Accounting - Foreign Bank Accounts

PROBLEM 1

You have a client Mr and Mrs Joe Smith have bank accounts in Germany. In 2002 when they moved from Germany, they had balance of 150, 000 in a local bank in Berlin. They filed their tax returns from 2003 to 2010 and reported interest income from bank account in Germany on their personal tax returns. From 2003 to 2008 interest rate was 6% and from 2009 to 2010 interest rate was 2% But they never reported existence of foreign bank accounts to IRS. They both are School teachers and hired a local CPA firm in Houston to file their tax return.

Complete the Income Tax Return with the information given above for each year of 2003-2010.

Problem 2

Mr. Zeta Shah and Mrs Xetai Shah had import and export business in Houston. In 2002 one of their customer paid $400,000 and money was deposited directly in India. Shahs forgot to report $400,000 income on their 2002 tax return. Over the years whenever they went to India, they used that money for their pleasure. Assume interest rate of 4% and withdrew 50,000 each year to pay for their trips and shopping. They filed their income tax returns from 2002 to 2010 and reported taxable income of 30,000, 40,000,35,000, 25,000,40,000, 30,000, 50,000, 25,000 and 50,000 respectively.

Complete the Income Tax Return with the information given above for each year of 2002-2010.