
• Bitcoin are created by a digital “mining” process and is not backed or regulated by any government, central bank or other legal entity. Some claim this makes Bitcoin safer than traditional currency because its value can’t be manipulated by central banks or governments.
• Bitcoin can also be directly transferred anonymously across the Internet. This can make the Bitcoin a cheap way to settle international transactions because there are no bank charges to pay or exchange rates to deal with.
• No one has to accept Bitcoin as money. Nevertheless, a growing number of merchants are accepting them. In fact, a Manhattan real estate broker recently announced that it would start accepting payments in Bitcoin.
• Interestingly, people buy and sell Bitcoin for dollars on online exchanges — much like gold.
• Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, Wage and Tax Statement, and are subject to federal income tax withholding and payroll taxes.
• Payments using virtual currency made to independent contractors and other service providers are taxable, and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
• Payments made using virtual currency will be subject to the same information-reporting rules as any other payment made in property.
• The IRS warns that taxpayers who treated virtual currencies in a manner inconsistent with IRS Notice 2014-21, before the date the notice was issued, will not get penalty relief, unless they can establish that their underpayment or failure to properly file information returns was due to "reasonable cause".

References:
inmanNEWS, "IRS’ Bitcoin Guidance Turns Every Transaction into a Reportable Capital Gain or Loss at Tax Time",  Stephen Fishman, Contributor, March 31, 2014

IRS Notice 2014-21

Journal of Accountancy, "New Guidance Clarifies Tax Treatment of Bitcoin and Other Virtual Currencies", Alistair M. Nevius, JD, March 25, 2014

New FinCEN Form 114 replaces FBAR Form TD F 90-22.1

New FinCEN Form 114  replaces FBAR Form TD F 90-22.1

• If you have a financial interest in or signature authority over foreign financial account(s), individually or in total which are $10,000 or more at any time during the calendar year, the Bank Secrecy Act (BSA) requires you to report the account to the Internal Revenue Service. 
• On September 30th, 2013, the Financial Crimes Enforcement Network (FinCEN) made a very important change to the FBAR form which will effect it's filing for 2014. 
• Attach Form 8938 Statement of Specified Foreign Financial Assets to Form 1040 if max value of account(s) exceeds $50,000.

New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938) 

• Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. File Form 8938 if max value of account(s) exceeds $50,000 at any point during the year. Must use US Treasury FMS website Treasury Reporting Rates of Exchange to calculate foreign currency exchange rate.
• The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web page.

Offshore Voluntary Disclosure Program

• On Jan 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program following continued interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

Here Are The Changes:

• The FinCEN Form 114 supersedes TD F 90-22.1 as the official FBAR form. 
• The new FinCEN Form 114 is only available online on BSA E-Filing System. 
• A paper copy of the FinCEN Form 114 will not be accepted. 
• The system allows the filer to enter the calender reported, including past years on the online form. 
• The online form offers an option to explain a late filing. 
• It also lets you indicate if a filing is being made in conjunction with an IRS compliance program. 
• If you are filing FBAR with your spouse jointly or if you wish to have a third party preparer file your FBARs on your behalf, you can use the new FinCEN Form 114a. This form is not filed with the Form 114 but maintained with the FBAR records by the filer. 

BSA E-Filing System website

• The taxpayer has to go on the website and can download an Adobe PDF version of the FBAR, fill out the report, sign and save a copy, then submit the FBAR on the BSA Website. 
• Or the taxpayer can designate their EA, CPA or attorney to file on the BSA website on their behalf. 

Becoming a BSA Filer:

• An Enrolled Agent, CPA or Attorney can become a designated third-party filer. 
• The EA, CPA or attorney must make sure they have documented authority from the tax payers required to file to sign and submit FBARs on their behalf through the BSA E-Filing System. 
• If such authority has been provided, the EA, CPA or attorney can file the FBARs through the single BSA account established for them.

20 tax tips for small businesses

20 tax tips for small businesses
The Internal Revenue Service sent letters to thousands of small-business owners recently, questioning whether they underpaid their taxes last year. 

