I’ve written about bank secrecy in Liechtenstein before. One Liechtenstein bank, Liechtensteinische Landesbank AG (LLB), has received a “group request” for information. The IRS wants information on accounts with $500,000 or more from 2004 or later.
If you happen to be one of those account holders and you have been reporting your foreign account with an FBAR and Form 8938 (along with claiming any interest income on your tax returns), there shouldn’t be any issues. However, if you have not done so you should see a tax attorney as soon as possible.
There’s an old saying: When the going gets tough, the tough get going. Well, with Bozos things work differently. “Oh my,” a Bozo thinks. “Tax Day is just a couple of days away. I’m completely unprepared. I know: I’ll go visit Aunt Bertha and Uncle Abner in Ottawa. I’ll catch the hockey, and forget about tax.”
Believe it or not, this strategy actually works (for a while). If you are outside of the United States on the day taxes are due (April 17th this year), you get an extra two months (until June 15th) to file your federal taxes. There are no penalties, just interest.
So suppose you haven’t a prayer of paying your federal taxes and you go to Ottawa to see the Rangers face the Senators on both Monday and Wednesday (and stay all three days). Yes, you have until June 15th to file your taxes.
Now, this strategy doesn’t work for every state, though. Some states do follow the two-month extension (New York and North Carolina, for example); others do not. I’ve had clients stuck in Europe do a volcanic eruption (remember that volcano in Iceland that erupted a couple of years ago), panic, and I told them to relax.
Of course, if you can’t travel abroad, going from the city to the suburbs won’t change the tax deadline. And I must emphasize that this is just a temporary fix. Yet this is the one example of a Bozo maneuver that can really work.
That’s it for our Bozo Tax Tips for the 2011 Tax Filing Season. I hope you’ve enjoyed them. We’ll be back with actual tax posts at the end of the week.
Happy Tax Day!
We get more mail:
I was thinking of taking a trip to Belize in mid-April to fish. My accountant told me that if I’m out of the country on April 17th, I get a two-month extension on my taxes and I find that hard to believe.
It’s true: If you are outside of the United States on April 17th, you get an automatic two-month extension until June 15th; you need to note this on your tax return (filed by June 15th). You will owe interest but there are no penalties. Note that if you have a state tax return, not all states follow this automatic extension.
I worked in Australia last year, and my employer naturally withheld Australian income tax on my income. I can’t believe I have to pay US income tax, too.
It’s true: The United States is one of the few countries that taxes its citizens on their world-wide income. However, there is a tax credit available for your foreign income that has already been taxed. It’s taken on Form 1116. In essence, you will pay the higher of the two countries’ tax rates. Note that the required calculations do get somewhat complex, so you may want to discuss this with your own tax professional.
My father-in-law just passed away, and my husband this month [March 2012] received his bank account in a London bank. Is there anything I need to do for our 2011 taxes?
First, my condolences on your loss.
Assuming you and your husband had no foreign financial accounts in 2011, there won’t be anything related to this that you need to do for your 2011 returns. However, you will have a foreign financial account that may need to be reported for your 2012 tax returns. This involves filing a Foreign Bank Account Report (FBAR, Form TD F 90-22.1) which is filed separately from your tax return, disclosing the foreign account on Schedule B, and possibly filing Form 8938. The requirements depend on balances in the accounts, and the penalties are ridiculous if you make even a minor mistake. I strongly advise you seek a tax professional for this situation. You do have some time for this as it appears this will be a 2012 tax return issue (reported in 2013).
That’s it for our mailbag for this tax season.
Earlier this week the IRS issued proposed regulations to implement the Foreign Account Tax Compliance Act (FATCA). The press release from the Department of the Treasury states,
After many months of intensive discussions with foreign governments, the Treasury Department today also jointly issued a statement with France, Germany, Italy, Spain and the United Kingdom expressing mutual intent to pursue a government-to-government framework for implementing FATCA – an important step toward addressing legal impediments to financial institutions’ ability to comply with the regulations.
The statement does not contemplate an exemption from FATCA for any jurisdiction, but instead offers a framework for information sharing pursuant to existing bilateral income tax treaties and allows FFIs to report the necessary information to their respective governments rather than to the IRS. [emphasis added]
Given what some countries have looked at as the US sticking its fingers into local law, it will be interesting to see how this plays out. A good test will be Canada, as our neighbor to the north is not happy with how previous discussions on FATCA have progressed.
Other coverage:
TaxProf Blog
Washington Post
Due to the potential impact of Hurricane Irene, the IRS has extended the due date for offshore voluntary disclosure initiative requests until September 9, 2011. For those taxpayers who have not yet submitted their request and any documents, the following actions are necessary by September 9, 2011:
Identifying information must be submitted to the Criminal Investigation office. This includes name, address, date of birth, and social security number and as much of the other information requested in the Offshore Voluntary Disclosures Letter as possible. This information must be sent to:
Offshore Voluntary Disclosure Coordinator
600 Arch Street, Room 6404
Philadelphia, PA 19106.Send a request for a 90-day extension for submitting the complete voluntary disclosure package of information to the Austin campus. This request must be sent to:
Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
ATTN: 2011 Offshore Voluntary Disclosure Initiative
