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Do You Hold a Foreign Financial Account? Important FBAR Compliance Knowledge for the 2016 Tax Year
US Tax season begins January 23, 2017. As part of the plan to minimize taxpayers’ difficulties with filing dates for some of the returns and reporting forms, the US Congress has passed legislation, that changes the original and extended due dates for tax years beginning after December 31, 2015, which means 2016 returns being filed in 2017.
If you have a foreign financial account (bank, brokerage, mutual fund, trust or other type of foreign financial account) where you hold financial interest exceeding US$10,000 in aggregate, the Bank Secrecy Act requires that you report the account yearly to the Department of Treasury by electronically filing a Report of Foreign Bank and Financial Accounts (FBAR).
Date Changes for Foreign Bank and Financial Accounts Report (FBAR):
Under current law, FBARs must be filed annually on or before June 30 of the year following the calendar year being reported. There is no extension of time available for filing an FBAR, and the extension of time to file federal tax returns does not extend the time for filing an FBAR. The civil penalties for a non-willful violation can be up to $10,000 per violation, and a willful violation can be up to the greater of $100,000 or 50 per cent of the amount in the account at the time of the violation.
Under the new law (effective for the 2016 taxation year), the FBAR deadline will be moved forward to April 15, thereby aligning the timing of the reporting requirement with that for income tax returns filed by individuals and C corporations. Taxpayers will be granted an automatic extension to October 15 of each year to file the FBARs. Relief on this may be available and penalties may be waived for first-time filers who miss the extension deadline. FBAR filers should review the procedures and implications for requesting such relief.
Timing for FBAR Filing:
With the filing deadline for FBARs moving forward, taxpayers who wish to file their tax returns and FBARs in time for the April 15 deadline should know the foreign bank and financial account information must now be obtained earlier than usual, as FBARs are technically due earlier under the new system.
Be aware. Pay attention and know the Rules:
The new federal filing deadlines and the changes to the tax filing process will affect most, if not all, taxpayers. Although the new filing date rules will ultimately create a more rational tax return filing system, the changes also create some potential traps for taxpayers. It is critical for taxpayers to pay attention to these revised due dates and develop a clear understanding of how the rules will apply to them, beginning with their 2016 tax returns, in order to avoid unnecessary failure-to-file and failure-to-pay penalties.
We Can Help! No matter how much money, power or success a person will achieve personally and professionally, it’s easy to feel frustrated and unable to fully comprehend the rules of the tax authorities to fulfill all filing requirements. At Kaman Kwok Inc., we are committed to serving our clients with clarity and purpose, knowing the value of who they are, and what they do. Give us a call and let us help interpret your unique situation, so you will be confident when facing challenges that confront people who conduct business on both side of the border. We stay up to date on all the latest requirements, and will be your authority with respect to all aspects of your cross-border tax needs.