Titled “Notification of Possible Income Under Reporting,” the letters were mailed to small employers this summer requesting that they review and confirm that they accurately reported their income on their 2012 tax returns.

In response to this action by the IRS, American University professors Donald Williamson and David Kautter have created a list of “Tax Best Practices for Small Businesses,” a checklist designed to help small business entrepreneurs stay up to date on all tax-related issues, and away from the scrutiny of 
the IRS. 

Here’s what Williamson & Kautter recommend small-business owners should do: 

1. Keep good records about who is an “employee” and who is an “independent contractor.” 
2. Keep track of places where you may have "nexus" (“physical presence”) (even unknowingly), to properly comply with state rules governing sales and income tax collection. 
3. Invest in a good software accounting system — to track your records and regularly provide updates to new IRS rules. 
4. Hire a tax accountant who has experience in your type of business, whether it’s a coffee shop or a construction business. 
5. Keep good records on how much was paid and the date placed in service, for any equipment, vehicles or other business assets. 
6. Avoid using funds from employee payroll tax withholding (or any taxes, for that matter) as a short-term loan to tide your business over during a shortfall in your cash flow. 
7. One of the biggest traps for small-business taxpayers is estimated taxes — pay quarterlies on time, calculate quarterlies correctly, and know the safe harbors that can protect you against underpayments.  Miscalculating any of these steps can be a major headache, so small-business owners should speak with someone, most likely a tax accountant or enrolled agent, who knows the rules cold. 
8. If you are the owner, and your spouse, child, mother-in-law, or other close relative works in your business, you should make sure your relative abides by the same employment rules as your unrelated employees. When someone pays you in cash, it doesn’t mean that payment is nontaxable.
9. Select a “tax year” for your business that reflects the natural ebb and flow of your business’ receipts and disbursements. This way, you won’t get caught in a cash crunch when tax time comes. 
10. You (or your accountant) should retain all relevant tax records for at least three years, and if your records relate to property and depreciation, you should keep the records until the property is disposed of, plus an additional three years. 
11. Keep detailed records on how you use your personal or business-owned vehicle for business versus personal purposes. 
12. Hire a reputable third-party administrator (such as Fidelity or Vanguard) to manage your 401(k) plan and other tax-favored employee benefits. 
13. Make sure you (and your tax accountant) are familiar with the tax rules, including the favorable tax credits and deductions that are unique to your business. 
14. If it becomes necessary for your small business to open a foreign bank account in order to pay vendors or others in a foreign country, make sure you (and your tax accountant) are vigilant in following the new rules on foreign bank accounts enacted in the Foreign Account Tax Compliance Act, or FATCA. (FBAR reporting)
15. If your hope is that your business will continue after you die, under the leadership of another family member or designated heir, you should take steps to protect the business against a forced sale in order to pay inheritance taxes. 
16. Don’t become foolishly emboldened into thinking the IRS will have to “prove” you have done something contrary to the tax law. The "burden of proof" is always on the taxpayer, not the IRS. 
17. Become familiar with the tax rules surrounding starting, running, selling and shutting down a business. Determine whether you should operate as a Partnership, Corporation, S-Corp, LLC, or Sole Proprietorship. Your tax accountant should be closely familiar with these rules. 
18. Have a one-on-one conversation with your accountant about the Affordable Care Act. 
19. If you can’t pay the taxes you owe the IRS, or other tax agency, you should contact your accountant right away. The situation won’t get any better by ignoring it.
20. When someone pays you in cash, it doesn’t mean that the payment is nontaxable. The IRS has state-of-the-art statistical technology and models based on spending habits and bank accounts to build a case against alleged tax scofflaws.

