Atlanta Foreign Bank Accounts And Foreign Assets (FBAR Disclosure) Attorneys

If you have offshore accounts or foreign financial interests, speaking with an Atlanta FBAR attorney early can help you understand your obligations and reduce unnecessary risk. To discuss your situation, contact The Gartzman Law Firm, P.C., to schedule a confidential consultation.

FBAR Reporting Requirements And Deadlines

The Internal Revenue Service (IRS) wants to know about all assets, even those that are in foreign bank accounts. According to the Bank Secrecy Act, the Treasury Department wants foreign bank account owners to report these accounts by using a Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114.

Failing to report an FBAR when required, could result in civil financial penalties and/or criminal penalties. Therefore, it is imperative to understand FBAR reporting requirements.

Foreign account reporting rules confuse even careful taxpayers. These answers address the questions we hear most often from clients who are worried about FBAR filings, FATCA notices and potential IRS penalties.

Who Is Required To File an FBAR?

U.S. citizens, lawful permanent residents, certain nonresidents and domestic legal entities, including companies, must file an FBAR if they have a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during the year.
This includes bank accounts, brokerage accounts and some foreign pensions. However, retirement accounts and plans might be exempt from FBAR filing requirements.

When Is FBAR Reporting Required?

FBAR filing is required when the value of a foreign account exceeds $10,000 at any time during the calendar year.

What Types Of Foreign Accounts Are Exempt From Filing FBAR?

The following types of accounts are not required to file an FBAR:

• Correspondent/Nostro accounts
• Accounts owned by a governmental entity
• Accounts owned by an international financial institution
• Accounts maintained on a U.S. military banking facility
• Funds held in an Individual Retirement Account (IRA)
• Beneficiaries of a trust, if another person files an FBAR

FBAR reporting may not be required depending on the type of accounts that are owned. For example, if one spouse reports jointly-owned accounts on an FBAR, the non-filing spouse does not need to file an FBAR. However, the non-filing spouse needs to complete and sign a FinCEN Form 114a to authorize their spouse to file on their behalf.

When Should You File The FBAR?

An FBAR is an annual filing that is due on April 15th every year (Tax Day). Automatic extensions are given through October 15th if the filing date of April 15th is not met. The extension is automatic and requires no additional paperwork.

How Do I Report An FBAR?

To file an FBAR, you must comply with the regulations set forth by the Bank Secrecy Act. Unlike standard tax forms, FBARs (FinCEN Form 114) are not filed as an attachment to your federal income tax return. Instead, they must be submitted electronically through the BSA E-Filing System operated by the Financial Crimes Enforcement Network (FinCEN).

What Amount(s) Do You Report?

People who file FBARs need to report “the greatest value of currency or nonmonetary assets in their accounts during the calendar year.” If the account isn’t in U.S. Dollars, you need to convert the amount from the foreign currency into U.S. Dollars using the exchange rate on the last day of the calendar year (as listed by the Treasury Bureau of the Fiscal Service). If you use another source, such as the exchange rate on your year-end statement, you need to provide the source.
If you’re required to file an FBAR and don’t do so, you can face tax complications, civil penalties and even criminal penalties. That’s why it’s crucial not to take any chances. If you’re not certain whether you need to file or just want to make sure it’s done correctly, it’s best to seek experienced guidance.

Understanding FBAR, FATCA And The “Alphabet Soup”

What Is The Difference Between FBAR And FATCA?

FBAR is a Treasury Department filing that reports foreign account balances. FATCA is a separate tax law that requires disclosure of foreign assets on your federal tax return and mandates reporting by foreign banks. Many taxpayers must comply with both rules, even though they involve different forms and agencies.

FATCA

FATCA went into effect on July 1. This expansive law requires foreign financial institutions to share information with the IRS about their U.S. accountholders. Many foreign governments have reached an information-sharing agreement with the U.S. and almost 40,000 banks have agreed to comply.

OVDP

In addition, the IRS is on its third round of the Offshore Voluntary Disclosure Program. Approximately 45,000 taxpayers have used the OVDP since 2009 to come into compliance. In June, the IRS announced changes to the 2012 OVDP.

Now, taxpayers will need to provide additional information, but will be able to do so via electronic record submission. The reduced penalty for nonwillful taxpayers moved to the streamlined procedure. A taxpayer will also need to submit all statements and pay the offshore penalty along with the application.

A major change to the program is an increase in the penalty from 27.5 percent to 50 percent. The increased penalty applies when an IRS or Department of Justice investigation of a financial institution becomes public before the taxpayer submits a pre-clearance OVDP request.

I Received A FATCA Letter From My Foreign Bank. What Should I Do Now?

Do not ignore the letter. Foreign banks often send FATCA notices after reporting account information to the U.S. government. An experienced Atlanta FBAR attorney can review the notice, determine your reporting exposure and help you respond in a way that protects your rights.

IRS Enforcement And Penalties

Is The IRS Still Enforcing FBAR Compliance?

