New law moves up FBAR filing deadline

Under a new proposal recently signed into law by President Obama, the filing deadline for reporting foreign financial assets has been changed. Specifically, the law moved the filing deadline for these assets to April 15, bringing it in alignment with the general deadline for filing income tax returns. The law's changes will become effective beginning in the 2016 tax year. Previously, taxpayers were given a deadline of June 30th to report these foreign financial assets.

Who must file a FBAR?

Under the law, all United States taxpayers as well as non-citizens are required to file a Report of Foreign Bank and Financial Accounts (FBAR). A FBAR is required for every year that the person has signature authority or a financial interest in foreign financial assets with a combined value of at least $10,000. This rule applies even if, at year's end, the accounts are worth less than $10,000, as long as the $10,000 threshold was met or exceeded at some point during the year. Although the income from foreign accounts is also reported on the filer's tax return, a separate FBAR is required in addition to this.

Significant penalties for noncompliance

In addition to the new filing deadline, the IRS recently issued a memo regarding the penalties for failing to report foreign bank accounts and other foreign financial holdings. In the memo, the IRS expressed its intention to assess FBAR violation penalties on a more consistent basis.

If the FBAR violation was not willful, in general, the financial penalty is $10,000. However, the IRS deems every account not reported within a tax year to be a separate violation. As a result, if five separate accounts were not reported in a year, the violator can face up to a $50,000 fine.

However, the new guidance outlined in the IRS memo gives revenue agents some discretion in determining the amount of the FBAR penalties. Depending on the value of the foreign accounts and the conduct of the violator, revenue agents may assess a penalty of $10,000 per each year violated, regardless of the number of accounts not reported. If the circumstances warrant it, the fine can even be reduced to a single penalty of $10,000 for all the years the taxpayer was in violation.

For taxpayers that willfully avoid reporting foreign financial assets, the penalties are more severe. In such cases, the penalties can be as high as 50 percent of the highest balance for each year.

Seek legal advice if you own unreported foreign assets

If you have foreign accounts that you have not disclosed to the IRS, you may be able to avoid considerable penalties by participating in the voluntary compliance programs that are currently being offered by the IRS. Of course, you must voluntarily come forward to disclose these assets before the IRS finds the accounts in order to be eligible for this program.

If you fail to comply with FBAR and other foreign asset reporting requirements, you may face fines and penalties in addition to the ones described above, as well as the threat of imprisonment. In order to ensure that your best interests are protected, it is important to contact the Tax Litigation Law Office of Scott Kauffman. With decades of experience helping others in your situation, attorney Scott Kauffman can listen to your circumstances and work to negotiate a fair settlement, minimizing any penalties or negative repercussions that you may have otherwise faced.