Archives For tax law

We’ve invited Brian Wynne of Bond Beebe, a Maryland Accounting Firm, to share some insights on FATCA in light of the upcoming June 30 deadline.  For more great posts on taxes, estates, accounting, and finance, check out their blog: It’s Taxing.

flagsWe’ve been talking with our clients quite a bit the past few years regarding the push surrounding foreign financial reporting and the associated penalties if you don’t comply.  The Foreign Account Tax Compliance Act (FATCA) requires that you disclose all ownership of US assets in foreign accounts.  This requirement is in place both for individual taxpayers and for foreign financial institutions (which can report your holdings, even if you do not) and carries significant penalties for non-compliance – up to 50% of the value of the interest, and criminal charges may apply.

There is a deadline on the horizon: FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) is due to the U.S. Department of Treasury by June 30.  In this post, we’ll provide a high-level explanation FATCA, including what types of assets you need to disclose and what forms are required.

What is FATCA and What Do I Need to Disclose?

Any person or entity subject to the jurisdiction of the United States (including individuals, corporations, partnerships, trusts, and estates) with a financial interest in, or signature or other authority over, bank accounts, securities, or other financial accounts having a value exceeding $10,000 in a foreign country, must report this relationship.

Wait- what exactly does that mean?  Bottom line, if you are a US citizen who owns any foreign asset(s) valued at over $10,000, you must report it to the Treasury Department; the IRS threshold for reporting is $50,000.

This requirement doesn’t stop at anything that you yourself own.  You also have to file if you have direct or indirect control over a foreign or domestic entity (a company, a partnership, a trust) with foreign financial accounts, even if you yourself do not have foreign account(s). For example, a corporate-owned foreign account would require filings by the corporation and by the individual corporate officers with signature authority.

This requirement isn’t exactly new – you should have been reporting these assets since the 2012 tax year.  However, the IRS requirement for foreign financial institutions to report these assets will go into effect on May 5, 2014, which means that these banks will be required to disclose your assets, even if you haven’t.

What is a Foreign Financial Asset?

Not sure if what you own/have interest in counts as a foreign financial asset?  Here is a guide to help you determine whether or not (and what) you need to disclose:

  • Bank accounts (savings, checking, deposit) and brokerage accounts that are held at a financial institution outside the US.
  • Stocks, bonds, and other securities issued by a foreign individual or entity
  • Any interest in a foreign corporation, partnership, estate or trust
  • Any financial instrument that is issued by a non-US person, as well as any swap or similar agreement

Note that if you have a foreign investment that is held by a US-based account, it does not need to be reported. In addition, foreign real estate, currency, and directly-held tangible assets do not need to be disclosed.

What Forms Do I Have to File for FATCA?

IRS tax forms regarding FATCA are due when your income tax return is due, including extensions. If you fall into one of the below categories, or if you have any direct or indirect foreign interests, you may be required to file applicable IRS forms:

  • You are an individual or entity with ownership of foreign financial assets and meet the specified criteria (Form 8938);
  • You are an officer, director or shareholder with respect to certain foreign corporations (Form 5471);
  • You are a foreign-owned U.S. corporation or foreign corporation engaged in a U.S. trade or business (Form 5472);
  • You are a U.S. transferor of property to a foreign corporation (Form 926);
  • You are a U.S. person with an interest in a foreign trust (Forms 3520 and 3520-A), or;
  • You are a U.S. person with interests in a foreign partnership (Form 8865).

The threshold for disclosing foreign assets to the IRS is $50,000 (total value of the assets).  You’ll also need to file FinCEN Report 114 (formerly Form TD F 90-22.1) with Department of the Treasury on or before June 30th for any foreign assets that are valued at $10,000 or above.

What Happens if I Don’t Report Foreign Assets?

There are significant penalties for failing to file these forms.  Failure to file IRS Form 8938 can result in a $10,000 penalty, with an additional $10,000 penalty for every 30 day period that it is not filed, up to a maximum penalty of $50,000. Failure to file with the Treasury can elicit a penalty of up to $10,000 per non-willful violation.  Willful violations can elicit penalties that are the greater of $100,000 or 50% of the amount in the account for each violation.

The IRS Offshore Voluntary Disclosure Program provides an opportunity to become compliant while eliminating criminal exposure and reducing the civil penalties you may face.  More details about this program are available on the IRS website.

As foreign financial institutions prepare to report all accounts held by US citizens and the government continues to ramp up its efforts to curb foreign tax evasion, it’s essential that you disclose your foreign assets.  Talk with your CPA to make sure you are in compliance regarding this tricky tax issue.

Brian Wynne, CPA is a Principal at Bond Beebe Accountants & Advisors who specializes in tax preparation and planning for high-net-worth individuals.  He can be reached at or 301.272.6019.   


Due to the government shutdown this month, the IRS will delay the start of the tax-filing season by one to two weeks. The season for filing 2013 tax returns likely will start between Jan. 28 and Feb. 4, the agency said. Continue Reading…

With many tax reform proposals floating around Congress, Senator Mike Lee (R- UT) outlined his newest plan in a speech titled “Tax Reform, the Family, and the Pursuit of Happiness.” Senator Lee characterized his ideas as “more pro-growth, pro-opportunity, and pro-family” than our current system. Continue Reading…

The following infographic reveals some of the more bizarre things you can get tax reductions for. Enjoy!

