Sign New York Banking Lease Template Computer

Industry sign banking new york lease template computer

form 8938 my name is danae navani and before we get started with the meat of the presentation a few administrative items to go over use the win the questions pane in the GoToWebinar dashboard to so many questions or comments you have as we go to the presentation we have a lot of material to cover today and we're going to try to address questions at the end if we're not able to get your questions we will follow up with you by an email after the webinar the presentation will be one hour and at the end o be a slide with the contact information for the presenters at the at some point after stays webinar a copy of these slides will be on our website which is www their screen any of the attendees some of you are signed up for cpe and CLE and for those of you who are want that credit it's imperative that you do answer the following questions and finally please send us any comments you have or suggestions for future programs today we're going to take a look at the details behind the new IRS from 8938 the presenters are proud to telling myself parag is an attorney with the patel law offices in metropark his practice concentrations and tax business law in the state planning he's worked extensively on complex tax and estate planning issues and other tax motivated transactions Prague was recently named as a new jersey super lawyer rising star by New Jersey magazine for tax estate planning he was the 2010-2011 chairman of the tax chairman of the tax law estate planning and probate and trust committees in the American Bar Association's GP solo and small firm division he's a certified estate planning law specialist certified elder law care attorney and frequent speaker at seminars and legal issues affecting tax and estate planning he also serves as a part-time municipal court judge for Edison Township in New Jersey as for me I'm the director of taxa Wilkin and government plan in east brunswick new jersey my client base includes emerging and established businesses high tech and software industries as well as other closely held businesses along with their owners I spend a good amount of time with income tax planning and compliance matters such as business sales restructurings retirement plans chargeable giving strategies tax audits and other topics files work a lot with US citizens living overseas and US tax aspects of international businesses that have operations in both the US and in abroad so at this point we're going to start the presentation and prob is going to give us some background on the charts a shepherd presentation okay great today we're talking about 8938 but 8938 actually is the is it IRS form but it is a result of two different acts the higher acts in 2010 encapsulate the foreign account Tax Compliance Act and that I believe as a result of President Obama's campaign in 2008 where he publicized that there were a lot of taxpayers that had foreign accounts and the goal of this act was making good on that promise and also in of course it combats tax evasion by US persons and essentially you had to pay for this act and that is what 8938 is about as well as information sharing in year 2013 that comes about for foreign banks and it's required it's something that everyone should know about that after 2013 foreign banks are required to withhold on payments to a UN banks are required to hold on payments to farm bank that don't necessarily provide information sharing regarding their US taxpayers so 8938 is encapsulated in higher Internal Revenue Code section 60 38 d and the form is required for all tax returns filed after 2010 so it's going to be required if it's required for 2011's tax return so with that introduction vinay I think you're going to be talking about for quite a while form 8938 and going through all the intricacies exactly so we really split up the form 8938 presentations in two parts one is going to be kind of from the background and key terms and then towards the end rush you look at the form and go through a line by line so we're going to do that at the end if you haven't had a chance to do so I try to open up a window and try to have the form 8938 available because we will it will be helpful to look at that now we're starting to write an outline but we're going to talk about and I didn't have to because the IRS instructions do a pretty good job when you look at who must file it says if you are a specified person that has an interest in specified foreign financial assets and the value of those assets is more than the applicable reporting threshold you're probably going to fall out I don't know the rest of it says but I've underlined from the very key terms that are willing to be very important to us this presentation and running going to each one of them in more detail so who must file form 8938 are you a specified individual and who is a specified individual specified individual is more or less somebody who is treated as a US taxpayer to tax the worldwide income not exactly but for the most part if you're a US citizen a poor considered a resident alien so that means somebody was a green card holder or is in the US for enough days to meet the substantial presence test they will be considered as specified individual that's going to be most of your your filers in some cases you can have a non-resident alien who makes an election to be treated as the resident alien for purposes of filing a joint return one spouse in the u.s. one spouse one spouse's in the US have expressed is not the u.s. in order to follow married filing joint return that non-resident alien spouse might make an election to be treated the US person so in that case you would be a specified individual now currently only individuals were required to file form 8938 if you are a single member LLC or grantor trust so that for tax purposes you look through those entities then assets owned by those entities are going to be subject to the requirement cuz they're going to be considered to be on by the individual we're not really talking about going to talk too much about the f bars but the f bar is if you're familiar with those they have their own completely disjointed set of rules the form 8938 is a tax form and it really borrows