FBAR Filing & the IRS

FBAR Filing & the IRS

What is FBAR Filing?

FBAR Filing: The FBAR Filing rules are complex. The IRS requires U.S. owners of foreign accounts (bank and financial accounts) to report the annual balances on the FBAR, when the threshold requirements are met. This is especially important in light of the Internal Revenue Service’s enforcement priority for matters involving foreign accounts compliance.

The FBAR is also referred to as FinCEN Form 114. The due date is the same as the filing of the tax return, and is currently on automatic extension. The failure to file the FBAR (or filing it late or incomplete) may result in FBAR Penalties. These penalties may be abated or avoided with FBAR amnesty and other amnesty programs, referred to collectively as offshore voluntary disclosure.

FBAR Filing Basics Explained

FBAR filing is the U.S. Government’s requirement to disclose their account information on an annual “Report of Foreign Bank and Financial Account form” with the Department of Treasury (FinCEN). Technically, the FBAR is the FinCEN Form 114.In order to avoid IRS Penalties, the FBAR must be filed timely and completely. Not all U.S. owners of foreign accounts file the FBAR. Rather, the FBAR is filed when a person meets the threshold filing requirements for reporting foreign bank (and financial accounts). It is filed each year in which the FBAR threshold requirement is met.

Who Needs to File the Annual FBAR (FinCEN 114)

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 U.S. person (individual) 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 U.S. person, then you move onto step two.

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.

What Types of Accounts are Included on the FBAR?

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

IRS Penalties for Late Filing the FBAR

The IRS may issue either non-willful or willful FBAR violations.

Penalties Can be Reduced, Avoided or Abated

It is important to keep in mind that oftentimes, an individual can submit to one of the amnesty/offshore voluntary disclosure programs, and safely bring themselves into compliance without much issue.

Don’t Try to Sneak Around IRS Disclosure Laws

Instead of taking steps to legally get into compliance, some individuals will try to secretly submit their information to the IRS while making the least amount of noise – hence the name “quiet disclosure.” A quiet disclosure occurs when a person knowingly retroactively files past FBAR without properly alerting the government authorities. In this particular area of law, the proper authorities are FinCEN and the IRS.

While we understand there is an inherent fear factor in submitting past FBARs through approved procedures and dealing with potential IRS fines and penalties, if you just start filing timely FBARs going forward — that is also considered a quiet disclosure.

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 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 Offshore 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.