More On Legal & Compliance
from The Advisor's Professional Library- Books and Records Rule Thorough and complete books and records enable RIAs to demonstrate that they have fulfilled their fiduciary obligations to clients and complied with applicable rules and regulations.
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
Realizing that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts, the IRS announced a plan debuting Sept. 1, 2012, to help U.S. citizens residing overseas, including dual citizens, catch up with their tax filing obligations. In some cases, based on their compliance risk profiles, those taxpayers will be able to catch up without facing penalties or further enforcement actions. THe new procedures are also meant to provide assistance for taxpayers with foreign retirement plan issues.
The IRS’s new procedures are intended to allow U.S. taxpayers living abroad who have failed to timely file tax returns or “Reports of Foreign Bank and Financial Accounts,” known as FBARs. A U.S. person with a financial interest in, or authority over, foreign financial accounts must file a FBAR if the foreign accounts exceed a certain amount during the calendar year.
Generally, taxpayers who are deemed “low compliance risks” will be required to file information and tax returns for the past three years, and delinquent FBARs for the past six years. Taxpayers who are considered “higher compliance risks” will be subjected to more stringent requirements after making their submissions.
To help these taxpayers, the IRS said these new procedures will allow taxpayers who are low compliance risks to become current with their tax requirements without facing penalties or additional enforcement action. These people generally will have simple tax returns and owe $1,500 or less in tax for any of the covered years.
Taxpayers using the new procedures will be required to file delinquent tax returns along with appropriate related information returns for the past three years, and to file delinquent FBARs for the past six years. Taxpayers who are “higher compliance risks” will be subject to a more thorough review and potentially subject to an audit, which could cover more than three tax years.
The IRS also announced that the new procedures will allow resolution of issues related to certain foreign retirement plans (such as Canadian Registered Retirement Savings Plans). In some circumstances, tax treaties allow for income deferral under U.S. tax law, but only if an election is made on a timely basis. The streamlined procedures will be made available to resolve low compliance risk situations even though this election was not made on a timely basis.
