- 1 Automatic Extension of the FinCEN 114 FBAR
- 2 10 Steps to Filing an FBAR (FinCEN 114)
- 3 What is the FBAR?
- 4 Important FBAR Definitions
- 5 How to File The Form
- 6 Step 1 – Are you a U.S. Person?
- 7 Step 2 – Do You Meet the Threshold Requirements?
- 8 Step 3 – Identify What is an Account
- 9 Step 4 – How Many Accounts Do You Have?
- 10 Step 5 – What is Your relationship to the Account?
- 11 Step 6 – Categorize the Different Accounts
- 12 Step 7 – Determine the Maximum Balance
- 13 Step 8 – Use the Exchange Rate
- 14 Step 9 – Complete the FBAR
- 15 Step 10 – Filing a Late FBAR(s)
- 16 We Specialize in IRS Voluntary Disclosure
- 17 No Case is Too Big; No Case is Too Small.
- 18 Who Decides to Enter IRS Voluntary Disclosure
- 19 What Should You Do?
- 20 When Do I Need to Use Voluntary Disclosure?
- 21 Common Un-filed IRS International Tax Forms
- 22 Golding & Golding – Offshore Disclosure
- 23 The Devil is in the Details…
- 24 What if You Never Report the Money?
Offshore Disclosure Attorney – International Tax Lawyer, Sean M. Golding (Board-Certified Tax Law Specialist) FBAR Filing Deadline 2017 – FinCEN Extended Deadline for 2017 FBAR (Golding & Golding)
FBAR Filing Deadline 2017 – FinCEN Extended Deadline for 2017 FBAR
Depending on what articles you read, you either missed the June 30th FBAR Deadline or the April 17, 2018 Deadlines – neither of these are correct.
Automatic Extension of the FinCEN 114 FBAR
Recently, in February of 2018, FinCEN issued a notice that the FBAR is on Automatic Extension.
What does that mean to you:
- You have until October 2018 to file your 2017 FBAR.
- You do not have to file any form to obtain the extension.
The key language is as follows: “To implement the statute with minimal burden, FinCEN will grant filers failing to meet the FBAR annual due date of April 15 an automatic extension to October 15 each year….Filers who fail to file their 2017 calendar year FBAR by April 17, 2018, have an automatic extension up to October 15, 2018
10 Steps to Filing an FBAR (FinCEN 114)
This summary designed to assist you in filing the FBAR (otherwise known as the FinCEN Form 114 or TD 90.22-1).
While the Form is not necessarily difficult to file, there are numerous pitfalls to consider before filing.
When you file an FBAR directly, you are making a proactive representation to the IRS, and as International Tax Attorneys we do not recommend making a proactive representation to the IRS unless you have counsel.
Nevertheless, as entrepreneurs ourselves, we understand that many “Do It Yourselfers” will want to tackle this form without counsel. To that end, we have prepared our own set of basic instructions.
While they not account for all potential issues you may face, they may help you understand factors to considers, and steps to take in filing the Form.
What is the FBAR?
FBAR is the Report of Foreign bank and Financial Account form. It is one of the most common IRS international tax forms, because it has a relatively low threshold requirement, and is a very broad form, encompassing many different types of foreign accounts.
Important FBAR Definitions
Outside of the United States. No same-country exception for reporting.
Account includes much more than just “Bank Accounts.” See below for an expanded summary.
Means the filing of the FBAR form, online on the FinCEN website.
Report of Foreign Bank and Financial Account Form.
TD stands for Treasury Department and is another way to identify the form.
FinCEN Form 114
FinCEN is a financial crimes enforcement network. FinCEN created the form initially back in the 1970s, but now the IRS enforces penalties.
The Bank Secrecy Act
How to File The Form
While we always recommend using a tax professional when submitting forms to the IRS, we understand many of you want to do it yourself. This guide is intended to provide you the basics of reporting. It is not intended for you to rely (or your tax professional) in actually filing the form. The summary is basic, and there are many other factors that may impact your specific filing, especially if it is a late filing.
Step 1 – Are you a U.S. Person?
The form must be filed by U.S. persons. In order to confuse you, the IRS does not define US person to mean the same as U.S. Citizen. A US person typically falls into three categories: U.S. Citizen, Legal Permanent Resident, Foreign National who meets the IRS Substantial Presence Test (typically individuals on H-1B Visa, L-1 Visas, and E-2 Visas – although it is not a requirement to have one of these Visas).
If you are a US person, then you move on to step two.
Step 2 – Do You Meet the Threshold Requirements?
The threshold requirements are relatively simple. On any day of the year, if you aggregated (totaled) the maximum balances of all of your foreign accounts, does that total amount exceed 10,000? If it does, then you have to file the form. The most important thing to remember is you do not need to have more than $10,000 in each account; rather, it is an annual aggregate total of the maximum balances of all the accounts.