and utilizes a lot of tax concepts viewpoint in other parts of the code ok so the reporting thresholds we have a whole myriad of different reporting thresholds that might cause you to have to file if there's two criteria you look at your value your maximum value of the assets during the year and then you also look at your value of your assets at the end of the year okay so at the lowest threshold if you're an unmarried person living the United States and the and as a December 31st you have foreign financial assets of more than 50,000 you need to file form 8938 but let's say at the end of the year your aggregate value of assets is 40,000 but during the year at any point it was 120,000 then in that case you'd have to file form 8938 as well so you have different requirements based on your your filing status unmarried living the u.s. marriage polyandry return America filing a separate return the IRS also recognizes that if your US citizen or resident alien but you're living abroad you're going to have more financial assets and they've given higher thresholds so if they're married probably a joint return of living overseas you know you have a 406 hundred thousand dollar threshold okay so keep that in mind and there we go we look at value of determine on the last day of the year the highest balance during the year exceeding either through the triggers of the reporting form now to qualify for those those higher thresholds if you're living abroad the code looks at the other set of rules under section 9 11 which allows you to qualify to exclude a certain portion of your earned income you don't have to income is excluded but you have to meet the rules and usually it's one of two tests either you're out of the US for 330 out of 365 days known as a substantial presence test or the foreign home is really your your domicile for lack of a better word you're really a bona fide resident to the foreign country okay so now let's suck one value value is really important for two reasons obviously to find out if the form 8938 required and then if it is required we have to disclose the value of each asset that we're going to see as we go through the form now the form says to use fair market value and they refers to use general tax law principles to determine fair market value and we're going to talk about a little bit a little bit more about that later you first determine the value in the foreign currency if you have there's no such thing as negative values so if you were to have an asset which was a net liability it would be considered a zero value assets okay and the instructions tell us to use the periodic statements as a good gauge of value unless you have reason to know that they don't for some reason they don't reflect the maximum count value during the year so if I have two month in statements 14 juna one in July but I know that during July my values spiked up then I can't rely on the month-end statements now I put two quotes here from the instructions referring to value i'm going to read them in most cases the value of the specified foreign financial asset to this fair market value and appraisal by a third party is not necessary to estimate the maximum fair market value during the year the other quote is in most cases you may use the value of the specified financial asset other than the financial account as of the last day of the year unless you know or have reason to know based on readily accessible information that the value does not reflect a reasonable estimate of the maximum value of the asset during the tax year now the reason I put these two coats here is I read them to me that the IRS is not going to beat us over the head we don't have value exactly right and they're telling us don't spend a lot of money and effort getting third-party appraisals well I think with these these two quotes are saying is be reasonable use your best judgment and as long as you're disclosing that you shouldn't have problems running its value because as we get into non publicly traded securities in foreign countries value is obviously a very difficult thing to to figure out so again maybe I'm reading too much into it but I see that this is being the IRS recognizing this fact by by these two quotes if I have a trust I look at the value of my share of the trust and if I have a value in a foreign estate corn pension plan or porn deferred comp plan I use the value if I know it's of my interest I may not know it and if I don't know it then they allow me to use my distributions if I had no distributions and I don't have any other information i can use zero now many assets are on jointly and you get to some unusual results here the general rule is that you always use the entire value of the asset not just my portion with the taxpayers portion so if I own ten percent of an asset and the other ninety percent can be owned by us or non-us people for the most part I'm putting the value of the entire asset not just my ten percent with you to figure out if I have to file the form or not if I own that acid joint with my spouse we we use the joint value because the 8930 is going to end up in a joint return anyway if I own an asset Jones my spots we filed separate returns we each choose one half the value okay that's really the only exception that I'm aware of that you don't use the full value when you're trying to figure out your form 8938 requirement if I own enjoyment espouse my spouse Antonio's taxpayer again total value joint with mountain on spouse total value of the asset on my form 8938 if the asset is denominated in foreign currency which is the most most of the time they will be we first determine the max in valuing the foreign currency now an interesting twist that I'm the IRS has imposed on the with the form 8938 is there actually directing you as to which foreign exchange service to use you have to use the US Treasury Department's financial management foreign exchange currency rate I know with with F bars and other currency translation requirements I'm not aware of any directive to use a particular service we've usually used a couple of internet available sites to find out the foreign currency exchange rate and I'm not sure to what extent the IRS is going to be enforcing this but they do make it very clearly you're supposed to