If you are seriously delinquent on taxes your passport is safe for now. The IRS and State Department have yet to write regulations or begin enforcement. At the mid-year mark, proposed regulations are still not expected until mid-November.
In our February 1 post, we described the new enforcement tool – revocation or denial of passports when a taxpayer owes more than $50,000 in back taxes, penalties and interest. Frequent international travel for work or to visit family makes a passport imperative. If you also have foreign bank accounts, you need to understand reporting requirements and an upcoming filing deadline.
Do I need to report a foreign account?
Since 2009, the IRS has focused on ferreting out offshore accounts used to avoid taxes. The Service has not only gone after individual taxpayers, but foreign firms have also paid huge penalties. Efforts lean toward over inclusive with broad reporting requirements.
More Americans have learned that they need to report their foreign accounts (including a foreign account or combination of foreign accounts with a cumulative value over $10,000). The annual number of disclosures increased from 350,000 in 2008 to more than 1.1 million last year, according to the Wall Street Journal.
This has hit the estimated 7 million Americans residing abroad especially hard. Those in the U.S. with ties to other countries also need to pay careful attention.
What is the deadline?
You need to file FinCen Form 114 (also referred to as an FBAR) by June 30. No extensions are available, but the form can be electronically submitted to the Treasury.
If you have only recently realized that you need to disclose an account, speak with a tax attorney about how to come into compliance. There are several programs available.
Penalties for not filing can be harsh. They start at $10,000 and can go as high as 50 percent of the account value per year. An alleged willful failure to file can lead to criminal charges.
For those who have a hard time remembering another tax deadline there is good news. Next year, Form 114 will be due at the same time you file your tax return. Extensions will also be allowed.