Despite the closure of the Offshore Voluntary Disclosure Program (OVDP), the IRS remains committed to tracking foreign assets. Taxpayers must consistently file FBARs and Form 8938, as failure to report foreign income can lead to severe financial consequences. If you have missed past filings, it is essential to evaluate current disclosure options before the IRS initiates an investigation.

How Can I Avoid FBAR Violations and Penalties?

Accurate reporting and timely filing are critical. If you failed to file in prior years, voluntary disclosure options may reduce or eliminate penalties. A qualified Atlanta foreign bank accounts attorney can assess whether corrective filings or negotiations with the IRS are appropriate.

Failure To File An FBAR

Penalties for failing to comply are some of the stiffest in the tax code. For example, a Florida jury recently approved a FBAR penalty of 150 percent of the highest account value in an undeclared foreign financial account.

The civil penalty for willfully failing to file the FBAR may be 50 percent of the highest account balance during the year. In this case, the penalties stacked up for violations from 2004, 2005 and 2006. Often, a guilty plea will only result in a single-year 50 percent penalty. A prison sentence is also possible for the willful failure to file.

Your Options For Correcting Unfiled FBARs

New Offshore Disclosure Rules

The IRS has established a new framework that differs from the old OVDP in three major ways. First, the standard disclosure period has been shortened from eight years to six years. Second, the penalty structure is now more flexible, though willful FBAR penalties can still be applied. Most importantly, while the financial costs vary, the program still offers a path to immunity from criminal prosecution for those who come forward voluntarily regarding willful noncompliance.

Eligibility For The Streamlined Compliance Procedures

The Streamlined Filing Compliance Procedures offer taxpayers a less costly alternative for disclosing their unreported offshore accounts. There are several eligibility criteria. Make sure you meet all of them before using this offshore disclosure method.

Certification Of Non-willfulness

Perhaps the most important requirement is that you must certify that your failure to file FBARs or report offshore income was non-willful. You shouldn’t guess about this issue – get an opinion from a tax attorney.

The Streamlined Procedures do not offer protection from criminal prosecution. If your conduct was willful, the IRS may pursue a criminal investigation and criminal FBAR penalties, which can include six-figure fines and the possibility of jail time.

Not Under Audit Or Investigation

You can’t use the Streamlined Procedures if you are currently under audit. Even if the audit is totally unrelated to your foreign accounts, you don’t qualify. Likewise, you don’t qualify if you are being investigated by the IRS Criminal Investigations unit for any reason.

No Unfiled Tax Returns

As part of the Streamlined Procedures, you will be required to submit three years of amended tax returns. If you were required to file a return for one of these years but didn’t file it, you aren’t eligible for the Streamlined Procedures program.

Pay Tax Penalties

If you have previously made a quiet disclosure of your foreign accounts, you’ll have to pay any penalty assessment related to these disclosures. You may have been able to avoid these penalties if you had used the Streamlined Procedures before making your quiet disclosure. This is one reason to always consult a tax attorney before making any type of voluntary disclosure.

Submit Amended Returns, FBARs And Penalties

If you meet all of these conditions, you may proceed with the Streamlined Procedures. Along with your amended returns, you’ll need to submit up to six years of FBARs. You must also pay all taxes due on previously unreported foreign income and a miscellaneous offshore penalty of 5% of the highest aggregate foreign account balance during the disclosure period. If you’re ready to make an offshore disclosure, contact a tax attorney to discuss your options.

Non-willful FBAR Violations

For taxpayers whose failure to file was unintentional, the IRS provides specific pathways to avoid the standard $10,000 per-account penalty.

• Quiet disclosure: This involves filing delinquent FBARs with a written explanation. If all foreign income was already properly reported on your tax returns, this method typically results in no penalties.
• Streamlined filing compliance procedures: This requires amending three years of tax returns and submitting six years of FBARs. In exchange for coming clean, taxpayers pay a reduced 5% miscellaneous penalty instead of more punishing FBAR and tax-related fines.

Because these programs can change or end at any time, immediate compliance is the best defense against evolving IRS enforcement.

How The Gartzman Law Firm, P.C., Approaches Disclosure Issues

Because our firm is familiar with all parts of the tax filing and appeals process, we have access to many successful tactics and methodologies. We analyze your assets and finances in full to identify what you need to report, when you should report it and what to do if you failed to report in prior years. Our approach to the law features:

• Complete financial review, including any evidence against you or forensic accounting issues
• Detailed planning for your taxes and an analysis of your current standing
• Negotiation with the IRS in the event that you have outstanding tax debts or filings
• Resilient defense

If you are concerned about FBAR and other received foreign disclosures or are already in conflict with the IRS, you need to work with someone who understands both the legal and financial implications.

Why Choose Our Firm

Jeffrey S. Gartzman is a tax attorney and a certified public accountant with an advanced law degree in tax. He is known for his dedication and skill in this area of the law. Call The Gartzman Law Firm in Atlanta at 770-695-7337 or email us to make an appointment.