If you are an American with foreign accounts living stateside or abroad, the foreign bank account report (FBAR) is an important annual obligation. Let’s talk about why.
Established in 1970, the Bank Secrecy Act (BSA) was intended to deter tax evasion and money laundering. Lax for years, enforcement of the Act is now serious business. Financial tools defined under the BSA help government and regulatory agencies uncover individual or enterprise malfeasance—from tax evasion to terrorism. When managing your investments or foreign assets, FBAR requirements are important to consider with an attorney or financial professional who has a practice focus on FBAR.
Created by the BSA, an FBAR filing is required of individuals and organizations with signature authority or an interest in any foreign accounts that exceed $10,000 US at any time during a calendar year.
Four key points to keep in mind
Here are four important points to remember about the FBAR:
- Do you have to file? The definition of who must file a FBAR includes US citizens and any estate, trust, or other entity created in the US, or under its laws. An alien living in the US, who meets residency requirements and maintains foreign accounts that meet the FBAR value threshold, is required to file. More subtly, holding a power of attorney on the foreign accounts of others also triggers an FBAR. Your FBAR requirement needs a close look if you are connected with accounts, financial tools, pensions, funds, or even a whole life insurance policy held outside of the US.
- What do you have to report? Generally, the FBAR requires disclosure of the name, address, and number of each account, the name and address of the individual or entity named on the account, the type of account, the institution in which it is held, and the maximum value (in US dollars) of the account(s) during the reporting year.
- FBAR filing deadline change: This year, the deadlines for filing the FBAR changed to align more closely with standard US tax deadlines. For those living in the US, the FBAR filing deadline is Tax Day in April (on or around April 15). For those abroad, the deadline is June 15. This year, a filing extension is available until October 16, 2017.
- Understand the amplified nature of FBAR penalties: Oftentimes, individuals and entities required to file an FBAR do not grasp the reach of the IRS to assess and collect FBAR penalties under the BSA. Penalties for failure to file could reach $10,000 per incident. A financial penalty as high as $100,000—or 50 percent of the balance of the violating account (whichever is greater)—could be assessed if the IRS contends you, or your organization, willfully failed to comply with recordkeeping required under the Code of Federal Regulations (CFR). Some penalties can be assessed more than once, and may result in ruinous financial damage.
An FBAR violation can result in civil financial penalties or criminal tax investigation. If you hold wealth or considerable assets outside the US, work with an experienced FBAR attorney to ensure your filing is correct. If you are challenged with an IRS audit, an attorney experienced with FBAR and offshore tax regulations can counsel you on options available in your case.
Speak with an experienced tax attorney in Cleveland
Whether you receive notice of an IRS audit, or have a tax concern, do not delay seeking skilled legal counsel.
With offices in Chicago and Cleveland, the experienced legal team at Robert J. Fedor Esq., LLC represents individuals and entities within the US and abroad on tax matters and strategic solutions to challenges with the IRS. Contact us today.
