3 things to do if you did not file your FBAR/FATCA
The major requirement under The FBAR/FATCA is to find out the financial assets of the U.S. citizens outside the country. All financial institutions outside the U.S. need to find out the records of customers with the U.S as their place of the birth & report about their assets to the U.S. Department of the treasury.
FBAR stands for Foreign Bank Account Report which must be filed with the Financial Crimes Enforcement Network (FinCEN) by U.S. citizens who are authorized signatories or financial interest holders in any foreign financial account, where the account can be either a bank account or a mutual fund.
Filing for FBAR is different from general filing for tax returns with IRS and is generally done electronically by E-Filing system.
Unfortunately, there are cases of U.S. citizens being unaware of the filing for FBAR and being penalized by the Government. So, if you have missed out filing for FBAR by any chance you can follow the below-mentioned procedures.
Streamlined Filing Compliance Procedures–
This method is applicable:
- If you have unknowingly missed foreign assets declaration
- Made any mistakes while filing FBAR forms
- If you are non-tax compliant for all foreign accounts which will be mentioned in your FBAR declaration.
In this method, the taxpayer is allowed to amend or make changes in the last 3 years of tax returns & the last 6 years of not reported FBAR declarations.
Offshore Voluntary Disclosure Program–
In this method, the IRS provides another opportunity to the non-tax compliant citizens to disclose their foreign financial assets voluntarily before the IRS finds out and implements criminal prosecution.
However, there are penalties associated with this method but can be reduced to a certain extent.
Delinquent International Information Return Submission Procedures-
- The taxpayers who opt for this method need to file the International Information Return by providing a statement of all facts which justify the reason for the failure of non-compliance.
- Usually, those citizens who have reasonable causes for non-compliance & have not been contacted by IRS yet for any penalties can use this method.
The FATCA also instructs citizens to self- report about their non-U.S. assets to the IRS (Internal Revenue Service). The entire motive behind this law is to prevent tax evasion. Several methods are used by the citizens to avoid paying taxes like making a tax-advantaged investment, plans or opening tax-advantaged accounts.
The Health Savings Account (HSA) is one of the best examples of tax-advantaged accounts in which the contributed funds are tax-exempted. Since these accounts are not liable to taxation citizens contribute more & more to these accounts.
As per current statistics reports, there are approximately 22 million HSA accounts holding over $45 billion in assets. The HSA accounts have grown by 8.3 billion dollars which results in a year over year increase of 22% in assets.
Another such tax-advantaged plan is the Child Tax Credit. This credit amount is given to the taxpayer at the end of the tax year for every dependent child below the age of 17 and satisfying other mandatory criteria like citizenship test, family income test, relationship test etc.
The new Child tax credit for tax years after 2017 is up to $ 2000 per qualifying child with a refundable amount up to $1400. As per recent reports, around 60 million children from 35 million families are saving taxes using the Child tax credit. In the U.S, the state and local tax deduction is one of the major tax expenditures.
However, all these procedures & methods enlisted are not simple and will need professional guidance as well. Hence, to have a hassle –free financial life it is always advisable to be compliant with the tax payments.