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Streamlined Filing Compliance Procedures expanded for Permanent Residents

June 20, 2014 1 comment

You might have read about OVDI or OVDP process but IRS introduced this new process called: Streamlined Filing Compliance Procedures

This was kind of introduced last year but was for US citizens residing abroad. This new process now includes permanent residents i.e. Green card holders as well.

Here are the quick links for your reference.

Streamlined Filing Compliance Procedures

U.S. Taxpayers Residing Outside the United States

If you are already under OVDI/OVDP program check these FAQs: Transition Rules

I couldn’t find much time to read all through and do much analysis. I will update my thoughts as I understand it better but feel free to post your questions and comments.

Hope this helps.

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Comparison of Form 8938 and FBAR requirements

June 4, 2013 2 comments

If you are confused about FBAR and Form 8938 IRS has a great comparison table.

The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts). Individuals must file each form for which they meet the relevant reporting threshold.

Check the comparison here.

Categories: FBAR, Foreign Accounts, Tax Tags: ,

Is it reasonable for one to NOT have known about FBAR?

August 1, 2012 2 comments

Is it reasonable for one to NOT have known about FBAR? Check out this blog post that discusses various reasons and citations.

U.S. Persons Abroad - Members of a Unique Tax, Form and Penalty Club

Two solitudes – To “OVDP” or to NOT “OVDP”

To OVDP:

To NOT OVDP:

When it comes to the “compliance dilemma”, the thinking seems to be:

“To OVDP or to NOT OVDP” – Note the Isaac Brock press release on OVDP 2012

That question has consumed created enormous “life altering anxiety” and a large number of LCUs life credit units). Readers of this blog will have seen a number of compliance options acknowledged and considered. These range from “compliance going forward” at one end of the spectrum to OVDP at the other. At a minimum it is important to consider the ramifications of all options. That said, there are a…

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Categories: FBAR, Foreign Accounts

Tax Regulations for Non-Immigrants and NRIs in US

July 24, 2012 6 comments

1040col2

Tax regulations is one of the most confused and complex topic when you are in US on non-immigrant visa (H1/F1/L1, etc.) or you are permanent resident (Greencard holder) or US Citizen.

I found this nice information in form of slides on slideshare.net by  Sanket Shah of NSGlobal. It is really nice information and worth going through once to brush up your knowledge on tax basics and implications. It explains several scenarios with simple examples that’s easy to understand. It has touched almost every basic points including Gift / Estate tax, FBAR / OVDI, FACTA(8938), etc.

Link to Slideshow

Also check this slideshow: Do you Know

Hope this helps.

My OVDI Progress

June 25, 2012 441 comments

This is a longtime overdue post. In this post I will update my OVDI progress.

Disclaimer: This is my own experience and this SHOULD NOT be taken as legal advice.

Oct-2012: I noted that links are updated for OVDI 2012. Find them here: http://www.irs.gov/uac/2012-Offshore-Voluntary-Disclosure-Program

Application Progress

02/15/2012: I decided to go with Attorney1. He was convincing and told me exactly what he will do, how long will it take and what are my chances on lower penalty are. His suggestions matched with my online readings and research. Though his charge seems a bit higher, but unlike others, with him I knew the cost upfront. Plus he was going to do all paperwork for me and I am just suppose to sign and pay any penalties/back taxes.

02/25/2012: So far my attorney got pre-clearance for OVDI from IRS i.e. now he can go ahead and submit the OVDI Letter . What is pre-clearance? Read OVDI FAQ #23. What is OVDI Letter? Read OVDI FAQ #24.

03/16/2012: Got an update from the attorney that my case is preliminary accepted for OVDI. So now he will do tax amendments and submit the OVDI package that will mainly consist of stuff mentioned in OVDI FAQ #25 i.e. previous year original and amended tax returns for year 2003 to 2010, bank statements and delinquent FBAR’s for the year I didn’t report.

05/15/2012: Attorney sent me the prepared delinquent FBARs, amended tax returns (Form 1040X) for each year I forgot to report my NRE interest and noted the amounts I owed to IRS. I signed those forms and also sent separate checks for each tax-year I owed to IRS.

05/30/2012: Sent a completed Form 872 (Consent to Extend the Time to Assess Tax) and document “Consent to Extent the time to Assess Civil Penalties for FBAR Violations

06/2012: Got notification from attorney’s office that my OVDI documents package is submitted to the IRS. To my knowledge the package consisted of:

  • Cover letter
  • Copy of pre-clearance received earlier
  • Copy of Amended tax returns 1040X
  • Copy of foreign bank account(s) statements
  • Original delinquent FBARs
  • Consent documents mentioned above (Form 872 and Extend FBAR Statue)
  • Statement of Highest aggregated foreign accounts balance
  • Power of Attorney to allow the attorney represent me

04/2013: Attorney sent a status inquiry to IRS to find out what’s happening with my case.

