If you’re a United States citizen who had or has money in a foreign bank account, then take note. Are you familiar with the Foreign Bank Account Report (FBAR) Form 114? It’s imperative that you are.
There are stiff penalties that exist if you neglect to fill this out.
What is the FBAR, and why do you have to fill it out?
The FBAR was instituted in 2011 and forms part of the Offshore Voluntary Disclosure Program (OVDP). The program ended in 2018 and FBAR requirements have since undergone an overhaul. Its basic functionality is still largely the same, however. The FBAR is a form on which all U.S. citizens with any fiduciary interest in foreign assets, whether bank accounts or real estate, must report those assets to the Internal Revenue Service (IRS).
In the case of a bank account, it doesn’t matter if that account earns any interest or yields any dividends. There are some restrictions on the types of bank accounts that you must report. For example, you only need to report bank accounts with balances of $10,000 or more during a single calendar year.
What are the penalties for not filling out the FBAR?
Stiff penalties exist for not submitting an FBAR to the IRS. It could result in you paying up to 50% of your account balance. While this is much better than the imposition of up to $250,000 in fines, hefty prison sentences, tacked-on interest and criminal tax evasion charges many individuals used to face before the program was reenvisioned in 2018, the current penalties can still leave behind an impact.
The best thing that you can do if you’ve recently discovered that you had a responsibility to file an FBAR, but you didn’t do so is to apprise yourself of your rights and responsibilities. You’ll want to address the matter swiftly, whether that ultimately results in you needing to file back disclosures, speaking with tax authorities or something else. Your future depends on how efficiently you address this very important matter.