FBAR penalties can be up to $10,000 for non-willful violations. Willful violations have much higher penalties, so taxpayers with foreign accounts should take the time to understand their filing obligations and comply with them.
Who Needs to File an FBAR
Did the total balance of all of your foreign accounts exceed $10,000 during the tax year? If so, you may need to file an FBAR.
There are some exceptions, but it’s worth your time to talk about the issue with a tax professional if you have any foreign accounts. Keep in mind that you may have other filing obligations due to foreign accounts such as Form 8938 for Specified Foreign Assets.
Of course, you also need to report foreign income (including interest on foreign bank accounts) on your tax return and pay taxes.
How to File the FBAR and Avoid Penalties
File FBARs by April 15. Already missed the deadline? Good news, you get an automatic extension until October 15, and you don’t have to request the extension beforehand.
You don’t file an FBAR with your regular tax return. Instead, you need to use the Financial Crimes Enforcement Network’s e-filing system. You can also use this system if you are making a quiet disclosure after the extended deadline.
Disclosing Unfiled FBARs
It’s not always wise to file late FBARs quietly. In fact, some taxpayers are not eligible to use this late filing option. You’ll have to use either the new Offshore Disclosure Program or the Streamlined Filing Compliance Procedures.
The Streamlined Procedures allow you to avoid paying any FBAR penalties. Instead, you’ll just have to pay a miscellaneous offshore penalty equal to 5 percent of your highest aggregate account balance during the disclosure period. You also have to pay any back taxes and interest due.
You may need to pay FBAR penalties as part of the Offshore Disclosure Program. The major benefit you receive from using this program is that you will be protected from criminal prosecution for your failure to file FBARs. Criminal FBAR penalties are not assessed frequently, but they are severe and can include jail time.
If you’ve fallen behind on your FBAR or foreign account reporting obligations, contact a tax attorney to discuss your options.
The Gartzman Law Firm can help you with unreported foreign bank accounts and other IRS tax problems. Use our contact form to request a consultation with an Atlanta tax resolution attorney.