Courtesy:  accounting today | October 2013 accountingtoday.com

Donald Williamson & David Kautter

Filing FBARs Electronically

Filing FBARs Electronically
...on behalf of my clients, here are five items that will be useful to know:
1.  An IRS Form 2848 will suffice to provide "documented authority" to e-file the FBAR.
2.  FinCEN is in the process of creating its own power of attorney form (though we've strongly suggested that continued use of the already common Form 2848 would be highly desirable given that so many individuals turn to their enrolled agents and other tax pros to file the FBAR.)
3.  If an attorney, CPA or EA files on behalf of his client, they are expected to retain (for five years) proof of your authority to do so. This proof may be maintained in electronic format.
4. FinCEN Form 114 supersedes TD F 90-22.1 (the FBAR form that was used in prior years) and is only available online through the BSA E-Filing System website. Report of Foreign Bank and Financial Accounts (FBAR) :: FinCen

5. File Form 8938 if max value of account exceeds $50,000 at any point during the year. Must use US Treasury FMS website Treasury Reporting Rates of Exchange to calculate foreign currency exchange rate.

Can an attorney, CPA or EA submit an FBAR via the BSA E-Filing System on behalf of a client?
Yes.  An attorney, CPA or EA may always assist his client in the preparation of electronic BSA forms for BSA E-Filing, including the FBAR. Consistent with FinCEN's recent proposal to provide for approved third-party filing of the FBAR, if an attorney, CPA or EA has been provided documented authority by the legally obligated filers to sign and submit FBARs on their behalf through the BSA E-Filing System, that attorney, CPA or EA can do so through a single BSA E-Filing account established for the attorney, CPA or EA. If such authority is not provided, the filings must be signed and submitted through a BSA E-Filing account unique to each client.

FBAR News

FBAR News
With the upcoming June 30th deadline to file 2013 FBAR forms for US Taxpayers with foreign accounts over $10,000 and so much News regarding FBAR's, it's a good time to review the FBAR requirement as well as the news relating to the IRS' Enforcement Efforts regarding FBAR's and Offshore Voluntary Disclosures, including:

1. Report of Foreign Bank and Financial Accounts (FBAR)
2. New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938)
3. Offshore Voluntary Disclosure Program 

1.  Report of Foreign Bank and Financial Accounts (FBAR) 
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).

• Who Must File an FBAR (Form TD F 90-22.1)

United States persons are required to file an FBAR (Form TD F 90-22.1) if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Look to the form’s instructions to determine eligibility for an exception and to review exception requirements.

• Reporting and Filing Information 

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040, the "Other Information" section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder's reporting obligation.

The FBAR is not filed with the filer's federal income tax return. The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR. The FBAR is an annual report and must be received by the Department of the Treasury in Detroit, MI, on or before June 30th of the year following the calendar year being reported. While FinCEN strongly encourages individuals to electronically file FBARs, the form can be mailed to one of the two addresses below, provided that the mailing is received by June 30, 2013:

File by mailing the FBAR (Form TD F 90-22.1) to:
United States Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621

If an express delivery service is required for a timely filed FBAR, address the parcel to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226

Delivery messenger service contact telephone number: (313) 234-1062. 
Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.

• Electronic Filing for FBAR Forms – MANDATORY Beginning July 1, 2013

On June 29, 2011, FinCEN announced that all FinCEN forms must be filed electronically with certain exceptions. The FBAR was granted a general exemption from mandatory electronic filing through June 30, 2013. E-filing is a quick and secure way for individuals to file FBARs (Form TD F 90-22.1). Filers will receive an acknowledgement of each submission. For more information about FBAR e-filing, read the FinCEN news release.  FinCEN BSA E-filing System.  

The FBAR filing requirements, authorized under the Bank Secrecy Act, have been in place since 1972. The FBAR form is used to report a financial interest in, or signature or other authority over, one or more financial accounts in foreign countries. No report is required for a year if the accounts’ aggregate value does not exceed $10,000 at any time during that year.

2. New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938)
Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. File Form 8938 if max value of account exceeds $50,000 at any point during the year. Must use US Treasury FMS website Treasury Reporting Rates of Exchange to calculate foreign currency exchange rate.

The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web page.

