Unsure About Your FBAR Filing Requirements – Learn About The FBAR Rules Now
FBAR Filing Deadline
As a U.S. taxpayer, everyone knows that April 15th is the tax deadline. But another important tax deadline that frequently applies to taxpayers overseas or taxpayers in the U.S. with foreign assets, is the FBAR (Foreign Bank Account Report – Form 114 – formerly known as TD F 90-22.1 ) deadline to report foreign bank accounts.
The FBAR filing deadline is June 30th (or the preceding business day if June 30th falls on a weekend). Unfortunately, requesting an extension on your individual return does not extend the FBAR due date – there is no extension available for the FBAR deadline. Any reports filed after this date are considered a delinquent FBAR. In addition, the FBAR is different than many other tax forms in that it must be received by the deadline date (and not postmarked by the deadline date).
FBAR Filing Requirements
The FBAR is a tool to help the United States government identify persons who may be, in the view of the IRS, using foreign bank accounts to circumvent United States law. With FACTA, IRS criminal investigators will use the FBARs to help them identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad as well as undisclosed foreign accounts.
This is an important IRS compliance requirement with huge monetary civil penalties at stake as well as potential criminal consequences. It has ongoing compliance reporting requirements with enforcement teeth behind it with foreign financial institutions starting to disclose U.S. account holder information as a result of FACTA.
The FBAR must be filed with the Treasury Department (it is not filed with your your federal income tax return) whenever you meet the FBAR filing requirements, which in a nutshell is whenever a U.S. person has a financial interest in, or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust or other type of foreign financial account (including an insurance policy with a cash value such as a whole life insurance policy) maintained with a financial institution, with an aggregate value of over $10,000 at any time during the calendar year based on the highest value of each foreign account during the tax year.
In addition, taxpayers with specified foreign financial assets that exceed certain thresholds must also report those assets to the IRS on Form 8938 as well. Unfortunately, while there is a duplicate reporting on this additional form, it does not alleviate you from filing the FBAR Form 114 (formerly known as Form TD F 90-22.1).
Who must file and FBAR
The FBAR instructions state that an individual or entity that meets the classification as a United States person must file an FBAR. A U.S. person for purposes of FBAR reporting includes U.S. citizens, U.S. residents (Section 7701(b) provides two tests used to determine a taxpayer’s residency status – the green card test and substantial presence test. If the non-U.S. citizen passes either test, they are generally considered a resident), entities including but not limited to corporations, trusts, estates, partnerships or limited liability companies that were created or organized in the U.S. under the laws of the U.S.
FBAR late filing and non filing
Civil penalties for non-willful FBAR violations can be imposed up to an amount of $10,000 per violation. For willful violations the penalty can be up to the greater of $100,000 or 50 percent of the account balance, per violation. Criminal penalties can result in fines of up to $500,000 and imprisonment of up to 10 years and may be imposed in conjunction with the civil penalties.
Effective July 1, 2013, all FBARs must be electronically filed with the BSA E-filing system. Tax Samaritan can both prepare and complete the FBAR reporting electronically on your behalf.
FBAR Voluntary Disclosure
If you are a U.S. person with previously undisclosed interests in foreign financial accounts and assets, you may want to consider participation in the current IRS offshore voluntary disclosure program (2012 Offshore Voluntary Disclosure Program ). There are various considerations before taxpayers should determine whether to pursue a voluntary disclosure through the OVDP, through amending or filing delinquent FBARs or in some other manner. While Tax Samaritan can prepare all your required FBAR forms for all years, we recommend a free consultation with one of our recommended attorneys after your FBARs have been prepared to explore recommended options for disclosure.