use that particular service to get the currency translation rate and only bad current only if the Treasury Department service doesn't have that currency you can use another source we are directed to use the currency exchange rate as of the last day of the year regardless of situations that the maximum value was not on the last day of the year or even if that value even if the ass that was sold part the end of the year you're supposed to use the currency value on the last day of the year so now this is really the meat of it what is a specified foreign financial asset oh do I have a I have a polling question I cyber polling question before I get ahead of myself third-party appraisals required to complete from 8938 for all form private business owners sure faults again if you're taking this for cpe or CLE you need to chill out the you need to answer the question and we have most everybody has voted we'll keep it open open for by another 15 seconds and okay so let's close the polling and of course everybody people were listening so thank you it is false you do not require you're not required to go to the third party prison so now we're going to specify foreign financial assets two main categories the foreign financial account a foreign financial account maintained by a financial institution and foreign financial assets now the first category financial accounts maintained by foreign financial institution is where you're going to see most of your overlap with the FR filings okay so you have traditional deposit type accounts the bank accounts or you have custodial accounts that may hold securities things like that in some countries you have these stocks they're concerned emad accounts are very common so what is the definition of foreign financial institution in addition to the normal rules you would expect you know a bank it also includes a business somebody engaged in the business of investing reinvesting or trading securities partnerships interest commodities etc so that category really pulls in things like foreign mutual funds for an edge funds foreign private equity funds okay so those types of investments are going to fall into this first category of foreign assets now let's talk about some foreign financial assets if I have assets held for investment that are not held in an account maintained by a foreign by a financial institution so I own shares in a UK private limited directly that's going to be a foreign financial asset if I have a loan to someone in a foreign country that's going to be a that's going to be considered of foreign financial assets because that's a nose bond to venture other from haven't that's between issued by a foreign person a fire an interest in a foreign partnership that's conservative foreign financial entity okay or more broadly any financial instrument or contract that has a non-us counterparty is going to be included as well as an interest in the foreign trusts or foreign state foreign deferred compensation plans with a foreign employer or a foreign pension plan is going to be included in this list of foreign financial assets so as you can see the list of foreign financial assets is really very broad one of the exceptions is foreign Social Security so if I have an interest interest in a program like that I'm going to not have to include that let me go back here one of the most common questions I get is I own a piece of real estate in the foreign country and generally speaking real estate is not a foreign financial asset the IRS actually came out with some frequently asked questions about form 8938 we stay posted on their website two days ago in the 29 and that was one of the things they addressed but before you jump to that conclusion you have to make sure that the taxpayer owns the real estate directly and it's not in a trust or any sort of entity i many countries especially in Latin America in south america for non-citizens own real estate that has to be in some sort of trust or others for the vehicle and in that case you would own an interest in a trust or a foreign corporation and that would be the foreign financial asset okay so it's very important to take a further step so if i own a specified foreign financial asset the next question is do i actually have an interest in a foreign specified foreign financial asset it may seem a little bit duplicative but it's important criteria so the question have to ask yourself is if that specified foreign financial asset paid a dividend or if I sold it what I have a potential gain or loss then chances are i have an interest in a specified foreign financial asset even of course if I didn't sell or didn't have a dividend but if I'm entitled to income associated with that asset then I will include it if I have made an election to report my kids income in dividends on my personal tax return then I as a parent and considered have an interest in the specified foreign financial asset even though legally may be owned by the child grantor trusts like we said the very beginning the grantor Trust is generally disregard for us tax purposes so if my grand tour trust owns a specified foreign financial asset then I is the Grand Tour I'm considered to have my the form 8938 volume requirement interest in foreign estates and trusts in some cases I may not know that I'm of beneficial I before entrust so I can't be required to report on something I don't know about but if I do know about it I need to report it and it's very clear that preceded with distributions is considered knowing it as obvious as that may seem vinay there's one interesting before we move on but to their next by dealing with exceptions one section that that I think that deserves some some some time is a question which is innocent and initially put but i think that is explosive and that's on the fur very first page of 8938 that where they ask about account numbers and deposits and things like that question 3 asks when it was never asked when it was open but they asked was it open during the tax year was a closed during the tax here right and i think that that deserves some attention if you don't check what is open during the tax year i presume that what does that mean that means it hasn't been run in a prior tax year right and that has a cascading effect and that is a there