In recent years, the IRS has become more aggressive about pursuing U.S. citizens who fail to report foreign holdings. If you hold money in foreign bank accounts, or hold signature authority in a foreign bank account, you must file a Foreign Bank Account Report (FBAR) with the IRS every year or face significant penalties.
Consulting with an experienced international tax lawyer can help keep you on the right side of the law. In the meantime, we’ve brought you the top five things you need to know about the FBAR.
1. Who Needs to File an FBAR?
The IRS requires that if you hold $10,000.00 or more in foreign bank accounts, you must file an FBAR. This amount is in the aggregate, so there’s no point in opening up multiple accounts and keeping them under the $10,000.00 threshold. If your accounts, at any time, no matter how short, reach $10,000.00, you must file an FBAR.
If you have signature authority over any foreign accounts totaling $10,000.00, you must also file an FBAR. Signature authority means that you have authority to control the disposition of assets within the account by direct communication with personnel at the financial institution in which the account is held.
2. How Do You File an FBAR?
The Department of Treasury has made reporting your foreign bank account information relatively painless through the BSA e-filing system. Individuals or couples are automatically able to file through the BSA system, while institutions, CPAs and other agents must register to become a BSA filer.
3. Do I Pay Taxes On the FBAR?
While it is best to talk to a tax professional about your taxable status, the FBAR is not a tax tool. The FBAR is merely a reporting tool.
4. What If I Don’t File My FBAR?
If you are required by law to report your foreign holdings and knowingly fail to do so, the penalties can be stiff – up to $10,000 per violation. If it is determined that you willfully failed to file, you can be fined the greater of $100,000 or 50% of the balance of the account at the time of the violation.
5. I Didn’t File an FBAR, But Was Required To – Now What?
If you have failed to file your FBAR, and millions of people do, you can take comfort in knowing that there are several amnesty programs available to help you get caught up. These include:
- Delinquent Information Return Submission
- Delinquent FBAR Submission
- Streamlined Domestic/Foreign Offshore Filing Compliance
- Offshore Voluntary Disclosure Program
Depending on your situation, you may take advantage of one or more of these amnesty programs and not be subjected to harsh penalties. The key is to report before you are “caught” by the IRS. Once they catch up to you, they will assume you are trying to hide assets and you will not be allowed amnesty.
If you have questions about the FBAR, contact the international tax lawyers at Brunoro Law, APC.
Posted in: International Tax