It’s that time of year again for a reminder blog about FBAR, Form 114, Report of Foreign Bank and Financial Accounts filing requirements. The filing deadline is June 30 and there are no extensions.
Inheriting a savings account at a foreign bank or earning decent returns in a foreign investment account could mean you need to file. Answer this question to determine generally whether you need to file. Do you have an interest or signature authority over foreign financial accounts that taken together were valued at more than $10,000 at any time during 2014?
If you answered yes to this question, then you likely need to file an FBAR even if the account had no taxable income and you took no withdrawals.
You cannot file an FBAR with your regular tax return. Access the FBAR form through the BSA E-filing System. The form is electronically filed with the Financial Crimes Enforcement Network (FinCEN) rather than the Internal Revenue Service.
Last year, U.S. taxpayers filed more than one million FBARs. FinCEN reports that the numbers have steadily increased from the 280,000 filed in 2005.
Part of the reason for the increased number of filing is that the failure to timely file can result in steep civil penalties. When the failure to file is non-willful the penalty can reach up to $10,000 for each omission. Willful omissions can result in penalties up to 50 percent of the account balance capped at $100,000. Criminal charges could also be filed if evidence supports that the omission was willful.
When questions come up about the proper disclosure of a foreign account, consult an experienced tax attorney. Programs exist that may help bring you into compliance.
Source: Forbes, “IRS Issues Reminder AS Taxpayers Near Deadline To Report Foreign Accounts, Assets,” Kelly Phillips Erb, June 16, 2016