WASHINGTON — The Internal Revenue Service reminds U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2012, that they may have a U.S. tax liability and a filing requirement in 2013.
The filing deadline is Monday, June 17, 2013, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. Eligible taxpayers get two additional days because the normal June 15 extended due date falls on Saturday this year. 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 additional information additional information on extensions of time to file.
Nonresident aliens who received income from U.S. sources in 2012 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 17 depending on sources of income. See Taxation of Nonresident Aliens on IRS.gov.
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 fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.
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.
Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds.Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.
Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Treasury Department Form TD F 90-22.1. This is not a tax form and is due to the Treasury Department by June 30, 2013. For details, see Publication 4261, Do You Have a Foreign Financial Account? Though this form can be filed on paper, Treasury encourages taxpayers to file it electronically.
Taxpayers abroad can now use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $57,000 or less can use brand-name software to prepare their returns and then e-file them for free.
Taxpayers with an AGI greater than $57,000 who don’t qualify for Free File can still choose the accuracy, speed and convenience of electronic filing. Check out the e-file link on IRS.gov for details on using the Free File Fillable Forms or e-file by purchasing commercial software.
A limited number of companies provide software that can accommodate foreign addresses. To determine which will work best, get help choosing a software provider. Both e-file and Free File are available until Oct. 15, 2013, for anyone filing a 2012 return.
Any U.S. taxpayer here or abroad with tax questions can use the online IRS Tax Map to get answers. An International Tax Topic Index page was added recently. The IRS Tax Map assembles or groups IRS forms, publications and web pages by subject and provides users with a single entry point to find tax information.
IRS Patrol – IRS Reminds Taxpayers that the Aug. 31 Deadline Is Fast Approaching for the Second Special Voluntary Disclosure Initiative of Offshore Accounts
WASHINGTON — U.S. taxpayers hiding income in undisclosed offshore accounts are running out of time to take advantage of a soon-to-expire opportunity to come forward and get their taxes current with the Internal Revenue Service.
The IRS today reminded taxpayers that the 2011 Offshore Voluntary Disclosure Initiative (OVDI) will expire on Aug. 31, 2011. Taxpayers who come forward voluntarily get a better deal than those who wait for the IRS to find their undisclosed accounts and income. New foreign account reporting requirements are being phased in over the next few years, making it ever tougher to hide income offshore. As importantly, the IRS continues its focus on banks and bankers worldwide that assist U.S. taxpayers with hiding assets overseas.
“The time has come to get back into compliance with the U.S. tax system, because the risks of hiding money offshore keeps going up,” said IRS Commissioner Doug Shulman. “Our goal is to get people back into the system. The second voluntary initiative gives people a fair way to resolve their tax problems.”
The 2011 OVDI was announced on Feb. 8, 2011, and follows the 2009 Offshore Disclosure Program (OVDP). The 2011 initiative offers clear benefits to encourage taxpayers to come forward rather than risk detection by the IRS. Taxpayers hiding assets offshore who do not come forward will face far higher penalties along with potential criminal charges.
For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Some taxpayers will be eligible for 5 or 12.5 percent penalties in certain narrow circumstances.
Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. All original and amended tax returns must be filed by the deadline.
The IRS has made available the 2011 OVDI information in eight foreign languages for those taxpayers with undisclosed offshore accounts. The agency took this step to reach taxpayers whose primary language may not be English. These translations include the following languages: Chinese (Traditional and Simplified), Farsi, German, Hindi, Korean, Russian, Spanish and Vietnamese.
The IRS decision to open a second special disclosure initiative was based on the success of the first program and many more taxpayers coming forward after the program closed on Oct. 15, 2009. The first special disclosure initiative program closed with about 15,000 voluntary disclosures regarding accounts at banks in more than 60 countries. Many taxpayers came in after the first program closed. These taxpayers were deemed eligible to take advantage of the special provisions of the second initiative.
Further details about this initiative are provided in a series of questions and answers
By Stacie Clifford Kitts, CPA
Ever wonder what kind of people hide money in Swiss bank accounts? Well here is your chance to get a glimpse into the world of some people who really did it.
There must have been some sweat’ in going on over at these tax cheats house’s when it was announced that a deal was struck to give them up.
