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.