Delinquent FBAR (IRS Penalty for Untimely Foreign Account Filing)
Delinquent FBAR Filing is a complicated issue. The main reason is because once a person has failed to timely file an FBAR, they are considered out-of-compliance with the IRS. Typically Delinquent FBAR Filing includes:
- Late FBAR Filing
- FBAR Penalties
- FBAR Statute of Limitations
One of the scariest aspects of Delinquent FBAR Filing are the penalties associated with it.
More recently, the IRS has started to issue extremely high fines and penalties against individuals who is out of compliance. With that said, it is important to note that there are mechanisms in individual can use to get back into compliance. And, based on the specific facts and circumstances of a person situation they may qualify for a penalty waiver and/or a reduced penalty.
FBAR Filing is Not New
Oftentimes, inexperienced attorneys and CPAs will tell their clients that the FBAR reporting requirement (aka foreign account disclosure) is new – that is incorrect. While FATCA (Foreign Account Tax Compliance Act) is a relatively new law that was drafted back 2010, with enforcement beginning in 2014 — the FBAR has been around for several years, dating back to the 1970s.
FBAR Deadline Date Has Changed
Starting in 2017, in order to report 2016 maximum balances, the due date for filing the annual (it must be filed each year) FBAR statement has changed. It used to be that the due date was June 30, with no extensions. But, as of 2017 the due date is now at the time that the tax return is due (April).
Moreover, if a person is on extension for the regular tax return than their FBAR filing requirement is on extension as well. Therefore, if the due date for you to file your tax return was pushed forward to October, then you should have that amount of time to file your FBAR as well.
Prior Year FBAR Filing
Once a person realizes that they have an FBAR filing requirement, and that they’ve been out of compliance sometimes for many years, there are a few common reactions. Usually (and understandably so) a person get sscared, they start calling around to different attorneys and CPA — and usually act hastily.
It is important to note, that you cannot just go back and file past FBAR (unless you qualify for a very specific delinquency procedure in which there was no unreported foreign income). Otherwise, in order to go back and submit prior year FBAR statements, it should be done through either:
- Streamlined Filing Compliance Procedures
- Reasonable Cause Statement
Failing to properly follow IRS procedures may result in an unintentional Quiet Disclosure – which could lead to much bigger headaches down the line.
FBAR Amnesty Options
When a person is out of compliance for not filing FBARs, oftentimes they are out of compliance for other issues as well. Common issues include:
- Unreported Foreign Income
- Unreported Foreign Assets
- Unreported Foreign Investments
- Undisclosed Interest In Foreign Trust
- Undisclosed Interest In Foreign Corporation
- Undisclosed Interest In Foreign Partnership
- Unreported Foreign Gifts
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.