06/2013: IRS replied saying no status update. Just need to wait 45 days before making another inquiry.

07/2013: I think an officer is assigned to my case as my attorney got query asking for some more details. I am not sure what they have asked for though.

07/2013: The query was asking some clarifications on my account balances and transactions. Attorney replied to the query along with new POA and Form-872.

09/2013: Received 3-copies of Form-906 and penalty calculation sheet 4549-A. The calculation sheet showed the 20% penalty on the taxes I didn’t pay (i.e. taxes on foreign account interest income) and 12.5% Offshore Penalty. It gave time of 14 days to reply with signed copies 906 and the checks for the amount mentioned on 4549-A. I was fine with the penalty amount and so I signed the forms and sent it to my attorney office. Attorney sent those to the assigned agent with a cover letter.

Check this: What should I do once I receive IRS 906 forms?

Note: If you think the penalty is too much and if you wish, you have an option to opt-out of OVDP. In this case don’t sign the 906s but then you will have to go through the regular tax audit process. Check this: Opt-Out Guide

12/2013: Received the final case closed letter from IRS. Two separate letters. One is signed consent form 872 and another one is signed 906. These were the both I sent earlier and they returned with the agents signature.

01/2014: Attorney prepared the amended State tax returns. Had to pay minor tax. As per the attorney, State tax department will directly send me bills for any penalties and interest.

Current Status: Filed the amended State returns. Waiting for the State department to confirm everything is fine.

Are you looking for a tax attorney for OVDI?

Read my blog post: Finding a tax attorney for OVDI

Resources

Hope this helps. Let me know if you have any questions or share your own experience in comments below.

Foreign Bank Accounts Reporting (FBAR / TDF 90-22.1) Online Filing

June 11, 2012 83 comments

fbar1_smaDisclaimer: The information here is from my own understanding and reading done online. This is my own experience and this SHOULD NOT be taken as legal advice.

I filed my FBAR for calendar year 2011 using their online filing system. I filed it as Individual Filer and single account holder. I am sharing my experience here.

 

Registration

The first step is registering yourself on their website: Enrolling to BSA E-Filing System

I registered as FBAR Filer as I was filing as an Individual and not as a business. You need to select Institution if you are planning to submit FBAR as a business.

This registration is simple but their instructions make it feel as if it’s scary’/complex.

1: Fill out and submit the User application form. It’s a very simple form with some of your personal details. Note down your “Challenge phrase answer” as it will be needed to request for New password for your login.

Note: EIN number field on the form for individual filer is the same as SSN/ITIN#.

2: Once you fill out the user and login information form, you will get an email confirming your User ID and instructions on how to activate the account. Instructions will be a PDF and straightforward.

3: Follow the instructions to generate new password. They have some password requirements, so read the instructions.

4: Once you login, read the instructions and obtain your PIN. You will need this PIN to electronically sign the form.

Download Forms Reader

You will need Adobe Reader to use this system to file FBAR online. If you need more help on this check: Download the Forms Reader

Filing FBAR using BSA E-Filing System

1: Login to your BSA E-Filing account.

2: In the left you will see a link – Next Steps for using BAS E-Filing. Read the instructions. Under Step 4: Submit your File, there is a user manual link. Open that and go through it. That is the file which shows everything in detail on filing a sample form using BSA E-filing.

3: On the left you will see – File FBAR option. Click the link and follow the instructions in the Manual which I mentioned above. It’s similar to the paper form. The main difference is you don’t have to sign in with a pen instead you will use PIN to sign it.

4: Fill the form as you would be filling the paper form.

5: Save the Form before you submit(very important): Once you are set i.e. Signed and Validated the form, use the Save button to save a copy of the form. This is really important because if something goes wrong while submission you can use this form to resubmit it.

6: Submit the form: Click Submit button to submit the form. You will see the submission confirmation (Successful or error) message.

Note: I didn’t get any message upon Submit and I was taken to BSE Login page. May be I was signed out or I don’t know. So I had to do the re-submission but this time I selected my Saved form.

Tracking the submitted file

Track the submitted form via Track Status item on the left side menu of your BSA E-Filing dashboard. The manual I stated above has details about it.

For some reason, the file I submitted didn’t appear in the tracking even after waiting for 15 minutes. So as I mentioned above that I didn’t get any Submission confirmation.

