U.S. citizens and residents and certain non-residents who have a financial interest in or signature authority over any “financial accounts” in a foreign country are required to make a separate filing if the aggregate value of these accounts exceeded $10,000 at any time during a calendar year.
There are two types of penalties applicable to FBARs –Non-Willful and Willful. It should be noted that the penalties can be assessed per account and not per FBAR. Additionally, the penalties are assessed for each year there is a violation. For example, if you have 5 accounts that have not been reported for 5 years, there could be 25 separate penalties assessed. A common misconception is that if each account is under $10,000, no filing is required and this may not necessarily be the case as you have to consider the total aggregate balance of all accounts. Additionally, filings are required even if the foreign account does not produce income.
It should be noted that there are no special rules for minors; therefore minors must also file FBARs.
While the penalties can be overwhelmingly high, there have been a host of Voluntary Disclosure Programs offered by the IRS that can potentially reduce or even eliminate the penalties noted above.
While FBAR reporting requirements have been in place since 1970, significant revisions to the form (in 2008) and associated penalties for non-compliance have garnered the attention of many taxpayers and practitioners over the last few years. This is a direct result of the Internal Revenue Service (IRS) determining that there is a significant amount of non-compliance in this area and they have therefore indicated that they will be stepping up enforcement of potentially considerable penalties related to non-filing.
Have a FBAR Concern?
Please contact a member of our International Tax team. Freed Maxick is poised to assist you in assessing your FBAR filing requirements, assimilating the necessary information and preparing your current and past due FBARs. We have helped many taxpayers navigate through the Offshore Voluntary Disclosure Program (OVDP) and Streamlined Filing Procedures Programs with no penalties.