Are you in compliance?  The penalties can be steep!

Increasing numbers of U.S. taxpayers have investments in bank and other financial and security accounts in foreign countries. Although it is not illegal to have foreign accounts, the accounts must be disclosed. 

The FinCEN* Form 114 is generating a lot of news this year as the U.S. Treasury Department and the IRS ramp up their oversight of taxpayers with foreign accounts.

The Bank Secrecy Act requires each United States person with a financial interest in, or signature authority over, any financial accounts with an aggregate value of more than $10,000 at any time during the calendar year -- including bank, securities, or other types of financial accounts in a foreign country -- to report that relationship by filing Form 114. The term "United States person" means a citizen or resident of the United States, a domestic partnership, a domestic corporation, or a domestic estate or trust.  If your foreign accounts total more than $50,000, you also may be required to file IRS Form 8938, Statement of Specified Foreign Financial Accounts, with your 1040 tax return.

Form 114 must be received on or before June 30 of the year following the calendar year being reported. This form is not filed with your federal income tax return and it is not filed with the IRS. Instead, it must be delivered to the U.S. Treasury Department.

These forms are serious, and so are the criminal and civil penalties. Failure to submit them can mean fines up to $500,000 and prison terms up to 10 years. Even a non-willful civil penalty can mean a $10,000 fine. Willful violations can draw the greater of $100,000 or 50% of the account for each violation -- and each year is separate. The numbers add up fast.

Remember - Canada is a foreign country!  Need help?  Give us a call so that we can help you determine if you need to file and what form to use.  We also can prepare your forms and make sure you are in compliance.

*FinCEN stands for Financial Crimes Enforcement Network and is a bureau of the U.S. Department of the Treasury.

Providing non-taxable benefits for employees & business deductions for employers

All Benefits are NOT created equal. Some benefits are not included as income to your employees but ARE included as expenses for your business, which creates a win for your employees and a win for you, the business owner!

Fringe benefits differ from direct compensation in that they are not a payment of cash or its equivalent, but they do provide immediate economic and financial benefit to your employees.  

Fringe benefits include items such as occasional meals, employee awards, or moving expenses.  Although the amounts may be small, they can add up and some can easily cost thousands of dollars a year per employee.  All payments, whether cash or noncash are taxable as income unless specifically excluded by law.   

Below are some examples of fringe benefits that can be a win-win:

• Occasional coffee and donuts, parties or tickets for entertainment
• Noncash small holiday gifts
• Noncash employee awards
• Employer-provided cell phones
• Employee discounts on company products
• Transportation benefits such as transit passes, parking and bike commuting
• Dependent care assistance
• Moving expenses
• Educational expenses
• Financial counseling

There are many fringe benefits that are commonly thought of as nontaxable, but are taxable.  For example, health club memberships are a taxable fringe benefit unless you provide an athletic facility at the place of employment.  

Health Savings Accounts (HSAs) are not taxable.  However, reimbursements to your employees for their individual health insurance policies are taxable, and quite possibly are not in compliance with health care reform provisions!  This could lead to penalties that can be quite steep.  More about this in our May newsletter! 

Fringe benefits do not include employer reimbursements or payments for employee activities in furtherance of the employer's business such as conventions, travel, meals, and entertainment. These are business expenses .

There are different rules for Partners and more than 2% shareholders of an S Corporation. 

Need help?  Give us a call, we can help you determine the right fringe benefits for you and your employees.