The United States Government makes it a point to be aware of financial holdings that Americans own abroad. Perhaps you’ve been living overseas and have set up bank accounts there. Maybe you live in Georgia or another state and have power of attorney for financial accounts that exist in another country. If so, it may be a requirement that you fill out a Report of Foreign Bank and Financial Accounts (FBAR) and possibly other foreign disclosure forms to be in compliance with the IRS.
The exact form you would submit to fulfill FBAR requirements is known as the FinCEN Form 114. The total amount of money in all foreign accounts at any time during a tax year is a determining factor as to whether you must report the holdings. FBAR rules are relevant to all U.S. citizens and expatriates, as well as those who possess green cards or dual citizenship.
The key amount in holdings is $10,000
If you have numerous bank accounts or signature authority on accounts overseas, it is important to add the total holdings in all the accounts. If, at any time during a fiscal year, your total holdings amount to $10,000, then you must submit a FinCEN Form 114.. If you fail to do so by the listed deadline, you may incur penalties, which, in some cases, could include facing criminal charges.
Advanced technology makes it convenient to file an FBAR
The IRS requests you submit an FBAR by using a digital form, online. If you typically hire a tax service to file your taxes for you, inform your tax preparer that you must file an FBAR, and they can help you navigate the process. You can also use an e-filing system independently if you do your own taxes.
An honest mistake or intentional omission?
Every year, in Georgia and across the country, people make honest mistakes on their tax returns. If the IRS makes you aware of an error, and you convince them that it was, in fact, not intentional, they may allow you to correct the error without penalty. However, if you intentionally omit an FBAR that you know you’re required to submit, you might wind up facing serious penalties and legal problems.
Depending on the total amount of your foreign holdings, you could face penalties of the higher amount up to $100,000 per violation or 50% of the total amount of holdings in your foreign accounts. In a worst-case scenario, you could face time in prison for willful FBAR violations. It is always best to seek guidance from a knowledgeable source rather than assume you are not required to report financial holdings, which may lead to an IRS investigation.