CURRENT TOPICS

If you have any foreign bank accounts, security accounts or foreign assets, you need to be aware of the following information.

There has been a long-standing requirement to file a Foreign Bank Account Report (FBAR) if the maximum values of your aggregated foreign bank and security accounts exceed $10,000 at any time during the year. The FBAR is due by June 30 of the year following the reporting year. There are no extensions and the penalty for late or non-filing is $10,000. The penalty for willful non-filing is $100,000. link to worksheet

There is a new filing requirement for Specified Foreign Financial Assets that in the aggregate total $50,000 or more. There are information returns for officers, directors or shareholders of certain foreign corporations (Form 5471), certain interests in controlled foreign partnerships (Form 8865), foreign gifts, inheritances and certain foreign trusts (From 3520), foreign disregarded entities (Form 8858) and US persons capitalizing a foreign corporation (Form 926). Foreign trusts created to hold real estate in a foreign country such as Mexico must file Form 3520. There are severe penalties for failure to file these forms. link to worksheet

As you can see, foreign tax compliance is very complex and the penalties are very large. Please consult with us regarding your filing requirements.

The IRS has clarified how California RDPs and same-sex married couples will file federal tax returns. Beginning tax year 2011, he IRS will enforce the requirement that California RDPs and same-sex couples file their federal returns reporting income and deductions using California community property laws. This means that, although filing as married for California, community income must be split between the two federal tax returns filed by the couple, who are precluded from filing a joint federal return by the Defense of Marriage Act (DOMA).

Since this is a clarification of how tax returns should have been filed, amended tax returns may be filed for 2007-2009 if advantageous and it is optional for 2010 to follow this requirement.

Contractors may now form an LLC in California effective January 1, 2011. The State Contractors' License Board will be issuing Contractor's licenses to LLCs by January 1, 2012. A bond requirement ($1,000,000 liability insurance or $500,000 liquid assets) must be met for a contractor to form a California Limited Liability Company (LLC).

Effective September 30, 2010, Engineers and Land Surveyors have been added to those professions, attorneys, CPAs and architects, previously allowed to form a California Limited Liability Partnership (LLP).