Patel Law Offices Blog

Foreign pension accounts reporting on the FBAR

Several clients have asked us in recent weeks whether foreign pension accounts are reported on the FinCen114 (FBAR). Most employer foreign pension plans fall under one of two types: defined benefit plan or defined contribution plan. A defined benefit plan

US Reporting of Foreign Retirement Accounts

Many clients contact our office regarding the failure to report their foreign retirement account. Such accounts need to be fully reported on an FinCen 114 (FBAR) and IRS Form 8938. Besides the need to disclose a foreign retirement plan on

Is the IRS Finally Receiving Increased Funding?

After months of back and forth, it appears that additional funding is on its way to the Internal Revenue Service (IRS) with the Inflation Reduction Act of 2022 (Act). The Act would spend nearly $80 billion on the IRS and

IRS Extends Late Portability Election Automatic Relief from 2 to 5 Years

On July, 8, 2022, the Internal Revenue Service released Revenue Procedure 2022-32, which provides a simplified method for certain estates to make a late portability election to allow the surviving spouse of the decedent to use the decedent’s unused unified

IRS Summons to a Third Party: Duties and Rights

One of the most common evidence-gathering tactics used by the Criminal Investigative Division is the issuance of summonses. The IRS has very broad discretion to use summonses, which are authorized by statute to allow special agents to assess “correctness of

Maryland Retail Store Owner Guilty of Tax Fraud and Tax Evasion

Sunil Chawla (“Chawla”), age 66, of Berlin, Maryland, pleaded guilty this week to tax fraud.  As part of his plea agreement, Chawla will be required to pay $70,000 in restitution.    According to his guilty plea, Chawla owned and operated “India

Specific Steps for Applying to the IRS Streamlined Foreign Offshore Procedures

If you are a US Person and not compliant for not properly reporting foreign accounts, assets, investments, and income to the IRS, you may have learned about Streamlined Procedures. If you live outside the US and are eligible to use

US Supreme Court to Rule on FBAR Penalties Case

The debate over FBAR penalties for non-willful failure to disclose all of an individual’s or business’ foreign bank accounts has reached the Supreme Court. The issue is whether the maximum $10,000 Foreign Bank Account Reporting (FBAR) penalty should apply on

Welcome news from IRS for late Form 3520 penalties

On its website, the IRS has announced that it has retired its Form 3520/3520A compliance campaign. In welcome relief for taxpayers, the IRS also indicates in updated IRM procedures that it will assert only one penalty — rather than the two

The IRS’s 2022 Dirty Dozen tax scams

The Internal Revenue Service today wrapped up its annual “Dirty Dozen” scams list for the 2022 filing season, with a warning to taxpayers to avoid being misled into using bogus tax avoidance strategies. The IRS warned taxpayers to watch out

Tax preparer sentenced to prison for fraudulent deductions on federal income tax returns

Nearly $3.5 million estimated tax loss over four years A tax preparer was recently sentenced in U.S. District Court in Seattle, to a year and a day in prison for 14 counts of aiding and abetting the filing of false

New Webinar: An Introduction to the Taxation of Passive Foreign Investment Companies

Event Details May 9, 2022 3:00 pm to 4:00 pm Many investors unknowingly invest in Passive Foreign Investment Companies (PFICs) and as a result must file IRS Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or

New Webinar: Resolving International Tax Compliance Disputes: FBAR Controversy, Penalties, Appeals, Form 3520/3520-A, Form 5471

I am pleased to announce that I will be speaking in an upcoming Strafford live video webinar, “Resolving International Tax Compliance Disputes: FBAR Controversy, Penalties, Appeals, Form 3520/3520-A, Form 5471” scheduled for Wednesday, May 11, 2022 1:00pm-2:30pm EDT.  The IRS has continually

How to Benefit from Tax Treaties

Paying taxes twice on the same income is a concern most U.S. citizens have if they earn income abroad. Luckily, the U.S. has entered into tax treaties with many countries to help alleviate that concern. IRS Form 8833 is how

FBAR compared to Form 8938: Differences, Which to File, When to File, etc.

