Form FinCEN 114 or a Foreign Bank Account Report is a source of confusion for almost every US national, US expat or green card holder with offshore financial accounts. Many US taxpayers seek the services of an attorney skilled in FBAR reporting and international tax law in order to properly disclose their foreign income and assets and avoid criminal consequences. The perplexities of the US tax law are immense and every year a lot of foreign nationals keep asking themselves “Should I speak with a tax attorney serving the area near me?”
If you were not aware of the reporting requirement, you too may want to get professional help. There are plenty of things to know about FBAR filing. Here are the basics.
What is FBAR?
The reporting requirement was established back in the 1970 under the Bank Secrecy Act to prevent financial fraud, money laundering and shady offshore transactions. Since then, The Report of Foreign Bank and Financial Accounts, also referred to as the Foreign Bank Account Report or FBAR, has to be filed every year to the Internal Revenue Service. The government can, therefore, identify persons who try to avoid paying tax and escape the law.
Should I file the FBAR?
If you are a non-resident alien, you need to pay tax only on US source income. You are not required to report any offshore financial accounts or assets back in your home country or anywhere in the world. If you are a US citizen or a resident alien, you are taxed on all your worldwide income and need to report certain overseas financial assets.
All US nationals and resident aliens, including green card holders and businesses, need to file the FBAR if they have at least $10,000 in one or more offshore financial accounts, including foreign-issued life insurance and foreign pension funds.
You are required to file an FBAR if you are a US taxpayer and have a financial interest in, or signature authority over a foreign account and the maximum value of one account or aggregate of the maximum account value of several financial accounts reaches $10,000 (or its foreign equivalent) or more at any time of the year. The rule also applies on any non-monetary assets of the specified value you have in your foreign account(s).
Are there any exceptions?
Exceptions to the reporting requirements can be found in the FBAR guidelines. For example, there are filing exceptions for certain individuals who have signature authority over but don’t have financial interest in a foreign account, certain offshore financial accounts jointly owned by spouses, US persons included in a consolidated FBAR, offshore accounts owned by a governmental entity, etc. To find out more, get in touch with a knowledgeable tax attorney to aid you in making a decision whether or not you have an FBAR filing requirement.
How to file the FBAR?
FinCEN has developed an electronic filing system called the BSA E-Filing System. You have to fill out each section of an online form or download the FBAR form and upload it. There’s no need to register if you are filing the FBAR for the reportable year as an individual. On the other hand, CPAs, lawyers and enrolled representatives need to submit the report as an institution and in order to do so, they have to register first.
What is the FBAR due date?
The new annual due date for filing the FBAR was established in 2017 and it is April 15 (April 18 for 2017). The date coincides with the deadline for filing individual income tax returns. When it comes to US expats, they need to submit their FBAR until June 15, when expat taxes are due.
All persons who can’t make the deadline have a six-month extension to October 15 each year without having to file a specific request. It’s important to know that you don’t submit the FBAR with your federal tax return, nor does the granted extension extend the deadline for federal income tax return filing.
What happens if I have failed to submit and report my previous FBARs?
If you have neglected your obligations, the first thing you need to know is that filing a late FBAR outside of voluntary disclosure programs is considered a silent/quiet disclosure. Doing so could land you in some real trouble, such as a 100 percent penalty or even criminal investigation and prosecution.
You can attempt to explain why the reporting is late by providing your own explanation or choosing one of the reasons for filing late on the electronic form. This is an option only if the International Revenue Service hasn’t called you yet or in case you are not under a civil examination or criminal investigation.
If you needed to file an FBAR but were unaware of this obligation, you could enter the Offshore Voluntary Disclosure Program (OVDP) until September 28, 2018, or get into compliance through the Streamlined Filing Compliance Procedures, which remains being available for US taxpayers with unreported offshore assets or revenue. Consult a skilled international tax attorney in/near New York to figure out the optimal way to disclose your offshore assets and income legally.
How serious the FBAR penalties can be?
For non-willful violations, failure to file an FBAR may result in a civil penalty of up to $10,000 for each violation and each year you didn’t report the account. The penalty for willful violations, on the other hand, can be much more severe. You could face a penalty of up to $100,000 or 50 percent of the amount in your foreign account at the point of the offense. The fine can be imposed for each account and for each year the account went unreported. Criminal penalties may include jail time of as much as 5 years and/or could include a penalty of up to $250,000.
Can an FBAR lawyer near the location I live aid me?
With fines this extreme, if you have actually failed to submit one or more FBARs, it’s highly recommended that talk with an attorney. If you live in New York, you can schedule a meeting with our knowledgeable international tax attorney to discuss your offshore reporting. If you are beyond New York, we provide 1-hour totally free consultation via skype or phone. It’s critical to have a well versed attorney who could handle your case, decrease your tax penalties and liabilities and prevent criminal prosecution if possible.