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Maryland FATCA Attorney


If you are an investor who owns or who has an interest in offshore financial accounts or if you have signature authority over any offshore financial accounts, it is very important that you understand the many rules and myriad regulations that are associated with reporting these foreign accounts to U.S. tax authorities.  

If you do not understand and follow the requirements for reporting your offshore accounts, you could potentially face civil penalties that actually exceed the value of the accounts that you are holding in foreign financial institutions.  You could also be criminally prosecuted and could face the very real possibility of spending time incarcerated due to tax evasion or related offenses.

Many people are not aware they have multiple reporting obligations for offshore accounts. Those who invest offshore must file an annual Report of Foreign Bank and Financial Account (FBAR) AND must also comply with provisions of the Foreign Account Tax Compliance Act (FATCA), which imposes additional reporting requirements.  Failure to fully comply with both FATCA and FBAR requirements could trigger serious penalties resulting in substantial financial loss.

If you have not complied with FBAR and FATCA requirements, you need to reach out to a Maryland FATCA attorney right away to get help and advice in deciding on an appropriate course of action to resolve your tax issues.  

You may have the option to limit the penalties that you are potentially facing for your non-disclosure of your offshore funds. You could, for example, limit potential penalties by participating in the streamlined Offshore Voluntary Disclosure Program (OVDP) which the IRS offers. However, attempting OVDP participation to resolve your tax issues is not without risks. You need a FATCA attorney who can advise you on the best way to approach a failure to file mandatory FATCA and/or FBAR forms. Fortunately, you can turn to Thorn Law Group for help.

Thorn Law Group has assisted more than 500 clients who have had legal problems related to their failure to file proper reports for their offshore investments when they were required by law to do so. Our legal team is uniquely suited to assisting clients with IRS compliance issues because our FATCA attorneys have experience working for the IRS in the past. Our attorneys know how to represent clients in U.S. tax courts and our legal team has a long track record of helping clients deal with FBAR and FATCA compliance issues.  We know the law inside and out and can put our experience and knowledge to work for you.

Give us a call today to discover more about your requirements under both FBAR and FATCA and to find out how a Maryland FATCA attoney can help if you've failed to fulfill these requirements.

What is FATCA?

FATCA stands for the Foreign Account Tax Compliance Act. This Act was passed in 2010 as part of a law called the HIRE Act. The goal of passing FATCA was to help reduce tax evasion that occurs due to offshore funds that go undeclared and that the IRS does not discover.

FATCA imposed mandates on U.S. persons (those with U.S. tax obligations, which could include people living abroad).  After the passage of FATCA, U.S. affiliated persons with foreign financial accounts exceeding a certain value must now submit a special form to the IRS declaring those accounts.  

FATCA also imposed reporting obligations on foreign financial entities, including but not limited to banks, investment firms and some insurance companies.   Foreign financial institutions must make reports to the U.S. about U.S. affiliated persons with substantial account balances in financial institutions located outside of the United States.

FATCA's reporting requirement imposed upon foreign financial institutions has caused significant hardship for many expatriates. Because of the risks and the responsibilities that are associated with FATCA compliance, many foreign banks have begun to simply decline to allow U.S. affiliated individuals to open accounts at all. This is a big problem for an expatriate who wants to open a bank account in the location where he now lives but who cannot do so because local banks do not want to deal with FATCA rules and possible non-compliance penalties.

What is FBAR?

FBAR is distinct from FATCA. FBAR stands for Report of Foreign Bank and Financial Account.  The Bank Secrecy Act, which is found in the U.S. Federal Code, mandates that certain investors with offshore accounts file an annual FBAR declaring those accounts and providing information about them.  

All U.S. persons who are affiliated with offshore accounts must meet compliance requirements under the Bank Secrecy Act. A U.S. affiliated person is considered to have a financial interest in an offshore account if the  U.S. person is the holder of legal title or is the owner of record, no matter whether the account is actually maintained to benefit a U.S. citizen.  

FBARs have to be filed NOT with the IRS, but with the Financial Crimes Enforcement Network. The due date for FBARs is April 15, although the due date was changed only recently to this date. The FBAR deadline was changed in the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 so FBARs would be required to be filed around the same time as other tax returns. 

However, it is very important not to confuse FBARs with tax returns or with FATCA forms. An FBAR is a separate and a distinct form that goes to an entirely different entity than the IRS.

How do FATCA and FBAR Differ?

Although both FATCA and FBAR require certain offshore accountholders to make reports of their foreign financial accounts, requirements for FATCA and FBAR are quite different.  

FBARs must be filed by any U.S. person with a financial interest or signature authority over at least one foreign financial account held at an institution located outside of the United States. Filing is mandated only if the aggregate (combined) value for all accounts exceeds $10,000 at any time over the year. This means if you have signature authority or own two accounts, each of which briefly is valued at $5,001 at some time during the year, you now have to file FBARs because the combined balance of those two accounts reached $10,000 at a particular point in time.  

FBARs must be filed by individuals who are U.S. citizens or who are U.S. residents. Corporations, LLCs, partnerships, and other business entities created in or operating under U.S. laws also must file FBARs to report foreign financial accounts. Trusts and estates that are formed under the laws of the U.S. also must file FBARs.

