Official: You Must Report Offshore Insurance, Annuity, and Gold Accounts
by Mark Nestmann: Mexico
Seizes $200,000 in Gold Coins at Airport Security Checkpoint
a U.S. citizen or permanent resident, you need to know about an
obscure Treasury agency called FinCEN, the Financial Crimes
Enforcement Network. Last March, FinCEN issued proposed regulations
greatly expanding what U.S. taxpayers are supposed to disclose about
their offshore holdings. The proposals were retroactive to 2009.
I wrote about them here
Before I get
into the nuts-and-bolts of these regulations, Ill provide
a little background.
U.S. law requires
U.S. citizens and permanent residents to report interests in, or
authority over all foreign accounts with an aggregate value of $10,000
or more. You must comply with this reporting regime even if the
accounts contain only precious metals or other non-cash assets,
or generate no income. No report is required if the aggregate value
of the accounts does not exceed $10,000.
the penalties for non-compliance are draconian. You can be fined
$10,000 per unreported account for each year you neglect to file
the FBAR, although the sanction for a negligent violation
is only a $500 fine. If you willfully fail to comply
with this obligation, you face a fine up to $500,000, imprisonment
up to five years, or both.
There are three
separate reporting obligations:
- You must
acknowledge foreign accounts annually on Schedule B of your federal
income tax return, due April 15 of each year, or June 15 if you
reside outside the United States. You can apply for a six-month
extension of this deadline.
- You must
file Form TD F 90-22.1 (the foreign bank account reporting
or FBAR form) annually with the U.S. Treasury Department.
The deadline for filing is June 30 for foreign accounts held the
previous year. Information requested on the FBAR form includes
how many foreign accounts you hold, their maximum value, the name
of the financial institution where the accounts are held, the
account numbers, etc.
- If you hold
more than $50,000 of foreign financial assets outside
the United States, a special reporting regime may apply, which
Ill discuss in my next blog entry.
The new FinCEN
rules apply to requirement #2, the FBAR. On February 24, FinCEN
issued final regulations that clarify the original proposal. Fortunately,
the regulations are no longer retroactive to 2009. However, they
do cover 2010, which means if you had any of the offshore investments
the regulations cover in 2010, you must report them on the FBAR
form by June 30, 2011. If you want to have a look at the new regulations
for yourself, theyre posted here.
its not always easy to figure out whether you need to report
an offshore financial relationship or not. If you have signature
authority over an account at a foreign bank or brokerage,
this relationship is clearly reportable. But even using the published
guidance from the IRS, its less clear whether you must disclose
details of other offshore relationships.
rules clarify what other types of offshore investments are reportable
- A foreign
account that is an insurance policy with a cash value or an annuity
- A foreign
account with a person that acts as a broker or dealer for futures
or options transactions in any commodity on or subject to the
rules of a commodity exchange or association; and
- An account
with a mutual fund or similar pooled fund which issues shares
available to the general public that have a regular net asset
value determination and regular redemptions.
says it wants U.S. persons to report an account with a person
that is in the business of accepting deposits as a financial agency.
A financial agency is a person acting for a person as a financial
institution bailee, depository trustee, or agent, or acting in a
similar way related to money, credit, securities, gold, or in a
transaction in money, credit, securities, or gold.
what the financial agency obligation means is that if you entrust
a foreign person or entity not just a bank with your
money, securities, or gold, the U.S. Treasury wants to know about
it. For instance, if you buy gold overseas and pay a custodian a
fee for safekeeping it, that custodian is probably acting as a financial
agency. On the other hand, if you keep the gold in a safety deposit
box at a bank or private vault facility to which only you have access,
the bank or vault likely isnt acting as financial agency.
This type of holding appears to remain non-reportable.
With the publication
of this final rule, hundreds of thousands of U.S. citizens and permanent
residents previously not required to file FBARs will now need to
file them. The best that can be said about the rule is that the
FBAR form is simple to complete, and with this new guidance from
FinCEN, its much easier to determine whats reportable,
and whats not.
If you dont
want to report these investments, your choices boil down to three:
comply, and risk fines and imprisonment
give up U.S. citizenship and residence
In my next
column, Ill describe some additional aspects of the final
rule, including a few welcome changes to current practice. Ill
also explain how they interact with the greatly expanded offshore
reporting provisions of the HIRE Act, which President Obama signed
into law last March.
with permission from The Sovereign
Mark Nestmann is a journalist with more than 20
years of investigative experience and is a charter member of The
Sovereign Society’s Council of Experts. He has authored over a dozen
books and many additional reports on wealth preservation, privacy
and offshore investing. Mark serves as president of his own international
consulting firm, The Nestmann Group, Ltd. The Nestmann Group provides
international wealth preservation services for high-net worth individuals.
Mark is an Associate Member of the American Bar Association (member
of subcommittee on Foreign Activities of U.S. Taxpayers, Committee
on Taxation) and member of the Society of Professional Journalists.
In 2005, he was awarded a Masters of Laws (LL.M) degree in international
tax law at the Vienna (Austria) University of Economics and Business
© 2011 Mark
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