I just can’t understand the motivation of the people on the below list. The dollar amounts that were hidden and that are now subjecting the account holders to prosecution – just not worth it in my mind.
I know, we are talking a few million dollars in most cases and that is a large amount of cash – no doubt. Nevertheless, let us put it into perspective, the risk is jail, a 50% penalty, plus the tax that should have been paid including associated penalties and interest.
Besides, if I had a million dollars or so after tax, (which these tax cheats would have) I am confident that I would be happy with that. Yes – a cool million is okay with me. Moreover, I think the rest of the “average” folk out there would agree with me.
Don’t’ get me wrong, I’m never going to turn down a few million dollars if it is offered (legally this is). However, if in a different life I was willing to risk jail over some crime that I was contemplating, the payoff would have to be some astronomical amount of money, so much in fact, that I would never get away with it because everyone on the planet would be looking for me.
So the good news for me, I will never be on a “cheat” list because the compensation will never – ever be enough to justify the risk.
Oct. 5, 2009 — Roberto Cittadini of Bellevue, Wash., pleaded guilty to filing a false tax return and admitted to concealing nearly $2 million in Swiss bank accounts. Cittadini, a retired sales manager for Boeing, failed to file a Report Foreign Bank and Financial Accounts (F-BAR) for 2001 through 2003.
Sept. 25, 2009 — Juergen Homann of Saddle River, N.J., pleaded guilty to failure to file a Report of Foreign Bank or Financial Accounts and accepted responsibility for concealing more than $5 million in Swiss bank accounts.
Aug. 14, 2009 — John McCarthy was charged with failing to inform the government of a Swiss bank account as part of a scheme to move at least $1 million from the United States into Swiss bank accounts with the goal of avoiding the payment of federal income taxes.
July 28, 2009 — Jeffrey P. Chernick, of Stanfordville, N.Y., pleaded guilty to charges of filing a false tax return. Chernick, who owns a corporation which represents toy manufacturers in China and Hong Kong, accepted responsibility for concealing more than $8 million in Swiss bank accounts.
June 25, 2009 — UBS client, Steven Michael Rubinstein of Boca Raton, Fla., pleaded guilty to filing a false tax return for tax year 2004. On April 1, 2009, Rubinstein was charged with filing a false tax return that intentionally failed to disclose the existence of a Swiss bank account maintained by UBS of which he was the beneficial owner and failed to report any income earned on that account.
April 14, 2009 — Robert Moran, of Lighthouse Point, Fla., pleaded guilty to a criminal information charging him with filing a false income tax return. Moran accepted responsibility for concealing more than $3 million in assets in a secret bank account at UBS in Switzerland.
Legal Actions to Date
Aug. 21, 2009 — Former UBS banker Bradley Birkenfeld was sentenced to 40 months in prison. Birkenfeld worked as a private banker for UBS AG and assisted an American billionaire real estate developer evade paying $7.2 million in taxes.
Aug. 20, 2009 — Hansruedi Schumacher and Matthias Rickenbach were indicted for conspiring to assist wealthy American clients conceal their assets by establishing sham offshore entities. Schumacher was an executive manager at Neue Zuercher Bank (NZB), a private Swiss bank. Rickenbach was a Swiss attorney who advised U.S. clients.
Feb. 18, 2009 — UBS AG, Switzerland’s largest bank, entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service (IRS).
Nov. 12, 2008 — Raoul Weil, a senior executive of a large Swiss bank, was charged with conspiring with other executives, managers, private bankers and clients of the banking firm to defraud the United States.
June 30, 2008 — The Justice Department filed papers seeking an order from a federal court in Miami, Fla., authorizing the Internal Revenue Service (IRS) to use a John Doe summons to request information from Zurich, Switzerland-based UBS AG about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes.
Dec. 12, 2007 — Igor Olenicoff, president and owner of Olen Properties Corporation, pleaded guilty to filing a false tax return for tax year 2002 related to foreign bank accounts he failed to disclose to the IRS. According to Olenicoff’s plea agreement, during the years 1992 through 2004, Olenicoff owned, controlled and had signatory authority over financial accounts outside of the United States.