If you are living anywhere in the United States and have offshore monetary assets, you need to understand at least the essential aspects of U.S. international taxation. Not just United States residents making earnings outside the US have the obligation to declare and pay their taxes under the federal tax legislation; these rules apply to resident aliens as well. They are also subject to FBAR reporting and have to pay tax on all their worldwide income.
US laws can be enacted by legislative bodies at the government, state or regional level. The U.S. code is so complicated that in order to avoid errors and criminal consequences, you may want to ask yourself “Should I seek advice from a tax attorney offering tax services in the area near me?” Many taxpayers discover that they need the aid of an attorney in order to properly fulfill their tax obligation. Rest assured that a competent legal representative in or near Chicago who is well versed in FBAR reporting can make sure that your tax obligations as a foreign national are met.
If you were unaware of your responsibilities, read on to find out all about FBAR reporting and filing.
What exactly is FBAR?
FBAR stands for the Foreign Bank Account Record, also referred to as The Report of Foreign Financial Institution and Financial Accounts. The FBAR requirement flows from enactment of the Bank Secrecy Act in 1970, when it was created to fight money laundering, tax evasion and financial fraud.
Do I need to file the FBAR?
Non-resident aliens are subject to tax only on United States source income and not on foreign source of income they receive. They also don’t have to report foreign accounts they have abroad or in their home country. On the other hand, both U.S. nationals and resident aliens have to report certain international material possessions and are taxed on their foreign-earned income, such as foreign pension funds as well as foreign-issued life insurance policies.
Regardless of whether you remain in the United States or not, if you a resident alien or a U.S. citizen, the guidelines are usually the same. The FBAR reporting is required of individuals, green card owners, as well as of companies that have minimum $10,000 in offshore accounts.
If you are a United States taxpayer and also have signature authority over, or a financial interest in a foreign bank account, you have to submit an FBAR if the total value of your international accounts is at least $10,000 or its equivalent at any point during one calendar year. It makes no difference if the cash is in one or various accounts.
You are supposed to submit an FBAR even if your foreign account has non-monetary assets of $10,000 or more. US companies with a foreign financial account balance that satisfies the stated criteria also have to file an FBAR.
Are there exemptions to the reporting obligation?
Exceptions to the FBAR reporting requirement can be found in the FBAR guidelines. Here are a few exemptions: a foreign financial account owned by you and your spouse, an offshore account owned by a governmental entity or an international institution, United States individuals who are included in a consolidated FBAR, certain individuals who have signature authority over a foreign account but don’t have material interest in it, etc.
Married couples who combine their finances in one account and don’t have separate bank accounts of their own might file a joint FBAR; otherwise, they are to report their foreign assets/income individually. For additional information, consult a knowledgeable tax attorney serving Chicago or area near you.
How do I submit my FBAR?
It’s crucial that you retain records related to your foreign accounts in order to keep up with your yearly FBAR responsibilities. Submitted documents have to include the number, type, as well as the name of the bank account(s), the name on the account(s), the maximum value for every bank account exchanged to US dollars, and the address and name of the institution at which the account is maintained.
Every year, you have to report offshore assets and financial accounts to the United States Department of Treasury by filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR). The report needs to be submitted online by using the BSA E-Filing System.
Individuals don’t have to register in order to file the report. On the other hand, CPAs, attorneys as well as signed-up agents need to register and submit their FBAR as an establishment. Read about the filing requirements on the IRS website.
What’s the due date for FBAR filing?
Since 2017, the FBAR has the exact same due date as individual income tax returns. For all Americans living in the U.S., the yearly filing deadline is April 15, unless it falls on a weekend break or holiday, like in the case of the 2017 tax year, when the FBAR reporting due date is April 17, 2018. U.S. expats need to file their FBAR until June 15, which coincides with the expat taxes deadline.
All filers who cannot satisfy the deadline, regardless of whether they live in the U.S. or abroad, are automatically given a six-month extension to October 15. For this extension, no particular requests are needed. The FBAR is not submitted with a federal tax return nor does an extension to submit your FBAR extend the deadline for filing your federal tax return.
Suppose I have neglected to submit and report my previous FBARs?
If you have ignored your obligation, bear in mind that you can’t merely file all your late. This is called a silent disclosure and it’s not the course of action you should take. It may result in criminal liability, considerable penalties and fines.
If you are not under a civil examination or a criminal investigation, and the IRS still hasn’t called you, you could provide explanation for this delay when filling out the digital form.
If you were required to submit an FBAR, yet were not aware you needed to, you could resolve your potential tax delinquencies through the OVDP until September 28, 2018, or the Streamlined Filing Compliance Procedures, which keeps being available for U.S. taxpayers with unreported offshore earnings or assets. Speak with a knowledgeable international tax attorney in/near Chicago about eligibility needs for these programs and find the optimal solution to reveal your foreign account(s) legitimately.
How extreme are the FBAR charges?
If you don’t adhere to the FBAR requirements, be ready to possibly deal with severe criminal and civil fines. If the IRS establishes that the offense is willful, the penalty could go as high as $100,000 or 50% of the balance in your offshore bank account at the moment of the violation. You may have to pay the fine for every unreported account and for each year that account was undisclosed.
In case the violation is perceived as unintentional by the Internal Revenue Service, the fine could rise up to $10,000 per violation. Although the penalty can also be imposed for each unreported offshore account and each year of the violation, the Internal Revenue Service tends to enforce solely a $10,000 penalty.
On the other hand, criminal penalties can include imprisonment of up to 5 years and/or might lead to a fine of up to $250,000. The IRS tends to charge violations such as tax evasion and submitting an incorrect tax return.
Can an FBAR legal representative near the location I live assist me?
With penalties this extreme, if you have neglected to submit several FBARs or only one, it is recommended that you consult an attorney. If you live in Chicago, make an appointment with our well versed international tax attorney to talk about your offshore reporting. If you are outside of Chicago, we offer one-hour free consultation over the phone or via skype. It’s essential that you have a skilled attorney who can decrease your tax obligation liabilities as well as penalties and if possible, help prevent criminal prosecution.