As a Seattle small business accounting firm, we encounter a variety of tax advice, ranging from prudent to downright shady. An example of the latter type is a recent scam wherein con artists contact people who would not normally need to file taxes–often seniors and low-income individuals–and claim to be able to help them obtain a tax refund. (Other common variations include stimulus funds or college enrollment tax credits.) The scammer will generally charge a hefty fee, ostensibly to obtain this nonexistent money, but drop out of touch before delivering anything. The IRS’s official statement and your Seattle small business CPA can both provide further information on detecting tax refund scams. As a general rule of thumb, if you do not need to file, you are probably not eligible for any refund/credit, regardless of what these too-good-to-be-true offers may claim.
The Seattle small business CPA firm of Alisa Na wishes to remind you of the importance of filing taxes while abroad. This applies to both income tax and Reports of Foreign Bank and Financial Accounts (FBARs), for any US citizen or dual citizen. Failure to file or pay is heavily penalized, although penalties may not be assessed if you do not owe any US taxes, or had what the IRS considers reasonable cause for failing to file or pay. If you are currently abroad and have not yet filed, then we urge you to consult your Seattle small business CPA as soon as possible to ensure full compliance.
US Income Taxes
All citizens whose gross income in a given year was not below applicable exemptions and deductions, are obligated to file federal income taxes for that year.
Penalties for Not Filing or Paying Income Taxes
Unfiled taxes are penalized at the rate of 5% of the amount due per month late, up to 25% altogether. The penalty for unpaid taxes is 0.5% per month, also subject to a 25% limit.
These document disclose foreign account balances to the IRS. Like income taxes, delinquent FBARs must be filed up to six years back.
Deliberately refusing to file an FBAR can be extremely costly: the greater of $100,000 or 50% of the foreign account’s balance, to be precise. If you should accidentally fail to file, the IRS may assess a penalty of up to $10,000.
New Foreign Financial Assets Reporting Rules
Beginning in 2012, certain types of foreign assets, aggregately valued at over $50,000, must be reported to the IRS.
Many tax complexities accompany living or investing abroad, such as US income taxation, FBARs, and financial asset reporting. The IRS has published further information on the above topics, and the firm of Alisa Na, CPA, looks forward to serving as your trusted tax assistant and advocate to the IRS.