Streamlined FBAR Penalty

Streamlined FBAR Penalty

Streamlined FBAR Penalty

Streamlining the FBAR Penalty: When it comes to FBAR penalties and offshore disclosure, one of the best ways to reduce the offshore account and asset penalties for taxpayers who qualify is to submit to the streamlined program. Under the streamlined program, the the FBAR and FATCA penalties are streamlined into either a penalty waiver (streamlined foreign) or 5% title 26 miscellaneous offshore penalty  (streamlined domestic).

Even though the streamlined FBAR penalty cannot be waived, some accounts and assets are included in the penalty base.

Let’s go through a few basics of what is not included in the offshore FBAR penalty computation:

Foreign Real Estate – Individually Owned

When a taxpayer owns foreign rental real estate, that real estate is not included in the streamlined penalty computation. Even though foreign rental real estate property technically generates foreign income, it is not computed into the penalty base.

Conversely, if the foreign real estate is owned by a foreign corporation, the foreign Corporation value is included in the FBAR penalty and a Form 5471 or 8938 may be required.

Canadian RRSP & RRIF 

Unfortunately, not all foreign pension and retirement is excluded from the streamlined penalty.

But, the IRS has carved out an exception for Registered Retirement Savings Plans (RRSP) and RRIF (Registered Retirement Income Funds). 

When a taxpayer computes their offshore penalty, the value of these retirement funds are not included in the penalty base.

Employee Accounts – Signature Authority 

The idea behind the streamlined program is that the IRS penalizes you on the unreported accounts and assets that you own, that were previously not reported.

In a situation in which an employee has signature authority over a foreign account – but not an ownership interest in that foreign account — the IRS typically does not issue any penalty for accounts in which a person merely has signature authority.

Why?

Because the account does not belong to the taxpayer and therefore it is not included in the offshore penalty computation.

Our Streamlined FBAR Penalty Lawyers Represent Clients Worldwide

Our FBAR Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure and Streamlined Disclosure.

Contact our firm today for assistance with getting compliant.


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