Many Americans and foreign nationals have questions about complying with the FBAR requirements. The US tax code is incredibly complex so no wonder many US tax payers aske themselves “Do I need to speak with a tax attorney serving the location near me to help me understand the FBAR filing requirements?” A competent and well versed FBAR lawyer in or near Washington DC will make sure that you collect all the necessary documents for the FBAR reporting and submit your report without making any mistakes.
In case you were unaware of your tax obligations or you neglected to file one or more FBARs, you are subject to civil examination, a 100 percent penalty or even criminal prosecution. In order to avoid that, we will help you gain deeper insight into the fundamentals of US international taxation. Below are the FBAR basics.
Exactly what is the FBAR reporting?
The FBAR is a report required under the Bank Secrecy Act that needs to be filed every year. FBAR stands for the Foreign Bank Account Report, also known as The Report of Foreign Bank and Financial Accounts. This requirement was established to aid the United States government in preventing financial fraud, money laundering and tax evasion.
Who needs to submit the FBAR?
If you are a US national or a resident alien, you are required to pay tax on all forms of income, both domestic and foreign. It doesn’t matter if your financial accounts are overseas, in your home country or in the US. This includes not only your bank accounts but also foreign-issued life insurance policies, brokerage accounts, foreign pension funds, etc.
As a US taxpayer with at least $10,000 (or its foreign equivalent) in one or more offshore financial accounts, you are subject to US taxation if you have a financial interest in or signature authority over the account(s). The Reporting Requirement applies to individuals, businesses, and green card holders.
It doesn’t matter if the money is in one or ten overseas accounts. If the maximum value of one account or the aggregate value of multiple foreign financial accounts reaches or exceeds $10,000 at any time during the calendar year, you need to file the FBAR. It’s not just the money that counts. If you have any non-monetary assets of the above-mentioned value in your offshore account(s), you are required to report them as well.
How do I file my FBAR?
An FBAR (FinCEN Report 114) for the reportable year has to be filed electronically through the BSA E-Filing System. You submit the form with the U.S. Department of Treasury. As an alternative to the PDF form, there is an online version of the FBAR form available to individual filers.
Institutions, including enrolled agents, attorneys and CPAs, must register first in order to file the report. If you are an individual and want to file the FBAR yourself, use the no registration option within the system to satisfy your reporting obligation.
Are there any exceptions to the Reporting Requirement?
Regulations issued by FinCEN provide a few exemptions from the requirement to file the FBAR, including: offshore accounts owned by a governmental entity, foreign accounts jointly owned by spouses, U.S. persons already included in a consolidated FBAR, certain individuals with signature authority over an overseas account yet don’t have financial interest in it, etc. For additional information, consult a knowledgeable tax attorney in or near the area you live to aid you in determining whether you have an FBAR filing requirement.
What is is the FBAR filing due date?
In 2017, the FBAR filing deadline has been moved up by two months to coincide with the individual tax return filing due date. All Americans living in the States have to disclose their financial accounts and file the report by April 15, while US expats are required to file their FBAR by June 15. Although the deadlines for these two tax obligations are the same, keep in mind that the FBAR is submitted separately from a federal tax return.
If you cannot meet the deadline, your chance to submit the FBAR is automatically extended for six months to October 15. The extension does not apply to the deadline for filing your federal tax return.
What happens if I have failed to submit my past FBARs?
If you haven’t filed all your FBARs for prior years, don’t fall into temptation to just fill out the forms late without submitting into the voluntary disclosure programs such as the OVDP (remains open by September 28, 2018) and the Streamlined Filing Compliance Procedures (continues to be available for those with undisclosed offshore income or assets).
In case you fail to comply with the IRS laws and decide to file it late, you will be submitting a quiet (silent) disclosure. By doing so, you could face serious repercussions like extremely severe penalties and criminal prosecution. Speak with a skilled international tax attorney in/near Washington DC to review your options and choose the optimal way to report your offshore accounts – legally.
How extreme are the FBAR penalties?
If you don’t timely file your FBAR(s), the penalties can be quite severe. In case you don’t submit the report or provide false or incomplete information about your foreign assets or income, the IRS has authority to impose penalties up to $100,000 or 50% value of your account per year in case the violation is considered willful.
If the IRS determines the violation was unintentional, they will usually issue only one $10,000 penalty, although they could impose the penalty for each and every unreported offshore account and year of the violation. Compared to these civil penalties, criminal penalties are even more extreme and can result in a penalty as high as $250,000 and/or imprisonment of up to 5 years.
Can an FBAR legal representative near the area I live help me?
As you can see, if you fail to submit one or several FBARs and get examined by the IRS, the penalties for neglecting your reporting obligation can be quite severe. To minimize your tax penalties and liabilities, as well as prevent criminal prosecution if possible, it is strongly recommended that you consult an attorney. If you live in or near Washington DC, our knowledgeable international tax attorney can meet with you to discuss your offshore reporting. If you are outside of Washington DC, we provide 1-hour consultation via skype or phone completely free of charge.