are multiple implications from that I would think that number one if you follow this route if you're filing 8938 if you don't check those open during the tax year essentially you're giving the IRS information be used against you saying that you had account in a foreign account in it prior to 2011 in which case you had to file probably f bar you probably had to file a disclose it on your on your schedule be so for example if you open it in 2010 you have to file on that part 4 2000 form bank on report nourish thousand ten you have to report it on your schedule B and I think you'd probably you have to answer that question at the very much yes yes so so in theory you may have had you know a talent two thousand dollars you may have had other specified foreign financial assets to get you to the reporting so you may not have had to file enough far but you certainly would have had the schedule hence the question on Schedule B and this whole conversation assumes that the person didn't do what they were supposed to have done and weren't reporting this correctly all along but you're actually right if they haven't been this is kind of a smoking gun if you will there's a prior exposure so it's a trigger and I in prior to filling this out you probably have to have a conversation with the client because by filling this out yes you're giving you know you're required to and you're giving disclosure the IRS but you're you know lack of a better word incriminating yourself I think because our criminal penalties for failure to dial those older years and this could lead to probably something that can be used against you correct absolutely correct and we're going to talk about towards the end about penalties and the IRS ovd I programs and similar things but you're absolutely correct wrong it is a very important aspect so let's talk about exceptions to find form 8938 we like exceptions if I'm not required to file a Form 1040 I don't have to file form 8938 if I have a foreign asset held by a US financial institution so my example is Nestle stock on Maryland's brokerage accounts I don't have to file form 8938 if I have a domestic branch of a foreign bank so the new york office of the state bank of india or the flip side the new delhi office of citibank would not be those accounts would not trigger a form 8938 filing requirement and if you look at the faq that came out again two days ago they elaborate on these little bit more okay this we're going to skip over that all right here is the biggest exception that most taxpayers will be relying on from for form 8938 if you are required to file any of these forms other forms they're listed with respect to your foreign ownership of your essay you still have to file form 8938 but you're filing it becomes much much simpler okay so this is an important list of form so let's go through it form 3520 which deals with transactions form trusts and receipts of certain foreign gifts as well as foreign inheritances for receipt of a form the quest is report on form 35-24 5471 is a form that's required to be filed if i have an interest in the certain foreign corporations or maybe 621 information return with respect to a passive foreign investment company otherwise known as p fix for mutual funds are included in that category from 8865 US persons that have an interest in certain foreign partnerships and from 88-91 US taxpayers that have an interest in the canadian registered retirement plan so if you have any of those scenarios and you're filing those forms then your form 8938 requirements is much easier pay attention in the penalties for not following any of these forms are pretty steep so you want to look at that now i will talk about the front 5471 in for a second there are many situations where i might add a ten percent interest in a foreign corporation and i may not have to file form 5471 but i will have to file form 8938 if i meet the other volume requirements and even if i do me even if I am reporting my ass is one of those other forms I still have to consider what the value is to determine if I filing application so i may own shares a UK private limited and i don't have to put too much detail about the UK private limited on the forum as we're going to see at the end but what we're going to do is I need to figure out what my value is so I can determine am i less than 50 or more than 100,000 whatever it is so I can figure out about the file the form okay do we have a polling question okay here we go which of the following are not specified foreign financial assets not foreign financial assets foreign securities account superb compensation plan with the foreign employer they can land in a foreign country or interest in a foreign partnership okay so please both as soon as we get most of the boats in we'll move on to the next part of the presentation we'll keep it open for about 10 more seconds okay so of course the answer was vacant land in a foreign country that's not a financial asset and most of you got that right so the names you doing before we move on to the impending section adding question if you have a client that received save on the quest of land non income-generating land let's just use that as an example so is there an 8938 obligation that if I received the quest of land I'm had to file form 3520 right its report that inheritance but no I don't think that I'm I'm proud of my 8938 requirements so you would basically say you saw at the top part of 8938 and you would not disclose that asset on 8938 it simply it's a very end of 8938 to indicate that you're filing at 35 20 is one form there and that takes well well actually let me stop it because if that's the only app that i have that lab that's not a specified for financial asset so i may not even file form that you don't 38 in that case then case just finding a 3520 right and that would be presuming that you inherited it Herod inherited that asset during the year correct correct and as for on-demand time well you're going to talk about penalties now and one of the messages behind as you're going to talk about as the penalties are so steep that anytime you have any questions in the world will form 8938 it's always better to the err on the side of disclosing because you really have nothing to lose and you do have a lot to