If you are a “United States person” and hold a foreign bank account with enough value during the year, you probably owe the Internal Revenue Service a Report of Foreign Bank and Financial Accounts (FBAR).
You may be wondering what we mean by a United States person plus a few other FBAR details. A United States person is not just a labored term for a US citizen, it is a catch-all (literally). According to the US Treasury, US persons are “citizens (including minor children); United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.”
The idea is to cast a wide net that identifies who is required to file an FBAR and to define that group with enough clarity that individuals and entities can be prosecuted if they fail to file.
So what is an FBAR?
Your FBAR is a reporting tool that gives the IRS a look at offshore tax liabilities that you may have. If you have ownership, control, or authority over a financial account outside of the US, and if the value of that account or interest exceeded $10,000 at any time during the calendar year, then you must add an FBAR to your list of reporting requirements this year.
FBAR reports are filed electronically on form FinCEN Form 114 through the BSA E-Filing System. FBARs are technically due at the same time as your federal tax return on April 15, 2020, but you automatically have an extension to file until October 15, 2020. Your FBAR is not part of your federal tax filing.
On your FBAR, you will be asked to provide basic identifying information for your foreign accounts, including ownership of the account, account number, contact information and bank address, the type of account, and the maximum value of the account during the year. This type of information can be easily provided with account statements or other summary documents you might be provided by your bank.
The IRS expects you to retain account information for five years and the penalties for faulty recordkeeping, or not even filing an FBAR, are rough. If you are found to have willfully violated the requirement to file an FBAR, you could be fined as much as 50 percent of the balance of your foreign bank account. The IRS assumes holders of foreign assets are aware of their responsibilities, so claiming ignorance won’t help you if questioned about your FBAR during an IRS audit.
Best choice? File your FBAR each year, and if you aren’t sure about details or documents, speak with an experienced tax attorney to make sure your filing is correct the first time.
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Serving international and local clients from offices in Chicago and Cleveland, Illinois, the legal team at Robert J. Fedor, Esq., LLC delivers experienced legal service if you face a criminal tax charge, failure to file, tax fraud, or other allegation. Call us at 800-579-0997 or contact us today.