Any time an individual has a financial interest in a foreign financial institution or bank account, brokerage account or other type of account they may be required to report to the IRS on an annual basis.
While no one would ever accuse the Internal Revenue Service of being less than enthusiastic about exercising its power to audit both individuals and businesses, critics indicate that there is at least one area where the agency may not be conducting audits with its same zeal: large partnerships.
While we might like to think otherwise, the simple fact is that most people wouldn't dare attempt to complete our taxes without the aid of a sophisticated tax software program or a tax preparation professional. Indeed, most of us look at those brave enough to do their own taxes armed with nothing more than a pen and an IRS tax booklet with a mix of pity and concern.
Have you ever wondered what would happen if you simply didn't file your taxes? What would happen to you if you lived dangerously and tried the patient of the Internal Revenue Service? Well, it goes without saying that nothing good would come of it -- but let's break it down step by step anyway.
We often write about federal income tax and Americans living overseas. The law has triggered what some pundits believe is a citizenship crisis: More and more expatriates are opting to give up their U.S. citizenship just to free themselves of the tax burden.
The United States imposes an income tax on its citizens regardless of where they live. If you earn money abroad, the IRS wants to know about it -- and, of course, take its share. Similarly, if you earn money in the United States but process that income through a foreign bank, the IRS wants to know about it -- and, of course, take its share.
Turning back to the subject of our Sept. 25 post, we are elaborating here on the details of the Organization for Economic Cooperation and Development's global standard for automatic exchange of tax information. The G20 finance ministers formally adopted the standard in September; the finance industry should complete implementation in the next three or four years.
The Organization for Economic Cooperation and Development has reason to celebrate. At the G20 meeting in Australia, finance ministers from 19 countries and the European Union formally committed to the OECD's automatic exchange of tax information standards. Countries not in the G20 are expected to follow suit.
From digital currency to foreign bank accounts, the Internal Revenue Service continues to develop its methods of collecting taxes. As we've previously discussed, if a foreign bank holds more than $10,000 of your assets, then you are required to use the Report of Foreign Bank and Financial Accounts (FBAR) to report those assets to the Treasury Department.
Few people are thrilled about paying taxes to the federal government. However, under the law, most people are required to do so. While there are some legitimate reasons to challenge your tax bill, there are some arguments that the Internal Revenue Service simply won't tolerate.