lose it you should have made a disclosure and you didn't make a disclosure so that's a good entree to the next section which is what what there is to lose and if you remember anything up from this section they are severe penalties here they're very significant they are new penalties that don't otherwise apply and it's a real incentive to disclose and that's the reason why we have a fuzzy comes in first place but we'll go through it so the very first thing is a give a failure to file file penalty it's $10,000 it by the DD so for example for this year it's able to team or the presented due date their proms and fifty IRS for whatever reason send you a notice that you fail to file a return the 8938 then there is an additional continuing failure to file penalty which is ten thousand dollars for every 30 day period maximum penalty is for five months so it's a fifty-thousand-dollar penalty that would be in addition to be first penalty and if that is not enough then you have the accuracy related penalty and this is different from the normal accuracy related penalty that we may be so all familiar with this is a special accuracy related penalty only for undisclosed specified foreign financial assets that penalty is forty percent of that under payment of the under an undisclosed asset I would think Vinay I guess stepped in addition to the regular accuracy related penalty on certain I'm not certain but I had to guess I would say probably yes but I'm not certain you well you know what the regular accuracy related penalty is based on the amount of tax to so perhaps this is may be different I'm not sure I odd hopefully we'll never need to know that how is that was so expensive what's hope that we're not there now there's also a fraud penalty which is seventy-five percent and these are all percentages of the underpayment due to the fraud now the underpayment due to the broad now this is really a reporting form so i guess we're talking about the underpayment would be the tax due as a result of the foreign astuces that was undisclosed i think would have to be so so these are large these are large numbers he's a large number so let's go to an exam there a couple examples and these are just really straight out from the four in terms of the actors to related penalty if you don't report ownership of shares in the foreign corporation on 8938 any subsequently received tackle distributions and you didn't report that taxable distribution that's an example of the act and related penalty if you have ownership shares of foreign a foreign company and even report the game as you should have on schedule d then that's another instance where they would assess the accuracy related penalty and if you don't report for intention income and you receive a technical distribution so yeah I guess these these are on the underpayment right Tribble to the omitted asset right so this is these are very significant the presumption of maximum value if you if the IRS learned that you own it a specified foreign asset the burden is on the taxpayer to prove that the value doesn't give rise to 8938 so the burden is on the taxpayer and there's a presumption of maximum value there's a reasonable cause exception which is typical that we have here and I believe it's the standard the same standard that we're normally familiar with you have reasonable cause to get this penalty debated the fact that a foreign country would impose a penalty on you if you disclose the required information unfortunately does not constitute reasonable cause you can't rely on that and the very last thing is actually I think it's the most important thing and that is be it's not a penalty but it's an extension of the statute of limitations if you fail to fail to emit from gross income anything that's required to be disclosed as a specified for NASA and the omission is greater than five thousand dollars then the statute of limitations which is lonely three years jumps to six years from the date of return is filed so this actually any if you look at the if you look at the instructions it actually says not only for that part of the disclosure it's actually from a whole which are correct and your that that's probably choose a significant because you doubled your statute of limitations on from the entire return or for relatively small amount of limited income so if you took an aggressive position somewhere else on the return whatever it might be this is the crack that will open up the audit six years later and could lead to a very very bad result because normally would be a close year and this enables them from you know our typical six-year statute limitations with North normally where you have a substantial understatement of gross income gifts and that's actually a 20-foot it I think it's a 25 to ratify that's what constitutes it took a substantial understatement this is only five thousand dollars of gross income it's under reporting so this is actually a very very low threshold to open up a return which would otherwise be closed so as it is a word of caution this could be something that you have to really take into consideration when filing in 8938 and realize that this has implications across the whole spectrum of other disclosures that you make on your tax return because it really leaps and extend it significantly and just to sound like a broken record when in doubt file the form 8938 and disclosed because you don't want to be facing those penalties some other administrative aspects the form 8938 as I think I mentioned at the beginning is completely separate from the FR the FR rules are still unchanged VFR is still do on june thirtieth under its own criteria about your balance and foreign bank accounts there are situations where you could have an F Phi requirement and not a form 8938 department and vice versa form 8938 is part of your annual tax file user and form 1040 and the due date is the same as the 1040 so now we're going to go to our next polling question which is form 8938 is due on june thirtieth true or false i'm a tricky question because you're just talking about jack all right it is tricky that's not really fair hey people are awake for a fitting and most everybody voted just another 10 more seconds and it will close the polling ok and of course that's false the f