The presentation reviews the reporting requirements for US citizens with foreign assets and the remedies for non-compliance. You will view the appropriate tax forms needed for reporting, due dates and penalty amounts. Te difference between willful and non-willful will be explained.

1. Reporting Requirements for
U.S. Citizens with Foreign
Assets
Remedies for Non-Compliance
Presented by
Allan Peiser, CPA
Josh Ungerman, J.D., CPA

2. Introduction
• United States citizens need to report and pay tax
on worldwide income
• Resident Aliens are taxed as US citizens and need
to pay tax on worldwide income
• Citizens and Resident Aliens have the obligation
to report their financial interest in foreign:
– Bank Accounts
– Brokerage Accounts
– Mutual Funds
– Trusts

3. Reporting of Foreign Accounts
• Report a Signature Authority over foreign:
– Bank Accounts
– Brokerage Accounts
– Mutual Funds
– Trusts
• If total balances exceed $10,000 at any time
during the calendar year, all accounts must be
reported

4. Reporting of Worldwide Income: Interest and
Ordinary Dividends (Schedule B)
Check the boxes

5. Report of Foreign Bank And Financial Accounts
(FinCEN Form 114)
• Due Date: June 30th (cannot
be extended). This due date
will be changing after this
year, and will be due with
the tax return starting in
2017
• Financial Interest in or
Signature Authority over a
foreign bank
• Penalty: Up to $10,000 if non-
willful violation, and failing to
report an account has
penalties subject to the
greater of $100,000 or 50%
of balance in the account, and
may also be subject to
criminal penalties
• Form must be filed
electronically

6. Statement Of Specified Foreign Financial Assets
(Form 8938)
• Penalty: Up to
$10,000 if not filed
properly; 90 days
after notice of failure
to file, subject to
additional $10,000 for
each 30 day period.
Maximum additional
penalty is $50,000.

7. Comparison of form 8938 and FBAR
Requirements
Form 8938, Statement of Specified Foreign Financial
Assets
FinCen Form 114, Report of Foreign Bank and
Financial Accounts (FBAR)
Reporting
Threshold
Based on where the filer lives (in or outside the
US), and the filing status
Based on the aggregate value of financial
accounts exceeds $10,000 at any time
during the calendar year.
When do you have
an interest in an
account or asset?
When you are the owner of the asset When you are EITHER the owner of asset
or have signature authority
Filing
Requirements
Form is attached to your annual return and due on
the date of that return, including any applicable
extensions, and is filed with the IRS.
Received by June 30 (no extensions of
time granted), and is filed electronically
with the Department of Treasury
Penalties Up to $10,000 for failure to disclose and an
additional $10,000 for each 30 days of non-filing
after IRS notice of a failure to disclose, maximum
additional penalty is $50,000; criminal penalties may
also apply
If non-willful, up to $10,000; if willful, up
to the greater of $100,000 or 50% of
account balances; criminal penalties may
also apply
Source: irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements

8. Comparison of form 8938 and FBAR
Requirements (continued)
Form 8938, Statement of Specified Foreign
Financial Assets
FinCen Form 114, Report of Foreign Bank and
Financial Accounts (FBAR)
Foreign stock or securities not
held in a financial account
Yes No
Foreign partnership interests Yes No
Foreign mutual funds Yes Yes
Foreign-issued life insurance or
annuity contract with a cash-value
Yes Yes
Foreign hedge funds and foreign
private equity funds
Yes No
Foreign real estate held directly No No
Foreign real estate held through a
foreign entity
No, but the foreign entity itself is a
specified foreign financial asset and its
maximum value includes the value of the
real estate
No
Source: irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements

9. Information Return of U.S. Persons With
Respect To Certain Foreign Corporations (Form
5471)
• Due Date: Tax Return
• Penalty: $10,000 per
foreign corporation) if not
filed properly; 90 days
after notice of failure to
file, subject to additional
$10,000 for each 30 day
period. Maximum
additional penalty is
$50,000. Also subject to
reduction of 10% of
foreign taxes available
for credit.

10. Information Return of a 25% Foreign-Owned
U.S. Corporation or a Foreign Corporation
Engaged in a U.S. Trade or Business (Form 5472)
• Due Date: Tax Return
• Penalty:$10,000 if not
filed timely; 90 days
after notice of failure
to file, subject to
additional $10,000 for
each 30 day period.
Criminal penalties
may apply.

11. Annual Return To Report Transactions With
Foreign Trusts and Receipt of Certain Foreign
Gifts (Form 3520)
• Due Date: Tax Return
• Penalty: Greater of either
$10,000 or:
• 35% of the gross value of
any property transferred to
a foreign trust for failure by
a U.S. transferor to report
the creation of or transfer
to a foreign trust or
• 35% of the gross value of
the distributions received
from a foreign trust for
failure by a U.S. person to
report receipt of the
distribution or
• 5% of the gross value of
the portion of the trust's
assets treated as owned
by a U.S. person for failure
by the U.S. person to
report the U.S. owner
information.

