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The 5 Most Common Reasons For FBAR Penalties

The Foreign Bank and Financial Accounts Report (FBAR) is a form that is required to be filed by U.S. taxpayers who have foreign financial accounts. The FBAR is used to help the government detect and combat international money laundering and terrorist financing. If you fail to file the FBAR, you may be subject to civil and criminal penalties.

The most common reasons for FBAR penalties are:

  1. Failing to file the FBAR
  2. Filing the FBAR late
  3. Omitting information on the FBAR
  4. Incorrectly reporting information on the FBAR
  5. Failing to sign the FBAR

If you are a U.S. taxpayer with a foreign financial account, it is important to make sure that you file the FBAR correctly and on time to avoid penalties.

Non-filing of the FBAR

One of the most common reasons for FBAR penalties is failing to file the FBAR. The FBAR is required to be filed by U.S. taxpayers who have foreign financial accounts. If you fail to file the FBAR, you may be subject to civil and criminal penalties.

Failure to properly file the FBAR

Another common reason for FBAR penalties is failure to properly file the FBAR. The FBAR must be filed electronically through the Financial Crimes Enforcement Network (FinCEN) website. You must include your name, address, and Social Security number on the FBAR. You must also include the names of all foreign financial institution in which you have an interest, as well as the account numbers for those accounts.

Signing the FBAR under penalties of perjury

When you sign the FBAR, you are declaring under penalties of perjury that the information you have provided is true and correct. If you knowingly and willfully provide false information on the FBAR, you may be subject to criminal penalties.

Filing a joint FBAR when only one spouse has foreign accounts

If you file a joint FBAR, both you and your spouse will be jointly and severally liable for any penalties that may be assessed. This means that if only one spouse has foreign accounts, both spouses may be subject to FBAR penalties.

The civil penalty for non-willful violations

The civil penalty for non-willful violations of the FBAR filing requirements is up to $10,000 per violation. A violation is defined as each year you fail to file the FBAR or each foreign financial account you fail to report on the FBAR.

If you want to learn more about how to file expatriate taxes, visit our contact page to connect with us.

What You Need to Know About The Proposed Tax Bracket Changes For 2022

The United States has a progressive tax system, which means that taxpayers are taxed at different rates depending on their income level. The current tax brackets are 10%, 15%, 25%, 28%, 33%, 35%, and 37%.

For the tax year 2021, the income thresholds for each tax bracket are:

* 10% bracket: $0 to $9,875 for singles; $0 to $19,750 for married couples filing jointly

* 15% bracket: $9,875 to $40,125 for singles; $19,750 to $80,250 for married couples filing jointly

* 25% bracket: $40,125 to $85,525 for singles; $80,250 to $171,050 for married couples filing jointly

* 28% bracket: $85,525 to $163,300 for singles; $171,050 to $326,600 for married couples filing jointly

* 33% bracket: $163,300 to $207,350 for singles; $326,600 to $414,700 for married couples filing jointly

*35% bracket: $209,426 to $523,600 for singles; $418,851 to $628,300 for married couples filing jointly

*37% bracket: $532,600 or more for singles; $628,300 or more for marries couples filing jointly

Who will the tax bracket change affect?

The proposed tax bracket changes will affect taxpayers with an income of $200,000 or more. Under the proposed changes, there will be a new tax bracket of 39.6% for taxpayers with an income of $200,000 or more.

What are the proposed changes?

The proposed changes would create a new tax bracket of 39.6% for taxpayers with an income of $200,000 or more. The other tax brackets would be unchanged.

How will the changes impact you?

The changes would impact you if you have an income of $200,000 or more. If you are in this income bracket, you would be required to pay 39.6% in taxes on your income.

What can you do to prepare for the changes?

If you are in the affected income bracket, you can begin to plan for the changes by adjusting your tax withholding. You can also make adjustments to your budget to account for the higher taxes you will be required to pay.

Wrapping up

The proposed tax bracket changes would create a new tax bracket of 39.6% for taxpayers with an income of $200,000 or more. The other tax brackets would be unchanged. The changes would impact you if you have an income of $200,000 or more. If you are in this income bracket, you would be required to pay 39.6% in taxes on your income. You can begin to prepare for the changes by adjusting your tax withholding and making adjustments to your budget

If you have questions about your tax brackets or other tax information, visit our contact page to connect with an expert.