We receive many client queries regarding FBAR and Form 8938. If you are a U.S. person and you have assets and accounts in a foreign country, you may need to submit Form 8938 and/or FinCEN Form 114 (Report of Foreign

An exception to PFICs in Foreign Pension Plan Accounts

Certain US persons may become subject to the passive foreign investment company (PFIC) regime if they own an interest in a foreign corporation that invests primarily in passive investments (or become US persons while owning such interests). Typically, foreign mutual

Passive Foreign Investment Company Tax & Mark-to-Market (MTM) election

A PFIC is a passive foreign investment company. One of the most common types of PFIC is ownership of a foreign mutual fund. Our office has worked with clients from dozens of countries.  However, Indian mutual funds are especially problematic

IRS Releases New IRS 2022 FBAR Fact Sheet

The IRS released its new 2022 FBAR Fact Sheet last month, which comprehensively provides all information related to the FinCEN FBAR Form 114. Interestingly, it fails to include the Delinquent FBAR Submission Procedure (or DFSP), which our office has successfully

US Tax Treatment of a UK Self-invested personal pension (SIPP)

We have had many clients with British retirement accounts and pensions, which often cause US tax complications. Self-invested personal pensions (SIPP) can be a complex account for US tax purposes. A straightforward pension for a British person can be very

Payment Apps like Venmo and Paypal Now Subject to Tax Reporting

Third-party peer-to-peer cash apps like Venmo, Paypal, Zelle, and Cash App have become popular and have become essential to everyday life. Under a little-publicized provision in the 2021 American Rescue Plan Act (ARPA), third-party peer-to-peer cash apps must begin reporting

IRS announces an update to its Voluntary Disclosure Practice Preclearance Request and Application

Last month, the IRS announced revisions to Form 14457 and its accompanying instructions. Specifically, the IRS updated Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, to reflect a shift away from paper filing and include an expanded section on

Upcoming live video webinar: “FBAR and U.S. Tax Reporting: Compliance Requirements for Foreign Assets”

I am pleased to announce that I will be speaking in an upcoming Strafford live video webinar, “FBAR and U.S. Tax Reporting: Compliance Requirements for Foreign Assets” scheduled for Wednesday, March 16, 1:00pm-2:30pm EDT.  The IRS has continually reaffirmed its commitment to

Small PFIC Exception to Filing Form 8621

The Form 8621 filing requirements for shareholders of a passive foreign investment company (PFIC) are in effect for the current tax season. The annual filing requirement is imposed on U.S. persons who are PFIC shareholders who do not currently file

Penalty relief for International Information Forms 5471, 5472, and 8865

US tax law imposes large penalties for the failure to timely file international information returns on Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations; Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign

A Lesson From Brown v. U.S.: A Defective Tax Refund Filing

The recent case from the U.S. Court of Appeals for the Federal Circuit in Brown v. the U.S. shows the detriments to Taxpayers who do not properly file their returns with the IRS in order to receive their tax refunds. 

The Strange Case of U.S. v. Hughes: Willful and Non-Willful (at the Same Time?)

A recent decision from the District Court of Northern California has created more questions in the tax community about FBAR penalties. Usually, in challenging FBAR penalties, courts conclude that the US taxpayer will pay willful FBAR penalties, non-willful FBAR penalties,

How to Avoid Criminal Prosecution Through Voluntary Disclosure

The Voluntary Disclosure Practice is an IRS-created option of the IRS Criminal Investigations for U.S. Taxpayers at risk for criminal prosecution due to a tax-related offense. Taxpayers who have willfully failed to submit tax information reports may willingly submit a

All the Many FBAR Late Filing Procedures

The FBAR or Foreign Bank and Financial Account Reporting or FinCen Form 114 is a form which many U.S. taxpayers are unaware and unfamiliar with and thus many of them become noncompliant and delinquent. However there are a number of

A Lesson to be Learned from US v. Schwarzbaum: Bring Back the Foreign Funds to Pay FBAR Penalties

The recent case of U.S. v. Schwarzbaum shows U.S. taxpayers the length the United States will go to require a U.S. person to pay FBAR penalties, to the point of requiring the taxpayer repatriate money located outside the United States

Beware IRS Letter 6291

Many of our clients have recently received IRS Letter 6291, which begins with Why We’re Contacting You: “Our records for the tax years above show you did not properly report the foreign financial accounts on form 8938 statement of specified