bar is due june thirtieth without extensions deformation entered ages do with the tax return of your tax returns extended then form 8938 as you sent as well ok so now we're going to go through this form and hopefully you either have a form 8938 available either on screen or on paper or we're just going to go through some of the aspects of the form that maybe we didn't touch on before so i'll first player attention to the upper left hand corner the november two thousand eleven revision date this is not an annual forum like a 1040 so always be mindful to make sure you're using the right form i always check the IRS website to make sure they haven't updated it because oftentimes the IRS will update the form and our tax software has not gotten around to updating the it yet so always focus on that the form 8938 contemplates lots of assets and for every asset you may be filing an attachment different page so if you look there's the bar right at the top with you have attached additional sheets check here okay so keep that mind the name shown the return it's going to be the same as your tax return okay the name address identifying number the tax year beginning really should be the same as your regular tax return now the tricky part is type of filer you have the specified i dividual and then that specified individuals either gonna be married filing a joint return or other which will be single married filing separate head of household you see the box on the line be specified domestic enginee for 2011 only individuals up to file form 8938 we're going to talk about in a few minutes some rules changing for next year that will expand the four major 938 some of those other different types of entities but for the tax returns that you're preparing right now for 2011 you're only going to be concerned in the box for a line a so now let's put a part one type of account deposit of custodial account number so line three is the question of Prague and I were talking about earlier in the presentation that you have to pick one of the fall or not one but some of the following choices are there applicable account open during the year account closed during the year account owned jointly with spouse and no tax item report I depart three with respect to this asset will get the part 3 later on but like we said before that it's if I'm not checking account open during the error it's the next natural question the IRS is going to ask is okay how is how is this account and the income associated with the account reflected on prior year's returns okay we skip down to questions six exchange rate you'll not right there there's a source of exchange rate used if not from US Treasury financial management service the instructions say you can only use another source if the US Treasury financial management service doesn't have the exchange rates of that currency okay which is going to be a very rare situation so now we're going to part two so part one is really going to be my bank accounts for the most part the types of things that I would see on an f bar part three is going to be everything else other form financial assets now if I have if I'm going to be reporting an asset that I'm already filing a form say 5471 for I don't list that information in fact if you see right there it says note if you've reported its specified foreign financial asset on forms 3520 and others you do not have to include the assets on form 8938 you must complete part 4 okay let's skip over to question 8 on the next page and on question 8 you have come little called the catch-all for all the other lots of different types of entities so if I have a loan to a non-us person I'm going to report it their own mining okay part three is a very important part of the form part three is kind of the connect the dots part of this form that connects the asset that's being reported on this form 8938 to the spot on the income tax return where the income that acid is being reflected okay can this is a summary format okay it's not an ass if I as a basis so if you attached additional sheets we check that box the beginning of the page with the first page you're not going to have a part three for each of those pages you're only going to have that for the lead form 8938 ok so now let's go to park for at the bottom this is the big exception if I if I reported macedon Saotome 5471 I simply check the box 5471 and right in the number of forms okay and the ones form that I don't they left out or they forgot was the form 88-91 they think of it its own check box and the instruction said if you have a form 88-91 for a canadian registered retirement plan you have to check the box for 35 20 okay don't ask me why but that's what the rules say so now let's spend the minute talking about what's going to happen next year to proposed regulations that have been issued under Sections 6038 cap d the getting next year or i should begin four years beginning in 2012 certain MTA's are going to have to file form 8938 and those who refer to as specified domestic entities and their corporations partnerships and trusts which meet this criteria that they have it that the entity has an interest in specified foreign financial assets that exceed the 50,000 75,000 threshold the NT is going to be closely held by an by an individual and the entities that have meet these two tests that at least fifty percent of the passive income fifty percent of its income is from passive sources or fifty percent of its assets is from passive our passive assets or it could have been formed with the intention of trying to escape reporting under Section 636 t-38 kathy so that's going to be in play for next year okay but not for the returns that were preparing right now so now we have a polling question for 2011 corporations are required to file form 8938 true or false and just let's keep it open for about 10 or 15 more seconds and while we're doing that somebody who has asked the question do we need to report rental real property if I owned real property the real property itself is not subject to form 8938 rental income obviously is reported on your tax return on Schedule II as if thats a rental property was in the United States the question really is is is that lease contract a foreign specified foreign financial asset my guess is i