New April 15th FBAR Deadline Makes it Easier for the IRS to Find You
As tax year 2016 comes to an end, it is important to take note that the time to file the FBAR (aka FinCEN 114) Report of Foreign Bank and Financial Account has changed.
In prior years, the FBAR was due on June 30th. This was a hard and fast rule; if you missed the filing deadline, you were immediately out of compliance — there was no mechanism to obtain an extension.
That Doesn’t Seem Fair
We agree. In fact, pretty much everyone agreed — including the U.S. government. That is why starting in 2017, the FBAR is now due at the time you file your tax return (although it is filed separately — electronically with the Department of Treasury). Therefore, when file your 2016 tax return (no later than April, 2017) you will also be required to file your FBAR by that date as well.
There is an understanding that if you apply for an extension to file a tax return, you should also be able to file an extension for your FBAR. With that said, because this is the first year the new date is being implemented, we would recommend erring on the side of caution, and making sure you file your FBAR no later than April 15th.
The New Due Date Increases the Risk of Getting Caught
Now that the FBAR and tax returns are required to be filed at the same time, the U.S. government will also be able to more easily glean both sets of forms to determine whether a person is in compliance.
Example: Before the introduction of the new rules, a person could have literally filed their FBAR on February 3rd and their tax return on October 12th; this made it harder for the IRS and DOT to track and reconcile the two sets of forms to determine if a person was in full compliance.
But now, with the U.S. government requiring both the FBAR and Tax Return (which includes FATCA Form 8938 if you meet the threshold requirement) to be filed at the same time, it overall makes it much easier for the IRS to review both sets of documents to determine whether a person is in compliance or not.
*Beyond just FATCA Form 8938, depending on the information contained in the FBAR, it will be easier for the IRS to determine if the applicant should have filed additional other reporting forms, such as a 3520, 3520-A, 5471, 8621, 8865, etc.
The Risk is Heightened if you Received a FATCA Letter…
In addition, whether people like it or not at the current time FATCA (Foreign Account Tax Compliance Act) is the law. Under this law, more than 100 countries and tens of thousands of Foreign Financial Institutions are proactively reporting U.S. account holder information to the IRS.
In addition, many of these banks are issuing very stern warnings to their customers, letting them know that unless they certify their status to the bank of their compliance with FATCA, the bank will no longer continue working with them. Moreover, we have represented numerous clients who received FATCA Letters wherein the foreign financial institution simply refuses to work with them any longer, solely because they are a U.S. Account Holder – even if they certify (specifically in the Cayman Islands and Switzerland).
As such, with so many different foreign financial institutions agreeing to, and proactively reporting to the U.S. government, compounded by the fact that the IRS has brought more clarity to the reporting of foreign accounts by synchronizing the due dates, it is very important that you remain in compliance.
Golding & Golding, A PLC
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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.
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