FATCA, on the other hand, must only be filed by U.S. affiliated taxpayers who have foreign financial assets with an aggregate value of $50,000 or more for single people or for individuals filing taxes as married filing separately. Married couples may have up to $100,000 in offshore investments before they are required to make reports under FATCA. FATCA's reporting requirements thus do not trigger until the account balances are significantly higher than the balances which necessitate FBARs be filed.  Only individuals and not other entities are required to make reports under FATCA, according to the IRS.

FATCA requires reporting related to many different kinds of offshore assets. For example, a U.S. affiliated person would have to make FATCA report for having an ownership interest in or signature authority on any foreign investments including foreign financial instruments, foreign stocks, foreign securities, contracts with non-U.S. persons, and interests in foreign entities. FBAR, like FATCA, also mandates reporting many different kinds of offshore assets including foreign bank accounts, brokerage accounts, mutual funds, and trusts.   

The value of assets held offshore must be determined in order to access whether FBAR or FATCA forms must be submitted.  The IRS indicates that valuations are typically done using an “estimation of the highest fair market value of the asset during the tax year which is being reported.”  However, there are certain special rules for asset valuation associated with reporting maximum values of interest in some foreign accounts such as foreign trusts, retirement plans, or estates.  Publicly-available information from verifiable and reliable sources is typically used to conduct an assessment of fair market value.

Making Reports Under FATCA and FBAR

While both FATCA and FBAR requirements are aimed at making certain the U.S. government knows of virtually all investments offshore, the specific process of making reports also differs for FBARs versus FATCA reporting.

FBARs must be filed by April 15 of the year after the calendar year being reported. If you were reporting your offshore accounts for 2017, you would need to make your report by April 15, 2018. FBARs must be submitted electronically and are submitted to  the Financial Crimes Enforcement Network (FinCEN) instead of being submitted to the IRS with other federal tax returns. The BSA E-Filing System allows for the submission of FBARS to Financial Crimes Enforcement Network.

FATCA, on the other hand, is filed along with an annual income tax return. To comply with FATCA's reporting requirements, U.S. persons with offshore accounts will need to submit Form 8938 with their standard tax returns.

Penalties for Failure to Comply with FATCA or FBAR Requirements in Maryland

Failure to comply with FATCA or failure to comply with FBARs can have very substantial financial consequences.

Penalties can be reduced, and the threat of criminal prosecution could be taken off the table, if the U.S. affiliated taxpayer is able to take action and correct problems with past reports that were not made.  The Offshore Voluntary Disclosure Program (OVDP) aims to encourage offshore account holders to come forward and voluntarily report their previously undeclared offshore funds. Penalties are lessened by OVDP and the possibility of criminal action can typically be taken off the table.

Taxpayers need to understand potential penalties so they can make the most informed choices.  If a taxpayer was supposed to file Form 8936, as required by the Foreign Account Tax Compliance Act, and that taxpayer failed to include the form with his or her tax return, this could result in a $10,000 failure to file penalty. After the IRS provides notice of the failure to file, then the penalties for non-compliance can continue to mount and can reach as high as $50,000.  If nondisclosure of foreign assets caused taxes to be underpaid, penalties can also include a 40 percent penalty on taxes that were not paid as a result of undisclosed foreign assets.

Monetary penalties also result from a failure to file FBARs when required to do so. The penalties can vary depending upon when the violation occurred and can vary depending upon whether the violation is considered to be a willful violation or not. A non-willful violation carries lesser penalties, but the taxpayer must swear under penalty of perjury that he did not fail to comply with FBAR rules to try to evade taxes. Instead, the taxpayer must have failed to disclose because of something like negligence or because of a misunderstanding about what the law required.  

If a penalty is assessed for failure to file FBARs and the penalty is assessed to the taxpayer after August 1, 2016 for violations that occurred after November 2, 2015, the IRS could charge an inflation-adjusted civil penalty up to $12,459 per non-willful violation, according to the IRS.  For willful violators, on the other hand, penalties could equal the greater of $124,588 or 50 percent of the balance of the offshore account at the time when the failure to file FBARs occurred.  The balance of the accounts is calculated based on what the balance was at the time of the failure to report.  Penalties can be assessed for each violation.  This means if there were multiple years in which FBARs were not filed but should have been, penalties could be very substantial.

Getting Help from a Maryland FATCA Attorney

A Maryland FATCA attorney at Thorn Law Group can provide you with invaluable assistance in determining if you have to comply with FBARs, FATCA or both. If you are not familiar with FATCA or FBAR, we can help you to determine if you have reporting requirements under either. If you have reporting requirements and must disclose your offshore financial accounts, we can help you to follow the guidelines and rules for disclosing with the appropriate government entity using the appropriate forms.

If you have not complied with FATCA or FBAR requirements in the past, our legal team will also advise you on what courses of action are available to you to try to reduce the penalties that could come from your failure to comply with these regulations. Give us a call today to learn more.

For a consultation, contact Kevin E. Thorn, Managing Partner, at ket@thornlawgroup.com or (240) 235-5096.

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