Every individual or a small concern or a big company has to comply with the financial obligation of filing the tax due to the government. Any institution can hope to flourish only if they act in consonance with their duty as a responsible citizen of a country/state, which has allowed them to function on their soil, to do business with their people and earn well. Tax procedures have been updated as per the requirements of the times and now the new IRA has come into force there is more trouble for people who willfully default on tax payments.
The government has introduced the streamlined domestic offshore procedure (SDOP) and the streamlined foreign offshore procedures (SFOP) to bring into the net of tax all those people who have not fulfilled the responsibility of tax payment for a period of time. The term ‘willfulness’ has assumed importance in that there is a chance of opting for SDOP or SFOP if the error in not filing is not due to willfulness in not reporting the asset or earnings through foreign assets. With the dictum ‘better late than never’ all citizens who have a stake in the country as citizens either with assets or earnings held within the country or outside, are duty-bound to pay all the taxes due for all the missed years even if it involves penalties of 5% as given. In fact, SDOP and SFOP have the procedures to soften the impact of the repercussions of negligence.
FBAR is the reporting of the Foreign Bank Account Reporting. Many Americans are earning in different areas both within the country and outside, the result is they have accounts in banks wherever they run their business outside the country. The government has brought in the provision of FBAR to show that all citizens who have been earning through these in the form of bonds and assets and business earnings should report the same and comply with the tax as per value. In fact just by compliance with tax regulation whether with stakes within the country or outside it is possible to use our time for genuine business instead of watering down the progress through nondisclosures of earnings. The following are considered as foreign assets:
- Financial accounts in foreign institutions
- Financial accounts of a US institution in a foreign country
- Foreign stocks and securities
- Foreign mutual funds
- Private equity funds or hedge funds of foreign countries
Depending on which of these categories a person falls in he has to take the time to evaluate the repercussions of nondisclosure and make a speedy effort and comply with the tax through SFOP and for this make it a point to meet the tax consultant.