The Report of Foreign Bank and Financial Accounts (FBAR) is filed annually. While the FBAR was due on April 15, it is not filed as part of a personal income tax return. For those filing late, the Internal Revenue Service offers an automatic extension to October 15 to file your return.
If you have delayed filing your 2022 FBAR, consider these tips:
- Should you file an FBAR? The FBAR report is required of U.S. persons who have any ownership or signature interest in a foreign bank account or offshore tax matters. This could be a personal or brokerage account, mutual funds, and may be held by a corporation, partnership, or other entity. The account, or accounts, do not need to produce taxable income in order to be eligible for reporting. Overall, an FBAR filing is due if the aggregate amount of any (or all) of the accounts exceeds $10,000 at any time during the year. This would include joint accounts held with a significant other. Here is the take-home point: the reporting threshold can be reached at any time during the year with one or more accounts.
- The Fincen website: As noted, your FBAR does not accompany your annual personal tax return. Instead, the FBAR is submitted through the website of the Financial Crimes Enforcement Network (Fincen). The report is submitted through the password-protected BSA E-Filing System.
- Don’t forget the children: Wealth management sometimes means there are minor children who become owners or signatories on foreign bank accounts. For a minor child, a legally responsible adult should ensure the FBAR is filed for the child.
- Basic stuff you should not forget: The FBAR and the FATCA report offer differing views of your wealth to the IRS. Foreign financial institutions use the FATCA to identify offshore tax holdings to the IRS. The FBAR should match up and provide the name of each account holder, account numbers, contact information of the financial institution(s) where assets are held, and the maximum value held in each account.
Your FBAR report is an important compliance tool that may help you avoid an IRS civil tax audit. Failure to file an FBAR on significant foreign holdings can lead to concern for tax fraud and trigger an IRS criminal tax investigation too. The fines and penalties are substantial.
If you are already in arrears on your FBAR filings, speak with an experienced criminal tax attorney. Putting off until tomorrow what should be handled today is never a good strategy with the IRS.
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