Sunday, June 12, 2011

2011 Offshore Voluntary Disclosure Program (FBAR Amnesty Program)

The Internal Revenue Service announced in a special voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. The new voluntary disclosure initiative will be available through Aug. 31, 2011.

The objective of the OVDP is to bring taxpayers that have used undisclosed foreign accounts and undisclosed foreign entities to avoid or evade tax into compliance with United States tax laws. If you have foreign bank accounts and or assets overseas and have simply overlooked the disclosure of this you have the opportunity to correct this now.

A United States person that has a financial interest in or signature authority over foreign financial accounts must file a Report of Foreign Bank and Financial Accounts "FBAR" if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. The FBAR must be received by the Department of the Treasury on or before June 30th of the year immediately following the calendar year being reported. The June 30th filing date may not be extended.

If you have not filed FBAR's in the past then the IRS is providing the Amnesty Program until 8/31 to become compliant with tax laws.

Here are some FAQ's from the IRS regarding the 2011 Offshore Voluntary Disclosure Program:

Why should I make a voluntary disclosure? Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution. The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts. Moreover, increasingly this information is available to the IRS under tax treaties, through submissions by whistleblowers, and will become more available as the Foreign Account Tax Compliance Act (FATCA) and Foreign Financial Asset Reporting (new IRC § 6038D) become effective.

What are some of the civil penalties that might apply if I don't come in under voluntary disclosure and the IRS examines me? How do they work? A penalty for failing to file the Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an "FBAR"). United States citizens, residents and certain other persons must annually report their direct or indirect financial interest in, or signature authority (or other authority that is comparable to signature authority) over, a financial account that is maintained with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign accounts exceeded $10,000 at any time during the year. Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.

What years are included in the 2011 OVDI disclosure period? Calendar year taxpayers must include tax years 2003 through 2010 in which they have undisclosed foreign accounts and/or undisclosed foreign entities. Fiscal year taxpayers must include fiscal years ending in calendar years 2003 through 2010.

What if I cannot make a complete submission by August 31, 2011? A taxpayer may request an extension of the deadline to complete his or her submission if the taxpayer can demonstrate a good faith attempt to fully comply with FAQ 25 on or before August 31, 2011. The good faith attempt to fully comply must include the properly completed and signed agreements to extend the period of time to assess tax (including tax penalties) and to assess FBAR penalties.
Requests for up to a 90 day extension must include a statement of those items that are missing, the reasons why they are not included, and the steps taken to secure them. Requests for extensions must be made in writing and sent to the Austin Campus on or before August 31, 2011:

Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
ATTN: 2011 Offshore Voluntary Disclosure Initiative

Is income earned outside the US taxable on my U.S. Income Tax Return? YES, the US taxes all income earned all over the world. If you have not included income earned in foreign countries you would be required to file an amended tax return to include this income.

I have already paid tax in the foreign country, why do I have to pay tax in the US? The IRS allows for a tax credit on your tax return if you have paid foreign taxes to presumably offset the double taxation of the same income.

2011 Offshore Voluntary Disclosure Initiative

2011 Offshore Voluntary Disclosure Initiative Frequently Asked Questions and Answers

Contact us immediatlely if you have questions about this program and filing your 2011 FBAR as both are time sensative. The amnesty program expires 8/31 and the 2011 FBAR is due by 6/30.

Sunday, May 15, 2011

Common Business Scams

Two of the more recent and popular business scams involve getting the checking account number of your business. In one case the scammer calls a business firm claiming to represent a bank credit card company. The caller offers extremely favorable interest rates and repayment terms for new customers. The scammer claims to need some basic information to complete the firm's pre-approved credit application. Included in this basic information is the business's checking account number. After getting the account number, the scammer writes "demand drafts" on the account which will be honored by the bank if the draft has a valid checking account number on it. To help cover up the deception, the scammer often writes the drafts for small amounts that will not attract attention.

In the second scam, the scammer mails the company a check for a small amount. When the check is returned to the scammer, the information on the check will permit the scammer to learn the company's checking account number. The scammer then uses the account number to start writing demand drafts on the company's account.

Companies can help to fight these scams by thoroughly reviewing and reconciling the company's bank statement each month. If you discover any suspicious activity, call your bank immediately and then later notify it in writing. Businesses can avoid the second scam by reconciling all incoming checks with existing customer accounts and balances before cashing any check. Don't cash checks until you have identified the source.


It is estimated that cyber crime costs the economy more than one trillion dollars per year. While attackers initially focused on large companies, they are increasingly targeting small and medium-sized businesses that often do not protect their systems as much as the larger companies. Automated attacks are becoming more sophisticated and frequent. Because of the volume and the technological sophistication of these attacks, any business-no matter its size-needs to be prepared with proper security measures. With the availability of "toolkits" for installing malware, cyber criminals do not even need to be well-versed in technology to penetrate a system.

