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FBAR Basics: Report of Foreign Bank and Financial Accounts

Do you have overseas income or assets? Are you under the US taxing jurisdiction? Then you should be aware of the FBAR reporting obligation and consult an attorney in or near the area you live who is skilled in international tax law.

Both US citizens and resident aliens have to pay tax on their foreign and domestic income in order to fulfill their obligation. Many have asked themselves “Do I have to get in touch with a tax attorney offering the area near me?” An experienced attorney serving Miami can help you understand the basics of the US tax code. He can tell you everything you need to know so that you can collect your tax files and properly report your earnings and assets.

If you were uninformed of your responsibilities, below is all you should know about the FBAR reporting.

What exactly is FBAR?

The full name of the FBAR is The Report of Foreign Bank and Financial Accounts and it is also known as the Foreign Bank Account Report. In 1970, Congress passed the Bank Secrecy Act to combat money laundering, tax evasion and financial fraud in the United States. The BSA requirements include the FBAR, under which individuals and businesses are required to report their foreign financial account(s) and assets yearly to the IRS.

Does everybody have to submit the FBAR?

Resident and non-resident alien individuals face a different set of rules regarding their tax obligations. If you are a non-resident alien, you don’t have to report your offshore financial accounts or income from a non-US source. They only have to pay tax on a US source income.

US persons and resident aliens have to report and pay tax both on their domestic and foreign source income, which includes foreign-issued life insurance and offshore pension funds. All green card holders, US nationals and businesses have to file the FBAR if the maximum account value of one account or aggregate of the maximum values of multiple accounts equals or goes beyond $10,000 at any time during the year. Be sure to calculate the USD value of your account(s) for the FBAR. Non-monetary assets of this amount that are in your foreign account should also be reported.

How can I file my FBAR?

The only way to file a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR) is through the BSA E-Filing System. If you are an individual, you won’t have to register in order to file the report electronically. As a CPA, enrolled agent or lawyer, you will need to register first and submit the FBAR as an institution.

Are there any exceptions to the reporting requirement?

The FBAR guide states filling exceptions to the FBAR reporting, such as: a foreign account owned by a governmental entity or an international institution, an offshore account jointly owned by spouses, U.S. persons who are already included in a consolidated FBAR, individuals who have signature authority over an offshore account, yet have no financial interest in it, etc. For more details, get in touch with a knowledgeable tax attorney who can help you determine if you have an FBAR reporting requirement.

Is there any deadline to submit my FBAR?

For those Americans who are living in the United States, the due date for the FBAR is April 15, which coincides with the deadline for individual income tax returns. All U.S. expats have to file their FBAR until June 15, which is also the expat tax filing due date. Just keep in mind that the FBAR is filed separately from a federal tax return.

Any filer who fails to submit their report until the deadline, does not need to ask for an extension – FinCEN grants all filers an automatic extension to October 15 every year. This extension only applies to the FBAR and not to federal income tax returns.

What if I have failed to submit and report my previous FBARs?

In case you have neglected your obligation one or multiple times, you cannot file all your past FBARs at once on your own because you would be breaking the law. If you reach out to a silent (quiet) disclosure, you can face severe penalties, criminal investigation and prosecution.

You can, however, try to explain why the filing is late when filing out the electronic form but only if the IRS hasn’t made contact yet or if you are not a subject of civil examination or a criminal investigation.

If you were required to submit an FBAR but were not aware you needed to, you could try the OVDP, which closes on September 28, 2018, or voluntarily disclose your foreign assets and income through the Streamlined Filing Compliance Procedures, which keep being available to US taxpayers. Talk to a reliable and skillful international tax attorney in/near Miami to get informed on these options and see which one is in your best interest.

How high are the FBAR penalties?

In case the Internal Revenue Service perceives your violation as willful, the penalty for neglecting your obligation could be 50 percent of the balance in your offshore account(s) or can go up to $100,000. You may have to pay the penalty for every account and each year the account was not reported.

If the IRS sees the violation as unintentional, they will impose probably only one $10,000 fine, although the penalty can be imposed for each unreported account and every year that account was undisclosed.

Criminal charges, however, can include jail time of up to five years and/or could lead to a penalty of up to $250,000. Typically, the IRS charges related offenses such as tax evasion and also filing an incorrect tax return.

Can an FBAR lawyer near the location I live help me?

In case you were unaware of your responsibility or failed to submit one or several FBARs, you are highly encouraged to speak to an attorney. If you live in Miami, our skilled international tax attorney could meet with you to review your options. If you are outside of Miami, we provide 1-hour consultation over the phone or via skype, which is free of charge. It’s essential that you have a well versed attorney by your side who could try to prevent criminal prosecution and minimize your tax penalties and liabilities.