12. Annual Return To Report Transactions With
Foreign Trusts and Receipt of Certain Foreign
Gifts (Form 3520) (continued)

13. Tax on Accumulation Distribution of Trusts
(Form 4970)

14. Annual Information Return of Foreign Trust
With a U.S. Owner (Form 3520-A)
• Due Date: March 15th
• Penalty: $10,000 or
5% of the gross value
of the portion of the
trust's assets treated
as owned by the U.S.
person at the close of
that tax year

15. Offshore Voluntary Disclosure Program
2014 OVDP Important Changes:
• Increase preclearance information
• New 50% offshore penalty outed banks
• Payment of miscellaneous penalty due when OVDP
submission is made
• Now include all offshore account statements
• Explicitly threaten no criminal prosecution protection if
there is not cooperation

16. Offshore Voluntary Disclosure Program
Opt Out and Removal
• Opt Out – Taxpayer Initiates
• Removal – IRS Initiates
Ability to Supplement Errors
• New disclosure to CI
• Work through the IRS examiner who worked the original
disclosure, who will need to obtain program
management concurrence

17. Streamlined Filing Compliance Procedures
Modern Streamlined Supervision Process
“Our goal is to ensure we have struck the right balance
between emphasis on aggressive enforcement and focus
on the law-abiding instincts of most U.S. citizens who,
given the proper chance, will voluntarily come into
compliance and willingly remedy past mistakes.”
“We are considering whether our voluntary programs have
been too focused on those willfully evading their tax
obligations and are not accommodating enough to others
who don’t necessarily need protection from criminal
prosecution because their compliance failures have been
of the non-willful variety.”
Commissioner Koskinen, 6/18/14, Quote from U.S. Council for Int’l Business – OECD Int’l Tax Conference)

18. Streamlined Filing Compliance Procedures
Definition of “Non-Willful” for Streamlined
Submission Process
“Non-willful conduct is conduct that is due to negligence,
inadvertence, or mistake or conduct that is the result of a
good faith misunderstanding of the requirements of the
law.”

19. Statement of Facts for Non-Willful
Certifications
• Certification must be signed under penalties of perjury
• Certification covers all foreign activities and assets
• Certification explains why the compliance failures
occurred
• Certification must include identities of tax advisor and a
description of the tax advice
Streamlined Filing Compliance Procedures

20. Domestic / Foreign Streamlined
Foreign
• Non-resident
• Provide delinquent or amended income tax returns
(Form 1040/1041); no Forms 1040 NR
• Zero penalties
Domestic
• Requirement of originally-filed returns that are amended
• 5% penalty on assets reportable on FBAR and Form
8938
Streamlined Filing Compliance Procedures

21. 2014 Transition Streamlined
• Must still be in OVDP
• Pre-July 1, 2014 OVDP Submission
• On July 1, 2014, must:
 not have a Form 906 Closing Agreement
executed by the IRS, or
 Not have an IRS exam letter where taxpayer
has opted out of OVDP
Streamlined Filing Compliance Procedures

22. Delinquent FBAR Submission Procedures
Delinquent FBAR Procedures
• E-file delinquent FBARs
• In e-file, identify applicable reason for filing late
• In e-file, short statement describing the delinquency

23. May 13, 2015 - FBAR Interim Guidance
• Attachment 1, heading (2) “Penalty for Willful Violations”
• “In most cases, the total penalty . . . Will be limited to
50 percent of the highest aggregate balance. . .”
• “Examiners may recommend a penalty that is higher
or lower than 50 percent of the highest aggregate
account balance . . . In no event will the total penalty
amount exceed 100 percent of the highest
aggregate balance. . . .”
Delinquent FBAR Submission Procedures

24. FBAR Interim Guidance (continued)
• Attachment 1, heading (3) “Penalty Amount for
Nonwillful Violations”
• “For most cases involving multiple nonwillful
violations, examiners will recommend one penalty
for each open year . . . And the penalty for each year
will be limited to $10,000.”
• “In no event will the total amount of the penalties for
nonwillful violations exceed 50 percent of the
highest aggregate balance of all unreported foreign
financial accounts.”
Delinquent FBAR Submission Procedures

25. Delinquent Information Return Procedures
Cannot be under civil examination or a criminal
investigation
• Cannot have been already contacted regarding
delinquent information
• Must have and describe the reasonable cause for the
non-compliance
• No guarantee IRS will accept the reasonable cause
explanation
Delinquent International Information
Return Submission Procedures

26. Take No Action
Take No Action for Past Non-compliance
and Begin Current Compliance on an
Ongoing Basis
• Taking no remedial action relating to past non-
compliance
• Not allowing taxpayer to continue non-compliance
• Must advise client of potential civil and criminal penalties
associated with a failure to remediate the past non-
compliance

27. If you have any questions please feel free
to contact:
Allan Peiser
apeiser@gppcpa.com
Josh Ungerman
jungerman@meadowscollier.com