Malware can be installed by sending an e-mail attachment, using a social network site, or breaking into a company's website. Once the malware is installed, the crook controls the computer. Some of the malware programs wait for the user to visit a banking or financial site and then capture the user's log-in information which is sent to the attacker. The compromised computer may also be used for its computing power, permitting the launching of additional attacks. Currently the biggest cyber risk involves bank account fraud, using legitimate account numbers. Attacks on bank accounts can be particularly harmful to small businesses. Banks typically do not extend the same protection to businesses that they do to consumers. Banks will generally provide some kind of coverage for losses connected to consumer accounts but do not provide similar protection for businesses.

Unfortunately, many small and medium-size businesses have done very little to protect themselves against cyber attacks. A poll of approximately 1,500 small businesses indicated that one-third of them did not even have basic antivirus software installed on their computers. Small businesses that had some protection tended to rely on antivirus software and basic network firewalls. Such protection may work against well-known viruses and attacks but not against the more sophisticated new attacks. A further concern is that computers increasingly operate outside of firewalls.

Companies should begin by assessing their degree of risk, taking into account the number of people who can access the network, the current level of protection, and the nature of the data being stored. Most cyber attacks come by web or e-mail, so filtering systems would be needed for those avenues of attack. When purchasing antivirus software, get the business-class version, rather than the consumer version. Businesses may want to hire the services of a computer security company. Finally, keep in mind that cyber criminals are more likely to direct their attacks at computer users than computer systems.


Bad data often lead to bad business decisions. Make a detailed review of your data on a regular basis. Know who is getting paid and what they are getting paid for. You need to be confident that the data underlying your financial statements is accurate and current. Don't wait until the end of the year to find out how things have been going for the previous twelve months. You may wish to hire a consultant to make a custom report of items that are of particular significance to your business operations. Most business software can provide alerts to warn you when certain indicators are not within an acceptable range. Be sure that your bank account is reconciled on a monthly basis.


If some of your customers have quietly slipped away, don't give up on them without a fight. There are some fairly simple things that you can do to try to wake up those dormant customers. First, find out why they have gone silent. There are online surveys and polls that can be specifically customized to fit your business. Ask them what you need to do better. Find out if you need to make some adjustments in the goods or services that you offer. Be prepared to react to their feedback and make adjustments where possible. Let your dormant customers know how you have responded to their feedback.

Second, you should be prepared to offer them special incentives to renew their business relationship with you. These incentives could take the form of discounts, cash, or personalized service. The incentives should involve offering your customers something that your competitors can not. It should be something unique to your business and valuable from the customer's viewpoint. Be prepared to use the new technology to get back your old customers. Use social network sites to connect with previous customers. As part of your original online survey, determine what sites your customers are using and bring them into play.

It is estimated that almost 450 million people use Facebook every day, and increasingly customers will be looking to such sites for business transactions. Use a browser app to reconnect with and maintain contact with customers. Social networking sites and browser apps can be a good way to convey the satisfaction of your current customers. If you do business online, e-mail can be an effective way of contacting and encouraging the return of former customers. Use the company website to seek out actively any customer problems and suggestions for improvement.

Many businesses become so concerned with attracting new customers that they often lose sight of the importance of trying to renew a business relationship with a former customer.


Business people worry regularly about the security of their computer operating systems. Security would be better served by worrying about the users of the system, rather than the system itself. Today's cyber criminals are more likely to target user behavior than a technical flaw in the operating system. It is simpler for the attacker to get users to compromise their own security by opening an e-mail attachment.

Two popular scams provide good examples of this. One involves an e-mail claiming to be from the IRS which directs the recipient to open the attachment and fill out a required form. Another claims to be from the BBB and tells the recipient to open the attachment to get information about a complaint that has been filed. In both cases, opening the attachment installs malware in the recipient's operating system.

Friday, April 1, 2011

Don't Lend Money to the IRS

Will you be among the thousands of taxpayers who get a big tax refund this year? While most Americans happily
accept their tax refund checks, smart taxpayers understand that refunds actually cost them money.

Here's why:

* The government pays no interest on refunds. Kept in your hands, those dollars could have been productive. For example, you could have invested the money or used it to pay off your debt during the year. If the money had been added to a 401(k) plan, tax would have been deferred on both the investment and its earnings. Even better, your employer might have matched all or part of your investment, adding to your retirement savings. 

* Refunded cash is not available for use until actually received. Even though most taxpayers get their checks promptly, circumstances or errors can delay (or stop) a refund. 

To prevent losing money on tax refunds, consider reducing your withholding or estimated tax payments. For most taxpayers, withholding must equal either the
prior year's tax or 90% of the current year's liability. If your annual income changes little, it's relatively easy to avoid overwithholding. You should consider filing a revised Form W-4 withholding statement with your employer if you're having too much withheld. For taxpayers with fluctuating income or multiple sources of income, the problem is more complex. The IRS provides a worksheet with Form W-4, but many people find the form complicated. If you'd like assistance adjusting your withholding, contact our office.

Saturday, March 12, 2011

Know Your IRA Options

It's not too late to make contributions to an IRA for 2010. You can establish and contribute to a 2010 IRA as late as April 18, 2011. If the IRA is the traditional, tax-deductible kind, you can deduct your contributions on your 2010 tax return. If you're under age 50, the maximum contribution is $5,000; if you were 50 or older by December 31, 2010, you can contribute up to $6,000.

