Foreign Taxable Income Reporting Under the Foreign Bank Account Report (FBAR)
Even as many individuals breathe a sigh of relief after the conclusion of the tax period, those that have foreign accounts and other foreign financial assets may not yet be through with their tax reporting.
The Foreign Bank Account Report (FBAR) is due by June 30th for all qualifying citizens.
The FBAR is a disclosure form that is filled by all U.
S.
citizens, residents, and U.
S.
entities that own bank accounts, are bank signatories to such accounts, or have a controlling stakes to one or many foreign bank accounts physically situated outside the borders of the United States.
The report also includes foreign financial assets, life insurance policies, annuity with a cash value, pool funds, and mutual funds.
Following the deficits facing the government, especially for the funding of the new Healthcare program, the Obama Administration is all out to ensure that all due taxes are paid.
One of the areas that is naturally expected to have the highest defaulter rate is in foreign taxable incomes.
The IRS is limited in its ability to enforce the collection of such incomes.
However, in recent efforts by both Congress and the IRS, there have been major steps taken to have tax compliance for foreign incomes.
The disclosure of foreign accounts through the filling of the FBAR is one method of pursing the collection of more taxes.
U.
S.
citizens are expected to shell out taxes on all incomes made in foreign lands.
The proceeds are to be included in their income tax returns and the necessary taxes are to be paid.
However, for incomes that are taxed in the foreign countries, taxpayers are allowed to include a tax credit equivalent to the taxes paid but to the limit of the taxes that would have been paid if the taxable income was made domestically.
For citizens that reside abroad, the IRS provides a tax free waiver for the first $92,900 earned in 2011.
In 2011, the IRS in conjunction with Congress, have decided to have a more rigorous disclosure policy on foreign incomes that includes a new FBAR form that requires more detailed disclosure of information.
However, the IRS is yet to release this new FBAR form.
There is also an amnesty in place until August 31st 2011 for taxpayers who did not fill form FBAR in past years.
Conscientious decisions to not fill out the FBAR form will result a punitive charge of $100,000 or 50% of the value in the foreign account for the year not reported.
The requirements in having to fill the FBAR form are if the foreign account in question has exceeded an amount equivalent of $10,000 at any point during the year as per the exchange rates on the 31st of December of the year being reported.
For an account to qualify as a foreign account, it must be physically situated in another country irrespective of the currency.
Therefore, a holder of an account held in a branch of a U.
S.
bank situated outside the U.
S.
will need to fill the form even, if the account is a U.
S.
dollar account.
On the other hand, a holder of an account held in a foreign bank in a branch located in the U.
S need not fill the form even, if the account is in a foreign currency.
The Foreign Bank Account Report (FBAR) is due by June 30th for all qualifying citizens.
The FBAR is a disclosure form that is filled by all U.
S.
citizens, residents, and U.
S.
entities that own bank accounts, are bank signatories to such accounts, or have a controlling stakes to one or many foreign bank accounts physically situated outside the borders of the United States.
The report also includes foreign financial assets, life insurance policies, annuity with a cash value, pool funds, and mutual funds.
Following the deficits facing the government, especially for the funding of the new Healthcare program, the Obama Administration is all out to ensure that all due taxes are paid.
One of the areas that is naturally expected to have the highest defaulter rate is in foreign taxable incomes.
The IRS is limited in its ability to enforce the collection of such incomes.
However, in recent efforts by both Congress and the IRS, there have been major steps taken to have tax compliance for foreign incomes.
The disclosure of foreign accounts through the filling of the FBAR is one method of pursing the collection of more taxes.
U.
S.
citizens are expected to shell out taxes on all incomes made in foreign lands.
The proceeds are to be included in their income tax returns and the necessary taxes are to be paid.
However, for incomes that are taxed in the foreign countries, taxpayers are allowed to include a tax credit equivalent to the taxes paid but to the limit of the taxes that would have been paid if the taxable income was made domestically.
For citizens that reside abroad, the IRS provides a tax free waiver for the first $92,900 earned in 2011.
In 2011, the IRS in conjunction with Congress, have decided to have a more rigorous disclosure policy on foreign incomes that includes a new FBAR form that requires more detailed disclosure of information.
However, the IRS is yet to release this new FBAR form.
There is also an amnesty in place until August 31st 2011 for taxpayers who did not fill form FBAR in past years.
Conscientious decisions to not fill out the FBAR form will result a punitive charge of $100,000 or 50% of the value in the foreign account for the year not reported.
The requirements in having to fill the FBAR form are if the foreign account in question has exceeded an amount equivalent of $10,000 at any point during the year as per the exchange rates on the 31st of December of the year being reported.
For an account to qualify as a foreign account, it must be physically situated in another country irrespective of the currency.
Therefore, a holder of an account held in a branch of a U.
S.
bank situated outside the U.
S.
will need to fill the form even, if the account is a U.
S.
dollar account.
On the other hand, a holder of an account held in a foreign bank in a branch located in the U.
S need not fill the form even, if the account is in a foreign currency.
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