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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23251
Experience:  Taxes, Immigration, Labor Relations
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I have a foreing account with more than 50000$. I didnt know

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I have a foreing account with more than 50000$. I didn't know i have to file a tax for the money(since it's taxed in my country already). ...I got the money from my grandfather in 2009. What steps I shoud take to have everything corrrect? I am USA citizen (became this year) and I am single mother with income less than 25 000$/yr.

Tahnk you
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV : Hi and welcome to Just Answer!If you are US citizen or US resident for tax purposes - you need to report all your worldwide income. Thus - if that foreign account earns interest income - that interest should be reported on your US tax return. If the same income is also taxed in a foreign country - you may claim a credit for foreign taxes - but still is required to report your income.
Customer: ....Hi
Customer: I would like to mentiond that the income is only 800$/year.
Customer: Isn't there some minimum limit ?
LEV : There is no minimum to report - you need to report any amount starting $1. However there is a minimum threshold for filing the tax return. With total income $25,000 - you are required to file - and therefore - should report all worldwide income.
LEV : In additional...1. the TD f 90is FBAR form - it is required for all years in which the total value of your foreign accounts was above $10,000. This form is sent separately from your tax return.2.Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010. For most individual taxpayers, this means they will start filing Form 8938 with their 2011 income tax return to be filed this coming tax filing season.So - no need to file form 8938 for 2010,3. For 2011 and 2012 - the form 8938 is needed if you had foreign financial assets with an aggregate value exceeding $50,000 during these years.
Customer: when is the due date to file the FBAR? and how to file the 8938 for the 2011,2012? For the FBAR and 8938 do I use same form just specify the year? how big penalty I get since I didn't file it on time?
Customer: Also do I file the amount(interest) after it's taxed in my country or the amount before?
LEV : Form 8938 is filed with your tax return (due by Apr 15 of following year). FBAR form - www.irs.gov/pub/irs-pdf/f90221.pdf‎ - is filed separately - and is due by June 30 of following year.
LEV : If you did not report interest income - you need to amend your tax returns. Use form 1040X .
Customer: 1040x for each year?...what penalty should I expect?
LEV : Penalty might be for unreported income and late payment - if you have additional tax liability. Generally .5% per month - but not more than 25%. Interest rate during that time was 3-4%. So your penalty woudl not be large. There might be additional penalty for not reporting foreign account - but if that was a honest mistake - you may may explain - and the IRS woudl not apply.
LEV : Yes - separate form 1040X for each year to correct mistakes.
LEV : If you paid foreign taxes on that interest income - you will claim a foreign tax credit - and there will not be any additional tax liability - thus no late payment penalties.
Customer: 5% of the amount on the account or the interest taht I got for that year?
Customer: claim a foreing tax credit? how do I do that? ...with another form or it's included on the 1040X form?
LEV : 0.5% of the amount of tax owned per month. Thus - if your missing income $800 - and if you are in 15% tax bracket - your estimated tax liability is $120. So - late payment penalty is $120 +0.5% = $0.6 per month.
Customer: what's 15% tax barcket?
Customer: bracket?
LEV : So late payment penalty - should not be large. However penalty for not reporting a foreign financial account might be up to $10,000. However you may explain your situation - that was a honest mistake - and you are willing to correct - and most likely - the IRS woudl not apply this penalty.
LEV : Tax bracket is based on your total income and filing status. You may find tax rate schedule on last page in this publication - http://www.irs.gov/pub/irs-pdf/i1040tt.pdf
LEV : Assuming - you are filing as a head of household - your income up to $12,400 is taxed at 10% and income above that amount - at 15%. So your marginal tax bracket is either 10% or 15%.
Customer: ... Paying my tax for account out of USA (for 2011,2012) will it have a effect on financial aid (grand) at college?
Customer: ..how come any of person I went to do my tax didn't ask me about if I need to file 8939? I really didn't know I need to report the money....
LEV : Additional income and additional assets do affect your eligibility. However I may not say for sure how it will affect. Eligibility is based on so-called Expected Family Contribution (EFC). You may try online calculators to estimate possible effect. There are several available - for instance - http://calculators.collegetoolkit.com/college-calculators/rescalcefc.aspx
LEV : Reporting foreign financial assets is not what regular tax preparer normally do. That is relatively rare situation - and you might want to find more qualified tax preparer.
LEV : Just for your reference - take a look at this IRS page - http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-(FBAR)
Customer: ...thank you for your help.....I am really nervouse about this. so in conclusion 1) FBAR file form for 2009,2010,2011,2012 if amout on account 50000$ and more 2)8939 I need file for 2011,2012 3) due date of FBAR is june 30th.....right?
LEV : (1) FBAR form is needed if the total value of all foreign accounts is above $10,000. (2) form 8939 is only needed for 2011 and 2012. (3) FBAR form for 2012 is due by June 30, 2013.
Customer: ...but I need report Fbar form for each year since I got the money on account right? in my case 2009,2010,2011,2012?
LEV : That is correct - separately for each year.
Customer: Thank you for your help.
LEV : Sorry for your situation. As I suggested - you might want to talk with a local CPA before sending anything to the IRS.
Customer: what CPA stands for?
LEV : Certified Public Accountant (CPA)
LEV : You will find contacts in local phone book.
Customer: ....ok I will do....have a nice day..is all our conversation send to my e-mail?....so I can go I read it again?
LEV : Experts do not have access to your account. You may either copy-paste to your local document or will be able to print after rating.
Customer: ok...thank you
Customer: have a nice day
LEV : You are welcome. Be sure to come back if you will have any questions.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23251
Experience: Taxes, Immigration, Labor Relations
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