The Tax Code Reads as Follows:

Any United States person who has a financial interest in or signature authority, or other authority over any financial account(s) in a foreign country is required to file a Report of Foreign Bank and Financial Accounts (FBAR), if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.

A potential nightmare all begins with Line 7 of Schedule B.

Line 7 of Schedule B directly ask a taxpayer if he/she have a foreign bank account. It then tells you the filing requirements for Form TD F 90-22.1. The next question ask if “Yes” enter the name of the foreign country.

Line 7 of Schedule B is at the bottom of the page, most Americans and a lot of Tax professionals just breeze right past it and continue with the return.

RED FLAG: Failure to file a TD-90-22.1 is a FELONY, punishable by a 5 year prison term.

If you are unsure of how to handle Line 7 of Schedule B, continue to read this article and then contact a Tax professional as soon as possible.

No extensions are allowed for this form. Taxpayers who have earned interest in Canada must comply as well.

There are ways for IRS to find out if you have an offshore bank account or have a financial interest in a foreign account.

One way for IRS to find out, is if you spend more then you report as income. Often times people do this by using a credit card associated with an offshore account or a foreign account.

Another way for IRS to find out is: IRS pays informers to report tax cheaters. Informers can use Form 211 to report tax evasion and receive 8% of the first $100,000 IRS collects from the tax cheater. Of course IRS investigates the informer as well.

Keep in mind that Line 8 of Schedule B has consequences as well. If you have a foreign Trust, you are required to complete Form 3520.

It is highly recommended that if you must complete Line 7 or 8, of Schedule B, that you contact a Tax Attorney or an Enrolled Agent.

The Way In Which to Comply With the Foreign Accounts Law: Check the block on Schedule B of Form 1040 Complete Form TD F 90-22.1 Mail the completed form by June 30th to the US Dept of Treasury, PO Box 32621, Detroit, MI 48232-0621

Tax Deduction Checklist

The best tax deductions checklists are found in three places:

Your past years’ tax returns; With your tax professional; and Through an online tax website

Past Years’ Returns

Just by looking at the deductions you have been able to take in the past, you will get a good idea of what deductions you can take this year. If you had mortgage interest, real estate taxes, IRA contributions, and charitable contributions last year – you probably have them this year as well. The same is true of medical expenses, various taxes, that safe deposit box you keep, and if you are required to pay certain expenses, like alimony. Finally, any business deductions you have taken in the past, for a home office, travel, mileage, etc. is likely to follow a pattern you have created and budgeted consistently.

Tax Advisors

Tax professionals are great at helping you identify deductions for one time occurrences and helping you organize your records and thoughts on how to approach the deductions that are available. You may need advice on issues that you have never faced before and those that run the risk of gaining or losing large sums of money. If so, your tax advisor is a great resource for addressing these issues.

Online Help

TurboTax Online, for example, has exceptional checklists for going over everything you need to consider before preparing your return and making sure you don’t miss anything important. It asks interactive questions, points out possible deductions you may forget, and reminds of the things you need to have or consider when taking a specific deduction.