Super Rich Being Push Around

[AZ-Tax]

Excerpt from the article:

"You have the super rich who are not used to being pushed around and they are finding themselves in unfamiliar territory."

Entire article at this link:

http://news.yahoo.com/s/ap/20090815/ap_on_bi_ge/us_tax_haven_crackdown

[Uncle Sam]

Super Rich Being Pushed Around

I guess now's the time for Obama to declare a Tax Amnesty Period.

[Corduroy Frog]

Schedule B response

At the bottom of Schedule B is a question where the taxpayer is supposed to answer whether he has signature authority for an account in a foreign country. If so, Form TDF 90-22.1 must be filed.

I don't have any clients who answer the question "yes," although I do have foreign-born clients who are very wealthy and suspect they do have access to money in their native country. Software populates this automatically with a "No"

I haven't had occasion to fill out TDF 90-22.1, but I have heard that the penalty attached to incorrect or improper filing is horrendous - in the $100,000 range.

No thanks.

[OtisMozzetti]

my software requires a yes or no answer

At the bottom of Schedule B is a question where the taxpayer is supposed to answer whether he has signature authority for an account in a foreign country. If so, Form TDF 90-22.1 must be filed.

I don't have any clients who answer the question "yes," although I do have foreign-born clients who are very wealthy and suspect they do have access to money in their native country. Software populates this automatically with a "No"

I just cannot comprehend that these tax cheaters can call themselves "pushed around" when they answer falsely, under penalties of perjury, that they do not have signature authority for an account in a foreign country.

The software which I use requires that a "no" answer, or a "yes" answer must be entered. I usually turn that into an opportunity for humor, when I ask my client "by the way, do you happen to have any Swiss bank accounts, or other accounts in foreign countries?" The typical answer is "don't I wish!"

[erchess]

Idle Curiosity

Suppose that someone owns gold in a foreign country. Is that considered a foreign account or does that depend on the details of what they have? Some people simply put gold in an ordinary bank safety deposit box or even a safe in their second home while others pay significantly more for what they hope is greater security offered by firms that specialize in buying precious metals for clients and safely storing them in a fashion similar to what stockbrokers do when people own stocks in street name.

For purposes of this discussion let's assume that the client did not sell or otherwise derive income from the gold holdings but was simply owning gold as a hedge against inflation and/or civil unrest.

[taxmandan]

I phrase the question thus: "Do you have any foreign bank accounts you want to tell the IRS about?" Gets to the point with humor. I do have clients with accounts and I give them the blank TDF 90-22.1 form to complete and mail in themselves.

Be careful if you have clients who are Canadian ex-pats. There is apparently some sort of retirement account that all Canadians have if they worked there, but they can't touch it until they turn 55 or 58 yoa. So, until that year, the account does not fall under the reporting requirements, but once they are vested it will require them to file a TDF 90-22.1 annually.

[Bees Knees]

Regardless of whether or not someone holds a foreign bank account, or owns gold located outside the U.S., or whatever, any citizen or resident alien of the U.S. is subject to tax on worldwide income. I had a client who purchased a vacation home in Spain. The only reason I knew about the property is because he wanted to deduct interest on the mortgage. I had to ask if he ever rented it out. Guess what? If you want me to do your taxes, that activity is going on your tax return.

I had another client who married a lady from the Philippines. She had never set foot in this country prior to their marriage. Guess what? If you want to file a joint return with her, she needs to report all of her income earned during the year, including what she earned in the Philippines prior to the marriage.

[OtisMozzetti]

needs to report, or required to report

...
I had another client who married a lady from the Philippines. She had never set foot in this country prior to their marriage. Guess what? If you want to file a joint return with her, she needs to report all of her income earned during the year, including what she earned in the Philippines prior to the marriage.

Bees Knees is entirely correct. On the other hand, I have seen that numerous clients view the phrases "needs to report all of her income" and "is required to report all of her income, including what she earned in the Philippines prior to marriage," as completely different concepts. The attitude is "the IRS won't know what goes on in such and so country" so there is no need to report the income. I have heard that remark more than once concerning India, in particular.

Also, as we all know, for cash basis taxpayers, it would be the income constructively received during the year, not the income earned during the year, which is involved.

[Davc]

Suppose that someone owns gold in a foreign country. Is that considered a foreign account or does that depend on the details of what they have? Some people simply put gold in an ordinary bank safety deposit box or even a safe in their second home while others pay significantly more for what they hope is greater security offered by firms that specialize in buying precious metals for clients and safely storing them in a fashion similar to what stockbrokers do when people own stocks in street name.

For purposes of this discussion let's assume that the client did not sell or otherwise derive income from the gold holdings but was simply owning gold as a hedge against inflation and/or civil unrest.

From the IRS FBAR FAQs page:

Q. Is an FBAR required for accounts maintained with financial institutions located in a foreign country if the accounts hold noncash assets, such as gold?

A. Yes. An account with a financial institution that is located in a foreign country is a financial account for FBAR purposes whether the account holds cash or non-monetary assets.