Step 3 – Identify What is an Account
This is one of the more difficult parts of the job. That is because when a person thinks of financial accounts, they typically think of a “Bank Account.” It makes sense, since the word “Bank” is included directly in the FBAR definition. Therefore, many people (understandably so) will only focus just on bank accounts. Unfortunately, you have to include all financial accounts unless it is otherwise excluded (and there are only a few exclusions).
Some examples of other accounts include:
- Stock accounts that have an Account Number
- Private Pension Accounts
- Investment Accounts
- Foreign Mutual Funds and ETF Accounts
- Foreign Life Insurance that has a Surrender Value
Step 4 – How Many Accounts Do You Have?
This is an important question, because if you have more than 25 accounts then you do not have to list all of the accounts on the actual form. Rather, you maintain your own records so that the IRS contacts you on a future date, you will have that information available.
Like most people, if you have less than 25 accounts then you would report all the accounts on the FBAR. It does not matter if your account has a zero balance, and it does not matter if the account was “dormant.” If the account is open and you are listed on the account, you have to report it.
Step 5 – What is Your relationship to the Account?
There are different sections of the FBAR. The sections are broken down into three main categories, which include ownership of the Account, co-ownership or joint ownership of the account, and signature authority and/or no monetary interest in the account.
The latter category typically includes people who may have been included on the account in emergency when a parent or elderly individual is getting on age. Also, if you are an employee and you have signature authority, that is included as well.
Step 6 – Categorize the Different Accounts
It is important that you prepare separate categories to identify each different type of account. That is to make sure that, for example, you do not report an account you have signature authority in this section that is labeled account ownership, because then the IRS and U.S. government will believe that the money listed is your own money — as opposed to money for which you may have no ownership over.
Step 7 – Determine the Maximum Balance
You are not required to search for the holy Grail of maximum balances. In other words, you should do the best you can. If you have bank statements for each month, then you would use each month statement to determine what the maximum value is. Likewise, if you have a passport account passbook account and you only get it updated when you enter the bank, then you will have to use the best value you can.
Thereafter, make sure you have identified the maximum balance available for each account.
Step 8 – Use the Exchange Rate
You are not required to use any specific exchange rate, but it has to be reasonable. Both the Department of Treasury and the IRS each publish their own annual exchange rates and feasibly, either exchange-rate would be okay to use.
It is important to make sure that you use the respective exchange rate for the year at issue. Sorry for those of you with euros, rupees or rubles who want to use current exchange rates for prior years.
If you are submitting to one of the offshore disclosure programs or a reasonable cause statement and have to go back six years, then you will have to use the rate that was available six years ago and not today’s rate for filing prior forms.
Step 9 – Complete the FBAR
The FBAR is a relatively simple from a preparation standpoint. In other words, for each account, you will identify the name of the institution, the address and the maximum balance. There’s not much more needed beyond this information.
If you are unable to access the maximum balance or even come up with your best estimate, you can mark off maximum balance unknown for each account of which this is applicable.
Keeping in mind, that the more you marked off “maximum balance unknown” the higher the chance that the FBAR might be further scrutinized. If you are in this type of situation, please be sure to speak with an experienced Offshore Disclosure Lawyer first.
Step 10 – Filing a Late FBAR(s)
At our International Tax Law Firm (Golding & Golding), offshore disclosure is all we do, and this includes Late FBAR Filings, and FATCA Compliance.
Filing a late FBAR outside of the offshore disclosure programs is typically considered a Quiet Disclosure and can land you in some real trouble. If you happen to have zero unreported income (that means zero unreported income from abroad and not zero tax liability) you may be able to qualify for the delinquency procedures, which results in a penalty waiver and a relatively simple submission procedure.
If you have any unreported income, you can still make a reasonable cause submission but it is different. Most individuals prefer to enter one of the approved programs such as streamlined filing compliance procedures or traditional OVDP — you may have multiple options available to you.
Depending on which program you qualify for, and/or which program you prefer to enter, you may qualify for reduced penalty for even a penalty waiver.
We do not recommend making any submission to the Internal Revenue Service regarding any foreign or offshore accounts without at least speaking with an experienced offshore disclosure lawyer first to evaluate and assess your facts.
We Specialize in IRS Voluntary Disclosure
We have successfully handled a diverse range of IRS Voluntary Disclosure cases. Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.
Unlike other attorneys who call themselves specialists but handle 10 different areas of tax law, purchase multiple domain names, and even practice outside of tax, we are absolutely dedicated to IRS Voluntary Disclosure.
No Case is Too Big; No Case is Too Small.
We represent all different types of clients. High net-worth investors (over $40 million), smaller cases ($50,000) and everything in-between.
We represent clients in over 60 countries and nationwide, with all different types of assets, including (each link takes you to a Golding & Golding free summary):
- Foreign Mutual Funds
- Foreign Life Insurance
- Fixing Quiet Disclosure
- Foreign Real Estate Income
- Foreign Real Estate Sales
- Foreign Earned Income Exclusion
- Subpart F Income
- Foreign Inheritance
- Foreign Pension
- Form 3520
- Form 5471
- Form 8621
- Form 8865
- Form 8938 (FATCA)
Who Decides to Enter IRS Voluntary Disclosure
All different types of people submit to IRS Voluntary Disclosure. We represent Attorneys, CPAs, Doctors, Investors, Engineers, Business Owners, Entrepreneurs, Professors, Athletes, Actors, Entry-Level staff, Students, and more.