COVID Penalty Relief for Taxpayers

Many unforeseen situations can occur at any time and for anyone. The IRS understands this and has given taxpayers flexibility. Notice 2022-36 gives relief to those in areas declared by the Federal Emergency Management Agency as a disaster. Only 2019 and 2020 tax returns are qualified under this issue.

Areas within November 15, 2022, are below:

  • Counties in Missouri (under the FEMA Major Disaster Declaration 4665)
  • Counties in Kentucky (under the FEMA Major Disaster Declaration 4633)
  • Crois Islands (US Virgin Islands)
  • Tribal Nation Members of the Salt River Pima Maricopa Indian Community

Areas that are under February 15, 2023:

  • Florida
  • Puerto Rico
  • North & South Carolina
  • Alaska (under the FEMA Major Disaster Declaration 4672)
  • Mississippi (Hinds County)

Certain taxpayers under the failure-to-file penalty are qualified for this relief. The penalty rate can be from 5%- 25% of unpaid taxes. The forms that are accepted under this relief include 1040, 1120, and Notice 2022-36. It is important for taxpayers to verify their qualifications and required adjustments.

Ineligible Tax Returns

This relief is not available for all tax returns. If a return was filed and listed as fraudulent, that submission will disqualify the taxpayer from getting this relief. Returns impacted by the Failure-to-Pay penalty are also disqualified for this relief. 2021 returns are not eligible for this relief. Taxpayers that want to inquire about their 2021 return eligibility should consult with a professional tax agent.

If you want to know if you qualify for the COVID penalty relief, visit our contact page to connect with an expert tax agent.

Things to Know When Considering an Early Withdrawal from Retirement

Unexpected events happen to everyone. Unfortunately, some people must make necessary financial sacrifices to withstand such circumstances. One of the sacrifices people make is withdrawing from their retirement early. This quick-cash method can produce significant tax penalties if enacted. Consider the following information before pulling from your retirement early:

  • Flexibility Within 401(k), 403(b), and 457(b) Plans

Taxpayers can withdraw from these plans only if an event of hardship occurs. A Hardship Distribution is when a taxpayer withdraws from their retirement savings earlier than their declared withdrawal date. The date is normally set to sometime after the taxpayer turns 70. Support needed for spouses or dependents is included in these policies.

The withdrawal is limited to the financial need of the taxpayer. Repayments for hardships are not permitted. The eligibility for early distribution should be accurately stated within the plan description. Withdrawals made before the set age or date are subject to an early withdrawal penalty.

  • Distribution Related to Divorce

If a taxpayer is experiencing a divorce, they may be eligible for early distribution. If a withdrawal from a traditional IRA is made early to supplement divorce requirements, the amount is subject to a 10% early withdrawal penalty. Exceptions on this income tax can be made according to the case.

The options listed in this article are not exhaustive for taxpayers. The IRS provides many helpful alternatives for hardships. If you want to learn more about what to do when considering withdrawing early from retirement, contact us by visiting www.expatriatetaxreturns.com. We are excited to give you the help you need.

Lookout for 1099-Ks if You Received Over $600

Be mindful of your taxes! The IRS sent out another reminder and notice for independent workers. Expatriate Tax Returns has the information you need for filing your taxes.

Taxpayers who sold goods or provided services that received over $600 from digital transactions will receive a Form 1099-K. This is a significant change in amount compared to previous reporting threshold requirements and is required to be reported on your tax return.

Taxpayers must make estimated tax payments if the following applies:

  • Generally, if a taxpayer earns income throughout the year
  • If the withheld income tax from one’s salary or pension is not sufficient
  • If other forms of income such as dividends, interest, alimony, capital gains, awards, and/or income from self-employment are received
  • If the taxpayer is in business for themselves

Taxable income qualifications remain the same. Taxpayers who earn income from jobs (full-time and part-time) and sales are still required to file for those amounts. Money from relatives, friends or other personal expenses is not usually taxable.

If you have more questions about tax filing your taxes visit www.expatriatetaxreturns.com.