What is the FBAR?

The U.S. government requires individuals to file a document called the Foreign Bank Account Report (FBAR) with the Financial Crimes Enforcement Network (FinCEN). It is designed to ensure that foreign assets and income are correctly reported, helping the Department of Treasury track the activities of U.S. citizens, residents, and businesses and ensure that foreign income is accurately taxed in the United States.

Who Must File an FBAR?

A U.S. person, which includes citizens, residents, corporations, trusts, partnerships, limited liability companies, and estates, must file an FBAR under certain circumstances. This situation occurs when a person in the US has a financial stake in or control over a financial account located outside of the country, and the combined worth of all the foreign accounts is over $10,000 (in US dollars) at any point during the year.

It’s important to note that the foreign financial account does not need to generate income or taxable income for the account to trigger the need to file the FBAR. If the balance of all foreign financial accounts exceeds the $10,000 threshold, each foreign account or asset must be reported, regardless of whether you received income from the foreign account and no matter how small or low the account’s value may be.

FBAR Compliance and Filing

Ensuring compliance with FBAR filing requirements is crucial. The FBAR report must be submitted annually by April 15th for the previous year. In case you miss the due date, you can get an extension until October 15th without having to make a request for it. There’s no need to file for an extension separately for the FBAR.

The FBAR is not filed with your individual tax return. Instead, you file the FBAR electronically through FinCEN’s E-filing system. You may be able to paper file the FBAR, but to do so, you must receive an exemption to E-filing from FinCEN. You are allowed to have a third-party file your FBAR on your behalf.

To properly file your FBAR, you will need the following information:

• The taxpayer’s name, address, date of birth (if an individual), social security or employer identification number
• Name on the foreign account
• Name and address of the foreign bank or financial institution
• Account number or identifying number for the foreign account
• Type of account or foreign asset
• The maximum value in U.S. dollars of the account during the year.

All foreign financial accounts are generally reported on one FBAR, even if the accounts are held only by you or jointly.

While the law does not require any specific record-keeping for the FBAR, it is highly recommended that you keep all of your forms or statements to verify the information stated on the FBAR and the exchange rate you used if you converted foreign currency into U.S. dollars.

Penalties for Non-compliance

Failure to comply with FBAR filing requirements can lead to severe penalties. Both civil and criminal penalties can apply when an FBAR is not timely filed.If you fail to file the FBAR, you may be penalized up to 50% of the account or asset value that was not reported.This means you could lose up to half of the value of your foreign account or asset by not filing the FBAR.

Other Foreign Compliance Forms

If you are reporting foreign assets on the FBAR, you may also have the requirement to report these assets elsewhere. If you have a foreign bank account, there are boxes on Schedule B that may need to be checked. Additionally, you may have income to report on your Schedule B. Other common forms to report foreign assets include Form 8938, Form 3520 or Form 3520A, or Form 5471. The specifics surrounding your foreign asset reporting will dictate the form or forms you need to file and how and where the forms need to be filed.

What If I Have Failed to File FBARs for One Or Multiple Years?

If you have not filed your FBARs and are not already under an investigation by the Department of Treasury, you may be able to file your FBARs and other foreign compliance forms and unreported foreign income through specific programs with a lesser penalty. These programs include the Streamlined Offshore Voluntary Disclosure Program (Streamlined OVDP), and the IRS has a Delinquent International Information Return Submission Program. These programs differ, and weighing your options and potential outcomes with your specific facts and circumstances is essential.

Taxation on Foreign Income from FBAR Accounts or Assets

Foreign income is taxable and would be included on the appropriate form or schedule on your tax return and thus subject to U.S. tax. For example, interest from a foreign bank account would be reported just like interest from a U.S. bank and subject to ordinary income tax.

What If I Have Already Paid Tax To A Foreign Country?

If you paid taxes to a foreign country, you might be eligible for the foreign tax credit. This credit allows you to apply all or part of the tax you have already paid to your total tax bill. Form 1116 is completed to claim the foreign tax credit.

FBAR Updates

As of July 1st, 2013, the electronic version of the FBAR is currently available and must be filed electronically. This is part of FinCEN’s efforts to streamline the filing process and make it more efficient.

In addition, FinCEN has provided some relief to victims of recent natural disasters, allowing them more time to meet their FBAR filing obligations. This is a reminder that the government considers extraordinary circumstances that may affect taxpayers’ ability to file on time.

Conclusion

If you have any questions about whether you have an FBAR filing requirement or have the FBAR filing requirement and have not filed, it is highly recommended that you speak with a tax professional, preferably one specializing in international tax compliance, to determine your compliance requirements and options. FBAR compliance is critical and can lead to hefty civil and criminal penalties.

The IRS requires you to report cost basis on certain property transactions, including sales, exchanges, gifts, inheritances, and losses. If you don’t know what it is, you’re probably confused about how to calculate it. You might think “cost basis” means “the amount I paid for my house,” but it doesn’t. Instead, it refers to the price you paid for an asset minus any depreciation you’ve taken over time.

The cost basis of stock options is the amount you paid for the shares when you bought them. You can use it to determine what portion of the shares’ value came from your initial investment and what portion came from the market.

 A tax attorney has prepared the article below to provide information regarding the basis.  Please remember that this is not legal advice, and it is recommended you consult directly with your tax attorney regarding your specific issues and questions.

To calculate the cost basis of your stock options, follow these steps:

1. Determine the total number of shares you purchased.

2. Multiply the price per share by the total number of shares.

3. Divide the total purchase price by the number of shares.

4. Subtract the resulting number from the current share price.

5. If the difference is negative, it indicates that the option had a loss. Otherwise, it indicates that the options had a gain.