3. Offshore Voluntary Disclosure Program
On Jan 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program following continued interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

Source: IRS

FBAR Requirements--Foreign account compliance summary

FBAR Requirements--Foreign account compliance summary

(1) US citizen required to file form TD F 90-22.1 if max value of foreign account over $10,000 at any point during the year.  (This TD F 90-22.1 is a separate form from tax return. Filed separately, no later than June 30th with US Treasury. Not extendable).
• Financial accounts include:
 :: Securities
 :: Brokerage
 :: Savings
 :: Demand
 :: Checking
 :: Deposit
 :: Time deposit or other account at institution
 :: Person performing as financial institution

(2) File 1040 Schedule B (Ask the question - Foreign accounts? FBAR?) even if no interest or dividend income.

(3) File form #8938 if max value of account exceeds $50,000 at any point during the year. Must use US Treasury FMS website 
Treasury Reporting Rates of Exchange to calculate foreign currency exchange rate. 

Note: There's nothing wrong with having a foreign account, as long as it's not being used for fraud. Avoid "shades of UBS".

IRS Deadline for Foreign Financial Accounts Reporting is June 30, 2012

IRS Deadline for Foreign Financial Accounts Reporting is June 30, 2012

• (PRWEB) June 15, 2012 Thompson & Associates, CPAs, LLC, a leading Atlanta CPA firm, warns that the deadline for reporting Foreign Financial Accounts (FBAR) is June 30, 2012. For individuals, corporations and foreign banks, the IRS is determined to enforce reporting of financial account information and income through foreign banking and financial institutions. As a result, the Foreign Account Tax Compliant Act (FATCA) and the Report of Foreign Bank and Financial Accounts (FBAR) could affect millions of people in the U.S.
• The FBAR isn’t a new filing requirement nor is it a tax return. Initially implemented by the Bank Secrecy Act in 1972, the form is used to report financial interest in, or signature authority over, one or more financial accounts located in foreign countries. Generally, if a taxpayer has signature authority over one or more financial accounts in a foreign country and the total of the foreign investments exceed $10,000, then taxpayers are required to file. The form includes the taxpayer’s account information as well as the average daily balance and the highest balance for the year. The form must be RECEIVED by the IRS no later than June 30 of each calendar year, not just mailed by that date.
• The penalties for not reporting are severe. Taxpayers who fail to file because they did not know can receive a civil penalty of $10,000 per violation. Knowingly violating the reporting requirement carries an even larger penalty of the greater of $100,000 or 50% of the account balance. Additionally, the IRS may evoke criminal penalties including a fine of up to $250,000 and imprisonment of 5 years.
• The IRS is taking the issues of penalties quite seriously and does not allow taxpayers to merely put their head in the sand. Under the Internal Revenue Manual, a “willful blindness” may constitute “knowingly” violating the reporting requirement.
• FACTA takes the FBAR one step further and generally requires taxpayers holding foreign assets with an aggregate value of more than $50,000 to report certain information concerning those assets on an IRS form 8938. This form was required for the 2011 tax year, thus reporting started in 2012, is required to be filed the date the taxpayer’s return is due.
• With regards to penalties under FATCA, there is an initial penalty of $10,000 per violation that jumps to $50,000 if the taxpayer continues to not report after notified by the IRS. Additionally, if any underpayments of tax are attributable to the non-disclosed funds, the IRS imposes a stiff 40% understatement penalty.
• FACTA rules extend beyond reporting requirements by taxpayers to the IRS for financial assets greater than $50,000. It requires foreign financial institutions (FFI) to report to the IRS all financial accounts held by U.S. Taxpayers and for resident aliens in the United States, if the balances in such accounts exceed $50,000. If a FFI refuses to be compliant with the law, they face a stiff withholding tax of 30% on all relevant US-sourced payments paid to them.
• The impact of these new laws will be far reaching, particularly in well-known of offshore banking locations such as the Caribbean, Luxembourg, Singapore and Hong Kong. The law requires FFI reporting to commence in the first quarter of 2014. Thus, count on the IRS knowing about taxpayer’s foreign financial accounts by 2014.

Courtesy: Thompson & Associates CPAs. Written in conjunction with Bomar Rice, LLC, Atlanta Tax Law Firm, the entire article may be found at Thompson & Associates CPAs