Above a certain threshold, assets held in offshore or foreign bank accounts must be reported to the Internal Revenue Service (IRS). The Report of Foreign Bank Account and Financial Accounts (FBAR) is reported each year through the Financial Crimes Enforcement Network (FinCEN) website.
Regarding eligibility thresholds, a U.S. person who has a financial interest in, or signature authority over, a financial account held outside the United States that exceeds $10,000 at any time during a calendar year is required to file an FBAR. This requirement also applies if the combined value of multiple accounts exceeds $10,000 during the year. FBAR reports are due April 15 each year, with an automatic extension to October 15 of the same year.
Why you should submit an accurate and timely FBAR report
The Bank Secrecy Act (BSA) is the legislation that requires that your FBAR is filed each year. As its name implies, the BSA is aimed at preventing tax evasion and money laundering through offshore tax havens or foreign accounts by U.S. taxpayers. Given that the BSA was enacted in 1970, the IRS does not accept ignorance of the requirement to file an FBAR as a reasonable excuse for not filing.
If you decide not to file your FBAR, or it slips your mind, it is a good idea to remedy the lapse as quickly as possible. Failing that, you could attract the interest of the IRS and open the door for civil penalties or worse.
As a remedy, the IRS encourages taxpayers to follow its process for submitting a delinquent FBAR. This process is available to those who are not already under a civil or criminal tax investigation by the IRS and have not been contacted by the IRS. Points to keep in mind include:
- You may be able to avoid a penalty if you already reported and paid tax on the holdings, but failed to file the FBAR.
- The IRS requires a statement detailing the reason why the FBAR is delinquent.
- If you willfully avoided filing the required FBAR, speak with your tax attorney regarding the IRS Criminal Investigation Voluntary Disclosure process (VDP).
If you failed to file an FBAR, attention is needed. Even penalties for non-willful failure to file an FBAR are steep. If you are behind on one or more years of your FBAR filings, speak with legal counsel for a route back to compliance.
Get experienced legal help with offshore report requirements
Offshore reporting obligations can be complex, and can carry serious financial consequences. If you have failed to file an FBAR or are usure whether you are compliant, contact Robert J. Fedor, Esq., L.L.C. today at 440-250-9709 or set up a consultation for reliable counsel. We serve clients throughout Northeast Ohio, Chicago, New York and abroad.
Want to learn more about offshore tax reporting requirements? Download our free eBook, "The Guide to Offshore Tax Matters," to better understand FBAR obligations, penalties and compliance options.
