If you have a foreign bank account, hold assets or have an interest in an offshore tax account, you are required to file a Report of Foreign Bank and Financial Accounts (FBAR). If you failed to file in the last year, the Internal Revenue Service (IRS) has a process for submitting a delinquent FBAR.
The FBAR is an annual filing required of anyone with assets held in a financial entity outside of the United States. This applies to a U.S. person, LLC, partnership, trust or estate, corporation, or resident. The report is required of anyone with combined holdings from one or more accounts that exceed $10,000 at any time during the calendar year.
Your FBAR is due at the same time as your annual tax return--on April 15. The FBAR is not filed with your income tax return but through the FinCen website. If you have not filed yet this year, technically your FBAR is not delinquent. The IRS grants an automatic extension to October 15 to file your report. You do not need to request an extension. Speak with your tax professional to ensure your report is submitted by October 15 and you are set.
If you did not file your FBAR for a prior year, it is important to move quickly to submit a delinquent report to avoid further action by the IRS and potential penalties. The IRS offers instructions for individuals to file their return. It is important to note this process cannot be used by those under the following circumstances:
- Taxpayers who would be eligible to use the IRS Criminal Investigation Voluntary Disclosure Practice
- Those who are already the subject of a civil examination or an IRS criminal tax investigation
- U.S. persons who have already been contacted by the IRS for a delinquent FBAR filing
If you failed to file a prior FBAR, but accurately identified, reported, and paid tax owing on your foreign holdings for the delinquent year, the IRS will not levy a penalty. The overdue FBAR should be accompanied by a statement describing why the FBAR was late, and you will need to select a reason on the filing cover sheet prior to submitting the FBAR electronically through FinCen.
The filing of a delinquent FBAR does not automatically place you in line for an audit. However, your return could still be selected for audit through the usual IRS selection process. If you have questions or a reason for not filing your FBAR on time—speak with an experienced tax attorney.
Strategic guidance with offshore tax assets, FBAR reporting, and compliance
The tax group at Robert J. Fedor, Esq., LLC represents business and individual clients in matters including offshore tax investigations, foreign bank accounts, or allegations of tax crime. When experienced tax advice is needed, call 440-250-9709 or contact us for a free consultation.
