Who Must File an FBAR
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (fincen) 114, Report of Foreign Bank and Financial Account (FBAR).
United States persons are required to file an FBAR if:
1) The United States person has a financial interest in or signature authority over at least one financial account located outside of the United States, and (2) the aggregate value of the account exceeds $10,000 at any time during the calendar year period. The annual date for filing your FBAR is April 15. There is a maximum six month extension of filing the deadline. The extension is automatic and does not need to be requested.
How to File an FBAR Application
If you have foreign accounts to report, or have signature authority over an offshore account, you must complete and file the FBAR online. Since July 1, 2013, the IRS has mandated all foreign account holders to report their overseas personal and business asset information electronically via FinCEN’s BSA E-Filing System. As per FBAR filing requirements, the deadline for taxpayers to submit foreign account information is April 15. This deadline applies if you are reporting accounts for the previous calendar year.
It's important to note that FBAR filing is separate from individual tax return filing. As such, tax extension deadlines and the usual forms that taxpayers submit to extend their return submissions do not apply to the FBAR. However, thanks to the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 being passed, taxpayers are allowed a maximum six-month FBAR extension period to file their foreign account information. FinCEN now grants taxpayers who fail to meet the annual April 15 FBAR reporting deadline an automatic extension to send their submissions until October 15 of the same year.
Filing Delinquent FBAR’s
The IRS has expanded the FBAR Streamlined Procedures program that allows taxpayers to resolve delinquent or inaccurate FBAR filings. To be eligible for this program, the taxpayer must (1) owe tax, (2) be an individual or an estate of an individual (corporations, partnerships, and LLC’s are not allowed), (3) be willing to file amended returns for the last three years, (4) certify that the failure to comply was not willful, and (5) not be under audit.
What Happens When A Taxpayer Applies to the Streamlined Process
Deciding whether to apply to the streamlined process is a complex and nuanced undertaking, and it should not be done without the expert advice of experienced legal counsel. When a taxpayer applies to the streamlined program, the IRS will assign an agent to the case to determine whether the failure to comply with the current law was willful or nonwillful.
It is imperative that taxpayers understand that what the IRS considers willful conduct is a very low bar. Each case is unique, but in most cases, the IRS will find that that a failure to file FBARs was the result of willful conduct. That is, the taxpayer either knew or should have known about the filing requirements. Oftentimes, if the taxpayer has checked “no” on Schedule B of their 1040, the IRS will determine that there is willful conduct, and the taxpayer will be rejected from the Streamlined Process. If a taxpayer is rejected from the streamlined process then they can be subject to a maximum penalty of (1) $100,000, or (2) 50% of the balance in the account at the time of the violation, for each violation.
Once a taxpayer is rejected from the Streamlined Procedures the IRS will automatically begin a civil audit of the taxpayer, and if the IRS determines the taxpayer’s conduct was egregious enough, there could be criminal consequences as well.
Determining whether a taxpayer should apply for the Streamlined Procedures is a complex undertaking requiring considerable effort. It is imperative that taxpayers seek expert legal advice to protect themselves, their families, their assets, and their futures.
If a taxpayer has already applied for the Streamlined Procedures program, been rejected, and is now being audited by the IRS or is considering appealing an IRS determination then it is equally as important to have a legal professional review their case to obtain the best possible outcome and protect themselves from criminal liability.
I have chosen to focus my law practice on Federal Criminal and Civil Tax Defense and White Collar Crimes. Over the last 38 years, I have earned a successful track record working with both the IRS and the Department of Justice in high stakes white collar criminal and tax matters and have argued before the United States Supreme Court as well as other federal courts throughout the country. I fight hard to enforce the rights of my clients, and I believe in the integrity of that fight.
If you have questions or concerns about the IRS Streamlined Procedures , tax shelters, undisclosed accounts, or other IRS issues, I invite you to contact me directly to discuss them at (718) 865-3470 or Mullin@taxdefense.com. You will discuss your concerns with me personally—never an associate or paralegal. In addition, you should know that your contact with me, and with my firm, is privileged under the law, regardless of whether or not you decide to retain my firm to represent you.