The "charitable IRA rollover" rule was extended through 2011, permitting taxpayers who are 70½ or older to use their IRA to donate up to $100,000 to charity. The donation must be made directly from the IRA to the charity, and it counts as part of the taxpayer's required minimum distribution for the year.


If you turned 70½ in 2010, remember that you're now required to take a minimum distribution from your IRA (and, unless you're still working, from other retirement plans also) every year. If you delayed taking your first distribution last year, you have only until April 1, 2011, to take it or you'll be subject to a 50% penalty on the amount you should have taken.

Converting a traditional IRA to a Roth IRA is still an available option for all taxpayers this year. Although a conversion will generate taxable income in the year you do it, later qualifying withdrawals from the Roth will be tax-free. Your conversion opportunities are not limited to just traditional IRAs. You can also convert your 401(k), 403(b), or 457 plan to a Roth.

For details or assistance on IRA matters, contact our office.

Thursday, January 20, 2011

Late 2010 law extends Bush-era tax rates for two years

After weeks of wrangling over the details, Congress passed a bill that will extend the tax rates in effect in 2010 through December 31, 2012. President Obama signed the "2010 Tax Relief Act" into law on December 17, 2010.

Here's an overview of the key provisions in the law:

* TAX RATES - The existing tax rates established in the 2001 and 2003 tax laws will continue for all taxpayers through 2012. This means the top tax rate for 2011 and 2012 will remain at 35% instead of reverting to 39.6%.

* CAPITAL GAINS AND DIVIDENDS - The top rate for dividends and long-term capital gains will remain at 15%. A 0% rate applies to taxpayers in the two lowest ordinary-income brackets.

* ITEMIZED DEDUCTIONS AND PERSONAL EXEMPTIONS - Higher-income taxpayers will not have their itemized deductions limited and their personal exemptions phased out.

* EDUCATION TAX BREAKS - The law extends through 2012 the American Opportunity Tax Credit, the income exclusion for up to $5,250 of employer-provided education assistance to employees, and the education savings account contribution limit of $2,000.

* ALTERNATIVE MINIMUM TAX (AMT) - The AMT was given another "patch" for 2010 and 2011, a move that will keep the tax from hitting millions more taxpayers. For 2010, the exemption amount is $47,450 for individuals and $72,450 for married couples filing joint returns.

* PAYROLL TAX CUT - For 2011, the employee rate for social security tax is cut from 6.2% to 4.2% on wages up to $106,800. Self-employed individuals will pay 10.4% on self-employment income up to $106,800. Employers will continue to pay 6.2% on employee wages. This payroll tax rate cut does not affect the Medicare portion of payroll taxes for either employees or employers.

* EXTENDERS - Effective for 2010 and 2011 returns taxpayers have the option of deducting state and local sales taxes instead of state and local income taxes. The deduction for up to $4,000 of higher education expenses and the deduction for teachers who buy classroom supplies are extended. Those aged 70½ or older may again contribute up to $100,000 tax-free
from an IRA to charity.

* BUSINESS PROVISIONS - The law extends the research tax credit for 2010 and 2011, and it extends the work opportunity tax credit through 2011. Bonus depreciation is increased from 50% to 100% for qualified business purchases made from September 9, 2010, through December 31, 2011. 50% bonus depreciation will be available in 2012.

* ESTATE TAX - The law restores the estate tax retroactive to January 1, 2010, and continues it through December 31, 2012. It establishes a top rate of 35% and an exclusion amount of $5 million ($10 million for married couples). Estates of persons who died in 2010 have the option of applying the estate tax and receiving a step-up in basis on property passing to heirs or having no estate tax but using a carryover of the decedent's basis in

Wednesday, January 12, 2011

News from the IRS

Here's a quick update on recent IRS activities that
might affect you:

* 2011 MILEAGE RATES RELEASED - The IRS has released adjustments to the mileage rates that can be used for business driving, charitable driving, or driving for medical or moving purposes.  Effective January 1, 2011, the standard mileage rates for the use of a car, van, pickup, or panel truck will be 51 cents per mile for business miles, 19 cents for medical or moving purposes, and 14 cents for charitable driving. 

* NEW LAW DELAYS RETURN FILING - If you itemize deductions or claim any of three restored deductions (for state and local sales tax, higher education tuition, or educator expenses), you must wait until mid February to file your 2010 tax return.  The IRS must reprogram its computers to handle the changes made to these items by the "2010 Tax Relief Act" passed in late December. 

* IRS CHANGES FILING DEADLINE - This year the deadline for filing various tax returns normally due on April 15 is being changed to April 18, 2011.  The reason?  Washington, D.C. is observing its Emancipation Day holiday on April 15, and though that's not a national holiday, the Treasury Department has extended Tax Day 2011 to Monday, April 18.  The new deadline applies to individual and partnership tax returns, extension requests, and other tax deadlines such as making 2010 IRA and education savings account contributions, and making the first 2011 estimated tax payment.