Do You Need To Report Foreign Bank And Financial Accounts (FBAR)?
Many U.S. taxpayers are required to submit FBAR reporting to the Department of the Treasury, and they don’t even know it. Do you know if you need to report your Foreign Bank and Financial Accounts? Read on to learn more about FBAR reporting.
What is FBAR?
Foreign Bank and Financial Accounts, or FBAR, is a form the IRS uses to collect information on offshore financial accounts owned or managed by U.S. taxpayers. While many people believe the FBAR form is part of the annual U.S. tax returns process, it is actually not included with your tax returns, and is meant to be sent directly to the Department of the Treasury. The FBAR form must be filed by June 30th each year, and is an informational return only. That means you won’t have to pay any taxes on the accounts that you report, but the FBAR can be used to determine if you are underreporting income or using offshore accounts for illegal purposes.
Do I need to submit an FBAR report?
Any U.S. taxpayer with an offshore account with a balance of more than $10,000 at any point during the financial reporting year must submit an FBAR report. Offshore accounts include bank accounts, mutual funds, unit trusts, and brokerage accounts. If the account is not in your name but you have signature authority on the account (for instance, your husband owns the account but you can sign on it) you must submit an FBAR report.
What happens if I don’t submit an FBAR report?
The IRS takes the FBAR very seriously, and the penalties for not filing an FBAR are severe. Penalties can range from an automatic penalty of $10,000 for filing the FBAR late to fines of 50% of the balance in the account. If the IRS finds that you willfully hid information by not submitting an FBAR, you could even face criminal charges and potential jail time.
Recently the IRS has significantly increased its efforts to bring taxpayers with offshore accounts into compliance with FBAR reporting. They have been pressing other governments for information regarding foreign bank accounts, and have even launched several voluntary disclosure programs. The most recent, the Offshore Voluntary Disclosure Initiative (OVDI), offers U.S. taxpayers who did not know they weren’t in compliance to submit their overdue FBARs to the IRS, and the IRS will take their willingness to comply into account when calculating their penalties.
If you have a question of whether you need to submit an FBAR report or whether you are eligible for the OVDI program, you need to contact a tax attorney immediately. An experienced tax attorney can go through your accounts and help you weigh your options for submitting the FBAR. If you are a U.S. taxpayer with offshore accounts, call a tax attorney for more information today.