don't think so but if i'm going to be err on the side of conservatism maybe i would report that on the form 8938 that that's the the unanswered question right now is whether a lease agreement is going to be considered a foreign financial asset okay so let's close the polling question of course Gans response that is slated to happen next year okay I'm just going to spend a real mess minute talking about factor in terms of foreign financial institutions when when fat bill is enacted in 2010 there were two sides to it there was the form 8938 and the enhanced reporting by individuals but there's also a whole other aspect of factor which is imposed on foreign banks and in a nutshell the IRS is trying to enter into information sharing agreements with the foreign banks to try to get the foreign banks to disclose the names of their us account holders that is going to happen in 2013 in the middle of the year so you may say ok what right does the IRS have to go over to a foreign bank and say send us the names of your foreign account or your us account holders and the mechanism is that there is a 30-percent withholding tax going to be imposed on all us source income that would otherwise not be subject to withholding whether it be by treaty or by the portfolio debt exception on that foreign bank but under this new statute there is that thirty percent is going to be imposed if the foreign financial institution does not enter in 20 the information sharing agreements so I guess today they really don't legally probably have a right true and now they're just saying we're going to use this hammer on you if you decide to voluntarily ignore our request that's that's exactly true and there's a lot of stories that are you hear from people of foreign banks that are telling their us account holders to simply close your account because they don't want to deal with the cost associated with complying with these rules and I've just put a link to and it burnt some young website on there to the banks this is a huge project and a huge dilemma because they have so much information reporting together it's really a tremendous project for the bank's now I'll leave one step further is that there's been a lot of press lately about you know the u.s. not the only one concerned with their citizens having counts and offshore jurisdictions and not paying tax in the United States most developed countries have the same concern so in addition to the u.s. going after the foreign banks the u.s. is also entering into much more robust information sharing agreements with other foreign governments because other foreign governments have the exact same incentives and want to know about these things so we're going to see just a trend of information sharing people in the US taxpayers who may have had accounts overseas who really about that they were so far below the radar that there was really no need to bother to to report these assets you know the trend is going in the other direction the trend is going that you know between the huge penalties prob just talked about as well as those information sharing but it's really something that has to be addressed sooner rather than later a lot of these foreign banks are complaining they're either asking for an extension of time they're lobbying for an extension of time and some of them are actually saying I don't want to report to the IRS that I might be willing to report it to my own country for example the EU there's some EU countries that are saying you won't give it to the US government but we're willing to give it to VG you and I would think that then the IRS or the government US government will enter some type of information sharing agreement with the GU then which will still get you to the same place where the fun on taxpayer is exposed because they will now get it indirectly not directly from the government for us there was a press release procurement of Treasury not too long ago that exact topic so now that we're talking about somebody who may have had us foreign accounts who doesn't want to comply or hasn't complied with the US rules and now sees the writing on the wall probably what opportunities are there for somebody to come into compliance and we had this webinar about six to eight weeks ago I would tell you I say not much but surprisingly the IRS has come up with a helpful solution so the IRS reopened the offshore voluntary disclosure program which had previously been closed closed that last fall and there was a very successful program called obdi in 2011 and to the surprise of many tax professionals the IRS indicated that they're going to have an indefinitely open program to enable taxpayers the occurrence with their farm and undisclosed accounts this is the third program that they've had in recent history that one in 2009 which was successful they had one in 2011 which I heard was even more successful and I guess the IRS Jesus as a cash cow perhaps and as a result of that they want to keep this open forever so just to recap and and we all know that us visions are supposed to report all of their foreign income under US income tax return you also have an empire requirement which requires you to file an f barge in theory in the preceding year for that foreign account and the failure to file the 1040 the f bar and now that 8938 results in very substantial civil penalties and criminal charges so in the backdrop of all this Oh VDI Nov DP for 2012 looks like a a real viable option for taxpayers who have some risk so let's just take a step back 2011 just finished and has there been any pronouncements from the IRS any correspondence to the taxpayers that are filed there were thousands of individuals that came through the program there's been no movement whatsoever with them I suspect the IRS is buried with their filings just like in 2009 what I expect the IRS to do what they're probably doing even as we speak is that the data mining and they're looking at who had went to which person in which country and the name come up more than once and they look at all this new information and the IRS is getting smarter they are looking for evidence and they are issuing subpoenas to occasionally to foreign banks when they have evidence and they are really prosecuting individuals there is a real criminal aspect