United States citizens and residents living abroad face two important filing deadlines in June 2014, namely the filing of their 2013 US Federal individual income tax return and the filing of the Report of Foreign Bank and Financial Accounts.

2013 US Federal Individual Income Tax Return Filing Deadline

Treasury Regulation 1.6081-5 provided you with an automatic extension of time in which to file your 2013 US Federal individual income tax return until June 16, 2014. If you are in need of a further extension of time to file you can do so by preparing and filing Form 4868 with the Internal Revenue Service on or before June 16, 2014. This will provide you with an extended due date of October 15, 2014 in which to file your 2013 US Federal individual income tax return. No extensions are available beyond such date.

2013 Report of Foreign Bank and Financial Accounts Filing Deadline

In prior years US taxpayers filed Form TD F 90-22.1 Report of Foreign Bank and Financial Accounts with the US Treasury Department in Detroit, Michigan, by mail. Effective July 1, 2013 the Bank Secrecy Act requires you to electronically file a new FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) with the Financial Crimes Enforcement Network (FinCEN). This report must be received by FinCEN on or before June 30, 2014. No extension of time to file is available. Assistance with this filing is available by calling 866-270-0733.

Offshore Voluntary Disclosure

It has been widely reported that the IRS discovered that thousands of US citizens and residents had a bank account with UBS in Switzerland and that such information had not been disclosed to the IRS on the annual filing of Form TD F 90-22.1 Report of Foreign Bank and Financial Accounts. In response the IRS set us an Offshore Voluntary Disclosure programme that thousands of US taxpayers have availed themselves of. We are now seeing the results of criminal cases wherein the individual did not avail themselves of the programme, were rejected from participation or simply continued to hide their assets. The IRS website currently lists the results of dozens of criminal cases with the latest noted below:

Florida Doctor Sentenced for Federal Tax Crimes: Doctor Maintained Multiple Offshore Bank Accounts at UBS and Other Foreign Banks That Concealed More Than $60 Million in Income and Assets

Dr Patricia Lynn Hough, of Englewood, Florida, was sentenced to serve two years in prison and three years supervised release by US District Court Judge John Steele in Fort Myers, Florida, for conspiring to defraud the Internal Revenue Service (IRS) by concealing millions of dollars in assets and income in offshore bank accounts at UBS and other foreign banks, and for filing false individual income tax returns which failed to report the existence of those foreign accounts or the income earned in those accounts, the Justice Department and the IRS announced. Hough was also ordered to pay $15,518,382 in restitution and $42,732.27 for the costs of prosecution. Hough was convicted by a jury on October 24, 2013.

According to court documents and court proceedings, Hough owned two Caribbean-based medical schools, Saba University School of Medicine located in Saba, Netherlands Antilles, and Medical University of the Americas located in Nevis, West Indies. Hough conspired to defraud the IRS with her husband, Dr David Fredrick, who is awaiting trial. They carried out the conspiracy by creating and using nominee entities, including a foundation, and by using undeclared accounts in their names and the names of nominee entities at UBS and other foreign banks to conceal assets and income from the IRS. Both schools and the associated real estate were sold on April 3, 2007, for more than $35 million, all of which was deposited into undeclared accounts in the names of the nominee entities. The majority of the proceeds from the sale were not reported to the IRS on their tax returns and no tax was paid. In total, between 2003 and 2008, Hough and Fredrick failed to pay more than $15 million in taxes.

Warner Sentenced to Probation After Paying $80 Million in Taxes and Penalties for Tax Evasion on Funds Hidden in Secret Swiss Bank Accounts

H Ty Warner, the creator of Beanie Babies and other plush animal toys was sentenced to two years’ probation for failing to report more than $24.4 million in income, and evading nearly $5.6 million in federal taxes, from millions of dollars he hid for more than a decade in secret foreign financial accounts at two banks based in Switzerland.

Warner, 69, of west suburban Oak Brook and the Santa Barbara, California, area, the sole owner of TY Inc, a Westmont-based company that designs and sells plush toy animals including Beanie Babies, as well as other business interests, was charged with, and pleaded guilty to, a single count of tax evasion last fall.

“Society will be best served to allow [Warner] to continue his good works,” US District Judge Charles Kocoras said in imposing the sentence. Judge Kocoras also ordered Warner to perform at least 500 hours of community service for at least three Chicago high schools and to pay a $100,000 fine.

In addition, Warner has paid more than $53 million in a civil penalty, representing 50 percent of the highest balance of his unreported foreign bank accounts, which at its peak was more than $100 million, as well as approximately $27 million in back taxes and interest.

In addition to exiling the new FinCEN Form 114 if you are preparing your own 2013 US Federal individual income tax return do not forget to include Schedule B in your tax return, even if you do not have dividends and interest, and complete Part III Foreign Accounts and Trusts.

Pursuant to the requirements relating to practice before the Internal Revenue Service, any tax advice in this communication is not intended to be used, and cannot be used, for the purpose of (I) avoiding penalties imposed under the United States Internal Revenue Code, or (ii) promoting, marketing or recommending to another person any tax related manner.

The tax advice given by this column is, by necessity, general in nature. You should, of course, check with your own US tax consultant as to how specific transactions affect you since tax advice varies with individual circumstances.

James Paul Sabo, CPA, is the President of ETS Ltd., PO Box HM 1574, Hamilton HM GX, Bermuda. Questions should be sent to: jsabo@expatriatetaxservices.com