Example Of Calculating Cost Basis

For example, you bought a $1 million home for $100,000. Your cost basis is $100,000. You sell the house three years later for $200,000. You’ll owe capital gains taxes on the difference ($100,000 – $100,000 $0).

You must figure out your cost basis for every item you sell, even if you use a professional real estate agent. So, if you buy a $5,000 car, you still have to include that expense in figuring out your cost basis.

If you’re selling a piece of property, you’ll want to subtract any outstanding mortgage balance from the sale price. For example, if you sold a house for $150,000 and had a mortgage of $50,000, you’d have a gain of $100,000 ($150,000 – $50,000 $100,000).

The same goes for stocks. If you sold shares of stock for $10 per share, you’d have a loss of $10 per share ($10 x 10,000 shares $100,000 loss). But if you sold those shares for $20 per share, you’d profit $10 per share ($20 x 10,000 shares).

What is Cost Basis?

Cost basis is the amount you pay to buy an asset. You might consider it the original price you paid for an item. If you purchased shares of XYZ Corp. at $10 per share, your cost basis would be $10 per share. This is the price you paid for the asset—the value of the stock at the moment you purchased it.

When you invest in a stock or mutual fund, your cost basis is usually the price you paid for that investment. For example, if you invested $1,000 into XYZ Corp., your cost basis would be the $1,000 you spent on the stock.

Understanding Cost Basis

Understanding the cost basis for an investment is essential for tax purposes – whether it’s a capital gain or a loss. You realize a loss if you sell an asset for less than what you paid. But how much did you pay for it? That’s where knowing the cost basis becomes helpful.

Generally, selling an asset and recognizing a profit or loss on the transaction is considered a taxable event, regardless of whether you are filing a personal or corporate income tax return. However, there are exceptions. For example, if you sold property used in your trade or business for $5,000 and realized a net loss of $10,000, you wouldn’t owe taxes on the entire $15,000. Instead, you’d only owe taxes on the $5,000 of profit. Similarly, if you sold a property for $100,000 and realized a $50,000 profit, you’d only owe half of the profits taxes on that amount ($25,000).

The IRS provides some guidance on determining the cost basis of an asset. You generally must use the purchase price of the asset minus depreciation deductions taken over the asset’s life. This figure represents the initial cost of the asset.

Tracking Cost Basis

There are many reasons why you might want to track what your cost basis is for investments. One reason is that it helps determine how much tax you owe on those investments. Another reason is to see whether you’re getting a good deal on your investment returns. You can use cost basis information to calculate net unrealized appreciation, which tells you how much money you’ve gained since you bought the asset. Cost basis information lets you figure out what you’ll pay in taxes when you sell the asset. For example, if you buy a home for $100,000 and later sell it for $150,000, you’d have to pay taxes based on the difference between the sale price ($150,000) and the purchase price ($100,000). But if you sold the same house for $200,000, you wouldn’t have to pay taxes on your profit.

 Questions About Cost Basis? Contact The McGuire Law Firm

If you have questions relating to your basis in property and tax treatment through the sale or purchase of property, you may want to speak with a tax attorney or business attorney. Contact The McGuire Law Firm at (720) 833-7705.

work through a number of IRS tax issues and implications. Over the past 5

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If you have any tax related question or issue, from a business tax question to an IRS audit or debt, contact The McGuire Law Firm to speak with a Denver tax lawyer regarding your matters.  The video below has been prepared so you can meet John McGuire, a tax lawyer at The McGuire Law Firm and learn more about the free consultation offered by the firm.

Contact The McGuire Law Firm to speak with a tax lawyer in Denver, Colorado or Golden, Colorado.

First, an IRS tax lawyer could be a lawyer that works for the Internal Revenue Service.  This lawyer would likely represent the government in cases before the United States Tax Court.  These cases would likely involve tax controversies and issues regarding the additional assessment of tax to individuals and businesses.  The specific reasons for the additional assessments of tax could be because not all income was claimed, the IRS is disallowing certain expenses or credits and/or the IRS is disagreeing with how (or where) a specific item was claimed on the individuals or businesses tax return.

On the flip side, an IRS tax lawyer could be a lawyer that represents taxpayers before the Internal Revenue Service in the certain situations that are described above.  John McGuire is a tax lawyer in Denver at The McGuire Law Firm and represents clients before the IRS in matters relating to IRS tax debts, IRS tax audits and other IRS tax disputes. Please feel free to contact John to speak with him regarding any of your tax questions or issues.  In addition to his law degree, John has an advanced degree in taxation known as an LL.M. and enjoys applying his tax knowledge to his client’s issues before the Internal Revenue Service and business related matters.  A free consultation is offered to all potential clients.

Contact The McGuire Law Firm to schedule a free consultation with a Denver tax lawyer!  The McGuire Law Firm has offices in Denver and Golden Colorado for your convenience.

– Individual & Business Tax Planning

– IRS Tax Debts, IRS Tax Audits and other IRS Problems

– Analyzing the tax implications of business transactions such as the sale of business assets, stock, business interests and other business acquisition matters

– The application of the tax law to the gifting of property whether at life or death

– Preparation of Tax Returns

Please view the video below to meet John and hear more about the services John provides as a tax lawyer.

You can contact The McGuire Law Firm at anytime to schedule a free consultation with a tax lawyer in Denver or Golden, Colorado.

Contact The McGuire Law Firm to schedule your free consultation with a Denver tax lawyer to discuss your tax questions & issues.  Offices in Denver and Golden Colorado.

Schedule your free consultation with a tax lawyer by contacting The McGuire Law Firm!  A Denver tax lawyer at The McGuire Law Firm can discuss your options regarding an offer in compromise as well as other tax matters.