- 1 Reporting FBAR Transfers Between Accounts
- 2 FBAR Transfers Between Accounts
- 3 FATCA Mismatch
- 4 Late Filing Penalties May be Reduced or Avoided
- 5 Current Year vs Prior Year Non-Compliance
- 6 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 7 Need Help Finding an Experienced Offshore Tax Attorney?
- 8 Golding & Golding: About Our International Tax Law Firm
Reporting FBAR Transfers Between Accounts
The FBAR Is used to report foreign bank and financial accounts to The Financial Crimes Enforcement Network, otherwise known as FinCEN (technically, the FBAR is FinCEN Form 114). The FBAR form requires taxpayers to disclose the maximum value of each account on the form. When Taxpayers have several accounts, sometimes they may have to create a supplemental sheet to keep in their records in case they are audited by the Internal Revenue Service (even though the FBAR is a FinCEN form, compliance has been enforced by the Internal Revenue Service since 2003). It is very common for taxpayers to transfer money from one account to the next, during the same year. Some common reasons include:
A foreign financial institution is offering better interest rates,
The taxpayer moves the money from one type of account such as a bank account into an investment account or vice versa,
The taxpayer has one or multiple short-term certificates of deposit or fixed deposits that roll over each year, or
The taxpayer closes one account and then opens another.
The question then becomes, how does the taxpayer report for FBAR?
FBAR Transfers Between Accounts
It is important to note, that the purpose of the FBAR is not to disclose the maximum amount of money that the person has each year. Rather, the purpose of the FBAR form is for the Taxpayer to disclose the maximum value for each account that the taxpayer has. Thus, it is quite common for taxpayers to double-count money that may have been transferred from one account to the next. Taxpayers are still required to identify the maximum account value for each account. In other words, Taxpayers should not artificially reduce the value of their account that they are reporting on the FBAR, simply because there was a transfer(s).
If the Taxpayer artificially reduces the account balances to account for transfers, it could lead to inaccurate FBAR reporting. And, if the Foreign Financial Institution reports the taxpayer in accordance with FATCA (Foreign Account Tax Compliance Act), it could make an audit much more complicated as it could appear that the taxpayer has underreported the value of their accounts.
Late Filing Penalties May be Reduced or Avoided
For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.