Last year, more than a million taxpayers filed a Report of Foreign Bank and Financial Accounts (FBAR). It should be noted that this year's deadline for filing a FBAR comes up on June 30.
If you are required to file the report, and fail to do so, you face the possibility of substantial penalties.
IRS Commissioner John Koskinen says that the agency's offshore compliance efforts have for the past several years been a top priority. "And we are seeing very positive results," he adds.
It's not difficult to understand the subtext of the commissioner's remarks: the IRS is getting more and more information from overseas banks about American account holders, making it easier and easier to identify those who remain noncompliant. Once identified, the process of collection of past due taxes and penalties can begin.
If the failure to file an FBAR is deemed willful, the hammer comes down hard: a person can be fined $100,000 or 50 percent of the account balance -- whichever is greater. Those amounts can be assessed for up to 6 years of violations. Forbes has noted "that in no event will the total willful penalty amount exceed 100 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination."
For nonwillful violations, penalties are capped at $10,000 per year.
It's also worth noting that there is no extension available for filing an FBAR after the deadline. Even if you got an extension for your federal tax returns, you should be aware that it does not grant you more time in which to file your report about your foreign bank holdings.
Those who face the possibility of penalties for past FBAR noncompliance should speak with a tax attorney experienced in bringing taxpayers into compliance and negotiating terms with the IRS. We have tax attorneys in Chicago and Cleveland that are experts in negotiating with the IRS on your behalf.