Kelly J. Bullis: Make sure to accurately report foreign bank accounts to IRS
You know what gets me riled up? You know what makes me so mad I could spit nails? The IRS going after widows and trying to throw them in jail for not reporting the existence of a foreign bank account.
There are lots of innocent reasons somebody may have a foreign bank account. Inheritance. That happens to be what happened to an elderly Florida lady. The IRS found out she had her name associated with Swiss bank accounts and asked the court to put her in prison! All because somebody died and left the accounts to her.
Another way of having a foreign bank account is from a prior job, like with an oil company in the Middle East or South America, etc. You forgot to close the local bank account after moving back to the U.S.
How about traveling business folks who have a local bank account in a certain country they use when traveling there to pay all travel costs in local currency rather than fight the rip-off artists converting currency back and forth?
Do you see anybody in the above examples who’s trying to deliberately hide assets and income from the IRS? Well, the IRS doesn’t see it the same way. If it finds out you have a foreign bank account before you have filed an annual information return (no tax to pay), the penalties are horrendous! How about $12,459 per violation until you file the required information return (called a FinCen 114). Ouch!
Generally, if you have a foreign bank account that had at least $10,000 in U.S. dollars in it for only one day, you must file a FinCen 114. Good news: If you filed an extension on your federal income tax return, your FinCen 114 is extended as well. Even better news: The IRS has said there’s still time to file before Oct. 15 for anybody who’s required to file this form, regardless of whether you asked for an extension to file or not.
This FinCen 114 must be filed electronically, no paper filing accepted. All you’re reporting is the name of the bank, the account number, the highest balance in U.S. dollars that was in that account during the year. Warning, if you checked “NO” to the two innocent-looking questions at the bottom of Schedule B on your personal income tax return, the IRS considers that to be the basis for criminal treatment. You see, you sign your return “under penalties of perjury,” and those two questions ask if you have any foreign bank accounts. Starting to see the IRS trap? You need to amend and answer those questions correctly if you made a mistake.
If you think you’re in trouble for not filing any FinCen 114s, give your CPA a call. They can help you navigate through various options to get you into compliance as painless as possible. There are some cases where the IRS will waive the late-filing penalties. So don’t put this off!
Did you hear? Romans 13:2-3: “Therefore whoever resists the authority … for rulers are not a terror to good works, but to evil. Do you want to be unafraid of the authority? Do what is good.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. He’s on the web at BullisAndCo.com and Facebook.