Big thanks to the folks over at NowSourcing for creating the infographic. You can check out the original link here


JDKatz: Attorney's At Law

JDKatz, P.C. is a full-service law firm focused on tax lawbusiness and transactional lawestate planning and elder law. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys, or visit

“There are going to be a lot of state tax attorneys working overtime next week,” said Verenda Smith, deputy director at the Federation of Tax Administrators. “This is what everyone has been waiting for. Now states can release their own guidance.”

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Hotel taxes might be an afterthought when you’re planning a vacation. But they add up quickly, so you should know what you’re in for before you book. Here’s an infographic of how certain cities use the taxes! Continue Reading…

This infographic takes a look at major tax policy changes in U.S. history. Along the way, it highlights a “slippery slope” of scandals ranging from serious mishandling of taxpayer funded organizations to unethical behavior by the IRS.

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It is a period of civil war.

IRS spaceships, striking from a hidden base, have won their first victory against the evil Corporate Empire (See: IRS Wins Massive Tax Shelter Case, Denying BNY Mellon $900 Million in Tax Benefits)

During the battle, IRS spies managed to steal secret plans to the Empire’s ultimate weapon, STARS transactions, an armored code of business law with  enough power to dodge billions in tax payments.

Pursued by the IRS’ sinister agents, Corporate lawyers raced home aboard their starships, remiss of the stolen plans that made their companies thrive and restored the secret swiss bank account to the galaxy.

In these dark times, the power to shelter corporate profits offshore is insignificant next to the power of the Economic Substance Doctrine.


In the upcoming months a string of high profile cases will showcase the U.S. government’s fight against corporate tax sheltering.

The accused are four major U.S. banks previously involved in structured transactions with London-based Barclays Plc.

The transactions, known as STARS deals, were designed entirely for purposes of tax avoidance, according to the IRS.  STARS is short for “structured trust advantaged repackaged securities.”  The banks, meanwhile, claim STARS were done to “enhance their core business model,” and are challenging the IRS over back tax charges worth hundreds of millions of dollars a piece.

BNY Mellon – the world’s largest custody bank – was the first to sue the IRS after it received a tax bill of around $900 million for improperly claimed foreign tax credits related to its STARS transactions with Barclays.  The U.S. tax court ruled in the IRS’ favor: “U.S. tax laws and treaties do not recognize sham transactions or transactions that have no economic substance as valid for tax purposes,” the court said in its opinion.

BNY Mellon is appealing that decision. Three other banks – Wells Fargo,  BB&T Corp and Santander Holdings are taking on the IRS in separate cases.  In total, over $3 billion of transactions are on the line.

The IRS’ main weapon in these cases is economic substance – a doctrine in U.S. tax law under which a transaction must have an economic purpose other than the reduction of tax liability in order to be considered valid.  While not as clumsy or random as a blaster, it may not be the ultimate weapon that prosecutors need it to be; one tax expert called it a”club in the closet” for the IRS that it is using too broadly.

Enhancements to the economic substance doctrine were written into the President’s 2010 healthcare system overhaul, upping the ability of the IRS to prove tax avoidance and allowing them to impose punitive penalties of up to 40% of the tax liability.

“For the IRS, said Robert Probasco, a partner at Thompson & Knight, the doctrine is a ‘convenient way to dispose of cases without some of the messiness of statutory interpretation.'”  Tax and legal experts are divided over whether that argument will hold through the appeals process and future legal showdowns.

Still, “If BNY Mellon loses its appeal of the Tax Court’s February decisions, ‘it will be the most remarkable extension of the economic substance doctrine around,'” said Jasper Cummings, a tax analyst with Alston and Bird LLP.

Already, BB&T Corp recognized a $281 million expense as a result of the BNY Mellon case.  A U.S. tax court heard closing arguments over their entire $892 million STARS dispute on July 30; a decision is expected sometime in the fall.

Santander and Wells Fargo will take the hot seat later this year as well, but Barclays – the bank that marketed and arranged the transactions – is not a party for the STARS cases.

In any case, those eagerly awaiting the summer 2015 release of Episode VII have plenty of STARS wars to keep themselves busy with.

JDKatz: Attorney's At Law
JDKatz, P.C. is a full-service law firm focused on tax law, business and transactional lawestate planning and elder law. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys, or visit

An analysis of Jeff Bezos’ personal tax situation suggests his purchase of the failing Washington Post Company may not be as self-indulgent as many have claimed.

In an open letter to Post staff, Bezos, the 49-year-old multi-billionaire and chief executive of Inc, said: “I won’t be leading the Washington Post day-to-day.”

That statement comes with a hefty tax consequence, making reporters even more perplexed as to what exactly motivated the 19th richest person in the world to pickup a an old, downward-sliding paper company.

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Check out this infographic if you are curious about how Presidents in the last 20 years have raised or cut taxes for you.

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