Estate FBAR Filing & the IRS
Estate FBAR Filing: The IRS Estate FBAR Filing rules are complicated. An inheritance may serve as the catalyst for offshore reporting of accounts, assets, investments and income to the Internal Revenue Service. Common forms include FBAR and Form 8938 (FATCA).
In a typical estate FBAR situation, a U.S. person passes away, and leaves an estate.
As part of the estate, the decedent has foreign bank accounts.
Now, when the estate files the estate tax return and/or the decedent’s final tax return, the may be required.
This can be a problem if there has been unreported foreign income or unreported foreign accounts in prior years. This is especially true, since the IRS takes and aggressive position on matters involving foreign accounts compliance. But, if a person is out of the compliance there are FBAR Amnesty and other amnesty programs — collectively referred to as offshore voluntary disclosure.
The Basics of Estate FBAR Filing, Reporting & Penalties
So what happens when a person passes away, and the personal representative or executor learns that individual has foreign accounts, but never filed the FBAR — and possibly other international informational reporting forms, such as
Estate FBAR Penalty Already Issued?
If the IRS has already issued penalties against the decedent, then generally the IRS can still come after the individual estate for payment.
In other words, the penalty does not fade away just because a person has moved on.
Rather, the Internal Revenue Service maintains the right to go after the underlying estate for any penalties due.
No FBAR Penalties Issued?
If no penalties have been issued yet, then that is a good thing.
It is important to take note that the Personal Representative/Executor should not prepare and submit current year returns along with FBAR, until he or she has done some due diligence, and can determine whether prior-year FBARs were required, and if so – were they filed.
No Prior Year FBAR Filed?
If no prior year FBARs were filed, but they were required to be filed because the decedent had met the threshold requirement for reporting, before filing the current year (aka filing forward), the estate should go back in remedy the prior year FBARs.
* We explain the different options a bit later in this article.
Just Start Filing Forward?
It’s tempting, right? Why not just start filing now, and hope the IRS is none the wiser. Here are three (3) reasons why:
FBAR Quiet Disclosure
Technically, if you just begin filing going forward for the estate/decedent with the knowledge that the estate was required to file in prior years, this could be considered a FBAR quiet disclosure – and may be considered criminal.
If you begin filing forward and the IRS catches you, you and the estate could face significant fines and penalties because the IRS would consider you “willful,” which could lead to penalties — upwards of 100% value of the account.
Personal Representative could be Liable
If the estate has penalties issued against it prior to the decedent passing away, the IRS has the right to come after the state for those penalties — as a creditor.
Moreover, if the personal representative distributes the money before the IRS (Creditor) can make a creditor’s claim for the money, then the personal representative may be personally liable (rule is not limited to just IRS creditor claims)
In addition, if the personal representative knowingly submits false tax returns by either intentionally omitting prior year amended returns with FBAR or just filing forward outside of one of the approved amnesty programs – the IRS can take the position that the rep has partaken in quasi-criminal behavior. This would be outside the duties of acting as a personal representative — and the IRS can come after the personal representative “personally.”
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced IRS 3520 Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.