You are not alone, and you are not the only one to find himself or herself in this situation.
…We even represent IRS Staff with getting into compliance.
Sean M. Golding, Board-Certified Tax Law Specialist
Our Managing Partner, Sean M. Golding, Board-Certified Tax Law Specialist is the only Attorney nationwide who has earned the Certified Tax Law Specialist credential and specializes in IRS Offshore Voluntary Disclosure and closely related matters.
He is frequently called upon to lecture and write on issues involving IRS Voluntary Disclosure.
Less than 1% of Tax Attorneys Nationwide
Out of more than 200,000 practicing attorneys in California, less than 400 attorneys have achieved this Certified Tax Law Specialist designation.
The exam is widely regarded as one of (if not) the hardest tax exam given in the United States for practicing Attorneys. It is a designation earned by less than 1% of attorneys.
Our International Tax Lawyers represent hundreds of taxpayers annually in over 60 countries.
What Should You Do?
Everyone makes mistakes. If at some point you discover that you should have been reporting your foreign income, accounts, assets or investments, the prudent and least costly (but most effective) method for getting compliance is through one of the approved IRS offshore voluntary disclosure programs.
When Do I Need to Use Voluntary Disclosure?
Voluntary Disclosure is for individuals, estates, and businesses who are out of compliance with the IRS and the Department of Treasury. What does that mean? It means that for one or more years, you were required to file a U.S. tax return, FBAR or other International Informational Return and you did not do so timely, then you are out of compliance.
Common Un-filed IRS International Tax Forms
Common un-filed international tax forms, include:
- 1040 (Tax Returns)
- Schedule B (Ownership or Signature Authority over Foreign Accounts)
- FBAR (FinCEN 114)
- FATCA (Form 8938)
- Form 3520 (Gift from Foreign Person)
- Form 5471 (Foreign Corporations)
- Form 8621 (Foreign Investments, aka PFIC)
- Form 8865 (Foreign Partnership)
If the IRS discovers that you are out of compliance, you may become subject to extensive fines and penalties – ranging from a warning letter all the way up to tax liens, tax levies, seizures, and criminal investigations. To combat this, you can take the proactive approach and submit to IRS Offshore Voluntary Disclosure.
Golding & Golding – Offshore Disclosure
At Golding & Golding, we limit our entire practice to offshore disclosure (IRS Voluntary Disclosure of Foreign and U.S. Assets). The term offshore disclosure is a bit of a misnomer, because the term “offshore” generally connotes visions of hiding money in secret places such as the Cayman Islands, Bahamas, Malta, or any other well-known tax haven jurisdiction – but that is not the case.
In fact, any money that is outside of the United States is considered to be offshore; the term offshore is not a bad word. In other words, merely because a person has money offshore (a.k.a. overseas or in a foreign country) does not mean that money is the result of ill-gotten gains or that the money is being “hidden.”
It just means it is not in the United States. Many of our clients have assets and bank accounts in their homeland countries and these are considered offshore assets and offshore bank accounts.
The Devil is in the Details…
If you do have money offshore, then it is very important to ensure that the money has been properly reported to the U.S. government. In addition, it is also very important to ensure that if you are earning any foreign income from that offshore money, that the earnings are being reported on your U.S. tax return.
It does not matter whether your money is in a country that does not tax a particular category of income (for example, many Asian countries do not tax passive income). It also does not matter if you are a dual citizen and/or if that money has already been taxed in the foreign country.
Rather, the default position is that if you are required to file a U.S. tax return and you meet the minimum threshold requirements for filing a U.S. tax return, then you have to include all of your foreign income. If you already paid foreign tax on the income, you may qualify for a Foreign Tax Credit. In addition, if the income is earned income – as opposed to passive income – and you meet either the Bona-Fide Resident Test or Physical-Presence Test, then you may qualify for an exclusion of that income; nevertheless, the money must be included on your tax return.
What if You Never Report the Money?
If you are in the unfortunate position of having foreign money or specified foreign assets that should have been reported to the U.S. government, but which you have not reported — then you are in a bit of a predicament, which you will need to resolve before it is too late.
As we have indicated numerous times on our website, there are very unscrupulous CPAs, Attorneys, Accountants, and Tax Representatives who would like nothing more than to get you to part with all of your money by scaring you into believing you are automatically going to be arrested, jailed, or deported because you have unreported money. While that is most likely not the case (depending on the facts and circumstances of your specific situation), you may be subject to extremely high fines and penalties.
Moreover, if you knowingly or willfully hid your foreign accounts, foreign money, and offshore assets overseas, then you may become subject to even higher fines and penalties…as well as a criminal investigation by the special agents of the IRS and/or DOJ (Department of Justice).
Contact us Today; Let us Help.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.