FBAR Reporting 101
FBAR Reporting is a requirement for many US Taxpayers across the globe (whether or not they are also required to file US Tax Return) when they meet the threshold requirements for disclosing their overseas accounts, assets, investments, and income to the IRS and FinCEN. Oftentimes, Taxpayers will only learn of the FBAR form filing requirements after they have been out of compliance for several years — but that is not always the case. Sometimes a Taxpayer will become aware of the FBAR (Foreign Bank and Financial Account Reporting aka FinCEN Form 114) before they have missed any prior year requirements. This is crucial, because once a Taxpayer realizes they missed the reporting requirements in a prior year — they have to be careful filing in the current year in order to avoid making a Quiet Disclosure. Let’s take a brief look at the difference between having your FBAR due for the first time in the current year as compared to this year being the first year you are going to file — but you were also required to file in prior years but did not do so.
First Time Due Example
Richard is a US citizen who expanded his business operations overseas last year. In order to transact with different vendors and to do so in local currency, Richard opened multiple bank accounts in different countries. Last year was the first year that Richard had any foreign bank accounts. Therefore, this year will be the first-time Richard is required to report his foreign bank and financial accounts. As long as Richard begins filing the form timely, he should have no problems going forward.
First Time Filer Example
Devon is a Lawful Permanent Resident who has multiple foreign accounts in different countries. Devon has not opened any new accounts since coming to the United States. Devon always thought he was filing his tax returns properly — and since his foreign bank and investment accounts pre-dated him coming to the United States, he was unaware of the requirements to still report them to the US government. As Devon considers becoming a US Citizen, he dives deeper into the tax requirements and learns for the first time that he should have been filing the FBAR. This would be the first time that Devon is filing an FBAR – but not the first time he was required to file the FBAR. If Devon just files in the current year going forward and does not first resolve the prior year issues, or submits FBAR and other missed international reporting forms without going through the proper channels such as FBAR Amnesty or Reasonable Cause, then he may violate the FBAR disclosure rules, which could result in significant fines and penalties. Thus for Devon, he should consider the different FBAR Amnesty Programs before filing the FBAR.
The US government has developed several amnesty programs to assist Taxpayers who have undisclosed international reporting forms, such as the FBAR, FATCA Form 8938, Form 3520, and Form 5471. Taxpayers should consult with a Board-Certified Tax Law Specialist who specializes exclusively in offshore disclosure to get an understanding of what their requirements are and what their options are going forward.
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