Upon re-submission, the record showed up and I also got and email.

Important Notes

  • When you start filing the form, the Sign With Pin is on the first page, but skip that until you finish entering the information on the page. The form has a Validate as well.

Hope this helps. Feel free to share your experience or questions via comments below.

Resources

How to report interest earned in foreign bank account(s) on US tax returns?

February 29, 2012 74 comments

Disclaimer: I would like to say this right here that the information here is from my own reading done online or talking to some tax attorneys. The information here may be out-dated. This is from my own experience and my own views and anything written here SHOULD NOT be taken or interpreted as legal advice

Do you have interest bearing accounts in foreign country or countries and wonder how to report the interest earned in those accounts on US tax return? I had the same question and recently I filed my taxes and learnt how to report that interest. I will share my experience and findings.

Should I report the interest earned in foreign bank account(s)?

A CPA or tax attorney would be the best to answer it for you but here’s my finding. If you are considered a U.S. resident for tax purpose you must report the interest earned in your foreign bank account(s). As a U.S. resident for tax purpose, most likely you will be filing form 1040 or 1040A or 1040EZ. There’s a lot of confusion if you should report foreign interest if you are on non-immigrant work visa(H1) and not a permanent resident(i.e. a green card holder).

To clear this confusion let me tell you my own experience. I didn’t report the interest earned in my foreign NRE accounts while I was on H1 visa. I got a wrong advice from a CPA that I don’t need to report this interest unless I was a green card holder. That was totally wrong and if you have read one of my other posts on FBAR, you will know what kind of mess I am in.

So bottom line again, whether your status is H1 or a green card holder:

If you are considered a U.S. resident for tax purpose you must report the interest earned in your foreign bank account(s).

Have confusion if you are a U.S. resident for tax purpose or not? Check  Publication 519(2010), U.S. Tax Guide for Aliens

What form(s) should I use to report the foreign interest?

Schedule B is the form that is used to report the interest earned in local U.S. banks or foreign banks. One important thing to note is you must use form 1040 or 1040A to file your tax return. You should not file Schedule B with 1040EZ. If you are not doing any itemized deductions, then you should file Schedule B with1040A.

If you are using some tax software to prepare your taxes, the software will generate appropriate form(1040 or 1040A) based on your inputs.

Tax Software(Online or Desktop)

If you are using some tax software to prepare your tax, the software will prompt you to input the interest earned i.e. 1099-INT entries and other information related to foreign accounts. Based on your input it will generate Schedule B with appropriate information for you. If you decide to do a paper filing, you will have to print and send Schedule B along with 1040 or 1040A. If you choose to do E-filing, the software will file Schedule B for you.

I used TaxAct’s online Deluxe Edition to prepare and file my taxes. In their Investment Income section, you can add 1099-INT(s). The information you enter here is used by the software in Schedule B which it will generate for you.

You might say, banks like SBI and ICICI don’t give 1099-INT. That’s totally fine.  I just calculated my total interest for each foreign bank account and used the end-of-year exchange rate published by treasury department to convert total interest in rupees to USD equivalent. Then I used TaxAct’s step-by-step guidance to generate 1099-INT for my SBI and ICICI accounts. I entered the Bank name, dollar equivalent of interest earned and the country. Since my accounts are NRE, they are non-taxable in India and so no tax was withheld/paid in India. So I left those entries blank. If you paid interest in your foreign country you should enter the information in appropriate section.

The software will use the above 1099-INT information you entered in Part-I Interest of Schedule B.

Manually filling Schedule B

If you are doing it manually, then you need to fill the foreign bank and interest earned information in Schedule B form’s – Part-I Interest section.

Reporting Dividends

I haven’t done this but I think it should be similar to the interest. Whether using software or manually, at the end the information should be entered in Schedule B. This is Part-II in the Schedule B form. If using a software to prepare, it will fill the details based on the inputs you would have entered during their preparation process.

Part III of Schedule B

You must appropriately answer the questions in Part-III of Schedule B. If you are using a software, somewhere in their process, they will ask you if you have foreign accounts, which country(ies) and if you are required to file TD F 90-22.1. Your inputs are used to complete this part by the software.

Important Notes:

  • You must fill the PART III Foreign Accounts and Trusts in Schedule B if it applies to you. When using TaxAct’s, they have a section – Foreign Investment Account Information. I answered the questions in that section and it filled the Part-III for me.
  • If you are supposed to file form TD F 90-22.1 i.e. FBAR, you need to file it separately and it’s not filed along with your federal tax.

    Hope this helps. Feel free to leave comments if you have any questions or want to share your experience.

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