- 1 Late FBAR
- 2 Are You Already Under IRS Audit?
- 3 Have You Ever Filed an FBAR Before?
- 4 Original or Amended Forms?
- 5 Is FBAR the Only Form Required?
- 6 Are There Joint Accounts with US Persons?
- 7 Current Year vs Prior Year Non-Compliance
- 8 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 9 Golding & Golding: About Our International Tax Law Firm
The FBAR refers to foreign bank and financial account reporting. If you have foreign accounts such as foreign bank accounts, investment accounts, stock accounts, pension plans, and/or foreign life insurance (and the annual aggregate total value of the foreign accounts and assets combined have a maximum value that exceeds $10,000), you may be required to file the annual FBAR (aka FinCEN Form 114). The failure to timely and/or accurately report the FBAR may lead to fines and penalties. While FBAR penalties can be civil and/or criminal in nature, the majority of the time FBAR penalties are civil and non-willful, despite all the fearmongering you will find on your Google search quest about willfulness and criminal penalties. Just as important as getting into compliance with FBAR filings is knowing how to navigate delinquent foreign account reporting and mitigate penalties. Here are five key facts to assist you with understanding the FBAR journey.
Are You Already Under IRS Audit?
When a US taxpayer is under audit or examination, they are supposed to voluntarily divulge any missed income or account information from their tax returns (that are subject to the examination) to the IRS Agent. Therefore, if you are under audit but did not previously report foreign accounts, you are still supposed to voluntarily disclose this information to the IRS Agent during the examination – even if it is not the primary purpose of the audit. If you are under audit, you are also ineligible for the FBAR Amnesty Programs such as the Streamlined Procedures or Voluntary Disclosure.
Have You Ever Filed an FBAR Before?
Before representing to the IRS agent (either in an offshore amnesty submission or audit) that you did not know about the FBAR, it is important to determine if you ever filed an FBAR in prior years. If you did FBARs in some prior years, you should be careful not to make a blanket statement to the IRS Agent (especially under penalty of perjury) that you did not know about FBAR filing.
Original or Amended Forms?
The requirements of an FBAR disclosure submission are different depending on whether you are filing an original FBAR or an amended FBAR. In the latter situation, the type of accounts and the value of the accounts you missed will be very important. In the former situation, it is also important to determine:
Was this your first FBAR?
Have you ever filed the FBAR before?
How many foreign accounts did you miss?
Did you have other international information reporting form obligations?
Is FBAR the Only Form Required?
While the FBAR may be the most common international reporting form, it is only one of several international forms a taxpayer may have to file in order to report their foreign accounts, assets, and investments to the IRS. Some of the other (more common) international reporting forms, include:
Are There Joint Accounts with US Persons?
When a person is on a joint account with another individual or company, they have to report the account — as well as identify who the joint owner is. Therefore, especially in a situation in which when the joint holder is a US person, it is important to consider putting the joint holders on notice about the late filing.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.