to this for taxpayers that have what I think are significant exposure and what a significant exposure i give you actually a slide here of a really it is this is a doctor who had a foreign account at hsbc over in india and hsbc by the way just a couple days ago indicated that they had the subpoena that was issued against hsbc was voluntarily taken back it apparently hsbc has shared some information with the Department of Justice we're not entirely certain what information but this is an example of what could go wrong and I use this example you can take a look at you can google the case if you want and this is what this shows an example of bad facts and bad results the IRA this doctor had eight million dollars it an offshore account at about a million to in foreign income which was undisclosed here are some of the bad facts just to show you what what really results in a really bad fatback bad result scenario requested that he doesn't want any information at his us address he transferred the funds abroad from the US bank counting small increments used foreign relatives addresses and this I suspect is this doctor has been indicted and he hasn't been sentenced yet but I expect to use him to be convicted penalties for that would be at least two hundred fifty thousand dollars for five years in prison you have all these other other types of penalties such as failure to failure to file a or filing a false tax returns notify life bar penalties these are very large amounts so this brings us to the 2012 ovd p and the most important thing is is that and this is really the only solution that I'm aware of that can provide one hundred percent risk immunization for properly files completely truthful filing this provides the risk immunization to a taxpayer that enables them to sleep at night if they're looking for that level of comfort this is the only solution you have quite disclosures you have limited disclosures you have other things that those don't provide the one hundred percent risk immunization that nobita 2012 OED TV does frogs once you spend one minute just coming for somebody who's not familiar with ODB p or obdi programs basically the structure of it sure there's a three-step process users a there is a pre-certification type of filing that's done very very basic one pager we fax in the IRS actually shockingly returns it back just within a couple of days make sure you're not on some blacklist and then you go through a pre acceptance process where you give a little bit more information about the sources of funds what the funds are for the rough numbers of the understatement and once that is return and approved by the IRS then you go through a full submission this usually takes six eight ten months to really put together from all these three steps all the way to the full submission and it's a sick package because you're going back eight years you're amending return to eight years you're filing f bars there's a lot of disclosure here but it's a great opportunity for the client that wants this immunization as I said to be able to escape the risk and by the way there is a twenty seven point five percent penalty which is really a very significant penalty on the highest account balance in any of the previous eight years so there is a large penalty assessment associated with that frog did you say to make some half percent on the asset or the income no I said on the asset so this is a very very significant almost confiscatory penalty that you're paying and there's a you know we can probably do another hour webinar on on this topic alone but there's a whole opt-out possibility and there's there's way that you can possibly reduce that amount this is all very unclear at this point there's been no response from the IRS for really any taxpayer either my office filed about four dozen movies and we haven't responded we haven't received any response back so if no one knows exactly what happened in 2011 and that will Telegraph all the way up to 2012 in terms of where they're going to be doing that so again the key difference is a no deadline there's twenty seven point five percent penalty but but prog to clarify we do know the worst-case answers in terms of what the IRS rules are we're hoping for is to get some leniency is the right word but hopefully something better than the worst case in terms of the huge penalties yeah that is the worst case and what I how clients is that this is the worst case scenario for you and really the IRS rules in 2011 which were piggybacking on 2000-2012 you're not required to pay that penalty with when you file the final full submission so there is a there's going to be a discussion about that for most of my clients about whether we're going to pay that whether with the program we have a real one to one with the examiner to see whether there's any possibility of a reduction and you know it's you know this is a project it's not for the timid rightly isn't so the benefits of coming clean as I mentioned that the voluntary disclosure rovides three significant benefits the risk risk of criminal prosecution goes away if it's a complete and truthful filing the civil penalties are reduced because you're not paying all of them you're paying in this case 27.5 is in lieu of all the other penalties and it gives you the certainty that you know that what you're going to be what you're going to be paying and even if your failure to comply with an inverter taking the chances with an IRS audit can be very risky because if you don't go to the obd program review program and if you're audited you're going to have a major major process and the whole the whole movement behind form 8938 is that we're going instruction of full disclosure so if you haven't you have exposure in the past this is something you should really take a look at and encourage your clients to look at these prior years and not just barrier ahead and soon and then probably has some information he keeps up with this on his website so you can see the link to his blog there here is the contact information for frog in myself we're right at the one-hour mark and its really been a pleasure having this discussion with you if you have any questions feel free to call or email any of us and again thank you for joining us and we'll sign out how about