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The US tax code has many unpleasant surprises for Chinese-American citizens.
Here’s an example, if a Chinese-American received a gift of over $100,000 from their Chinese parents and fail to report it, the IRS can impose a penalty of up to 25% of the gift amount.
There are other risks the Chinese-American citizens and Visa holders face, including those hwo have been in the US for more than five years on a student Visa.
We recommend contacting us so that we can review your filing to see if any mistakes need to be fixed.
What is FATCA?
FATCA stands for the Foreign Account Tax Compliance Act.
It requires China to see if any Americans or Chinese-Americans have bank accounts and then to share that information with the IRS.
Chinese banks will finish reviewing all bank accounts by the end of 2018.
A bank will send you a letter when they suspect you are a US person for tax purposes.
We can help you deal with this letter.
What is FBAR?
The FBAR requires that all US persons file a report each year of the foreign bank accounts they have of over $10,000 in the aggregate.
This means if you have three banks account of $3334 each, you have to file and FBAR.
The FBAR is required for many things that aren’t bank accounts.
What if I did something wrong. What kind of penalty will I have to pay?
This depends on what you did wrong. And if you come clean using the appropriate disclosure program for your situation. If you are just missing FBAR forms but have no additional income to report, you may have no penalty to pay is you properly use the delinquent return process.
Or you could have up to a 5% penalty based on your year-end balance in the affected accounts.
If you did something intentional, or “willful,” you may have to enter in the Full Offshore Voluntary Disclosure Program and pay a 27.5% or 50% penalty. Your penalty amount depends on whether or not your bank is on the “blacklisted” bank list.
Yet is some situations by "opting-out" of the standard 27.5% or 50% penalty, you can pay much less.
What happens if I didn’t comply with FATCA or FBAR, will the IRS prosecute me?
Recently, Da Ying originally of Beijing who was living in Farmington, Connectiuct was indicted for violation of a banking law.
Will these programs be around forever?
Why should I hire a tax law firm, and not an accounting firm?
We have CPAs who are on our team. So we have a lot of good things to say about CPAs. However a tax law firm is different than an accounting firm in a few important ways.
- First, a tax attorney is a trained advocate. A tax attorney will be at your side even if you did something wrong.
- Second the attorney-client privilege protects you. When you hire a law firm, the attorney-client privilege attaches to all of the employees of Parent & Parent LLP. The attorney client privilege protects your communications with our staff, CPAs, and other tax specialists.Third, attorneys are more heavily regulated than accounting firms. There is far more government oversight with attorneys. And attorneys can represent you in any court, whereas accountants are severely limited. A law firm provides the highest level of protection allowed by law.
While we don’t want anything bad to happen to you, if something does happen, with Parent & Parent LLP you will be well-protected.