FBAR Frequently Asked Questions
Questions about reporting requirements for your offshore bank account or how to avoid criminal prosecution or an FBAR penalty? Below are some of the most common questions our Orange County FBAR lawyers receive.
How Do I Determine I Am Required to File an FBAR?
A U.S. taxpayer is required to file an FBAR if they have foreign financial accounts with an aggregate max value of $10,000 or more. A taxpayer is required to aggregate the foreign account values of those they own a direct interest in or which they have signatory authority over.
Accounts over which you hold signatory authority include those accounts held through foreign businesses that you as the taxpayer have signature authority on behalf of.
If your foreign account is denominated in foreign currency, you will have to convert the value of that offshore account into the U.S. dollar to determine its account value is in excess of $10,000 at any point time in the year.
What Is the Due Date for Filing an FBAR?
The general due date for an FBAR is April 15th of the year following the applicable tax year. However, an automatic extension is granted to file your FBAR by October 15th of the year following the applicable tax year. If you miss the filing date, speak with a skilled Orange County FBAR lawyer about your delinquent FBAR as soon as possible.
How Do I Report My Account Held in Foreign Currency?
If your offshore account is reported in foreign currency, it will have to be converted into the United States dollar to determine, if, in aggregate with your other foreign financial accounts, their max value throughout the year was in excess of $10,000 at any time throughout the year.
You can find the applicable rates of exchange on the United States Treasury Bureau of Fiscal Services site here.
What if I Can’t Determine the Max Value of My Foreign Account in the Year?
There is an option to report the accounts you cannot find the max value for as unknown on the FBAR. If you have multiple accounts that you do not know the max value of, and you believe your aggregate account values were in excess of $10,000 you should file an FBAR to protect yourself from the imposition of potential civil penalties for the failure to properly such accounts.
A word for the wise when determining your max account value for the year. If your annual account statement does not provide a specified max value, you will have to find this on your own. You will have to look through your monthly bank statements and determine the max value through your search of such statements.
Can I File My FBAR Electronically?
Yes. Your FBAR can be filed electronically with the U.S. Treasury. You can file your FBAR electronically here, with the BSA E-filing System, Financial Crimes Enforcement Network.
What Do I Do if I Failed to Properly Report My Accounts in Prior Years?
If you failed to properly report your accounts in prior years or the current year, you have options to file delinquent or prior years FBARs through various disclosure programs. There are various options for you as outlined below—
- IRS Voluntary Disclosure Practice: This program is made for persons who may have willfully not properly reported their foreign income and other foreign assets to the IRS. This program provides taxpayers with certain protections to avoid criminal prosecution for disclosures made. At a minimum, the taxpayer will have to report the prior six years of FBARs.
- Streamline Filing Compliance Procedures: The streamline disclosure program is made for taxpayers who non willfully reported foreign income and other foreign assets. This program provides taxpayers civil protections against the improper reporting of foreign income and assets for prior years. At a minimum, a taxpayer will have to prepare and file the prior six years of FBARs.
- Delinquent FBAR Submission Program: This program allows taxpayers to prepare and file delinquent FBARs. Your delinquent or non-filed FBARs will need to be prepared along with a statement explaining why you are filing the FBAR late and submit them electronically with the BSA E-filing System, Financial Crimes Enforcement Network.
Do I Have to Report Foreign Accounts With Joint Owners?
Yes. Foreign accounts that you jointly own with another person or entity must be reported on your FBAR. Specific details about the joint owner will have to additionally reported. This will include the joint owner’s name, address, SSN/ITIN/EIN, etc.
Additionally, it is possible to report FBARs jointly. However, this is only allowed in limited situations. Generally, if you are jointly reporting and FBAR with your spouse, the reciprocal joint owner will also have to reciprocally report you on their annual FBAR filing.
Do I Have to Report the Accounts I Hold Through a Foreign Business?
This depends. If you have signatory authority over the foreign financial accounts you own through a business, then you must report such accounts on your FBAR. Generally, this will be required of an officer, director, or treasurer of a U.S. business with foreign accounts.
What Do I Have to Report About My Foreign Accounts on an FBAR?
An FBAR requires specific details about the foreign accounts you have a direct financial interest in or have signatory authority over. Specific details include the account number, name of the applicable bank or foreign financial institution, the address of the foreign bank, and the max value of the account. If the account is denominated in a foreign currency, the max value of the account will have to be converted into the United States dollar to be properly reported on your FBAR filing.
Do I Owe Penalties for Failing to Report Foreign Accounts on an FBAR?
Yes. There are both civil and criminal penalties applicable to the improper and non-filings filing of FBARs.
The criminal penalties include:
- Willful Failure to File an FBAR. Up to $250,000 or 5 years in jail or both.
- Willful Failure to File an FBAR while violating another “law of the United States” or as part of a pattern of any illegal activity involving more than $1000k in a 12 month period. Up to $500k or 10 years in jail or both.
On top of the fines and jail time, the willful failure to file an FBAR is a felony which can result in collateral consequences such as:
- The loss of the right to vote;
- Revocation of professional licenses such as those for CPAs, attorneys, and doctors;
- The loss of the right to bear arms;
- Loss of employment; and
- Deportation of a green card holder AFTER jail time has been served.
In addition to criminal penalties, there are onerous civil penalties for failing to report a foreign financial account on an FBAR. There is a three-tier system for these civil FBAR penalties. For willful violations occurring after October 22, 2004, the maximum civil penalty is the greater of $100,000, or 50 percent of the balance of the account at the time of the violation.
The IRS issued guidelines stating that the maximum amount of the civil FBAR penalty it would seek to enforce would be no more than 100% of the highest balance in the offshore bank accounts. The guidelines indicate that in “most cases” the penalty would be limited to 50% of the maximum balance in the foreign bank accounts.
If the holder of an offshore financial account can successfully convince the IRS that the failure to file the FBAR was not willful, then the penalties would be limited to $10,000 per violation. However, the IRS takes the position that a separate violation occurs for each bank account that is not listed on the FBAR.
Who Should I Consult About Preparing and Filing an FBAR?
Depending on the type of improper reporting, you will want to consult either a tax attorney or a CPA specializing in international tax reporting. These tax professionals will understand the various disclosure programs available to you based upon your level of non-compliance.
A tax attorney is uniquely qualified to bring you through the IRS Voluntary Disclosure Practice. That is because this program provides disclosing taxpayers criminal protections in exchange for their applicable disclosure. A tax attorney in this situation can provide you, the disclosing taxpayer, attorney-client privilege with respect to the facts around your previous non-disclosure. If a CPA is used, they cannot provide you the same protections. Contact an Orange County FBAR attorney at Evolution Tax and Legal to learn how we can help you prepare and file an FBAR.
What Do I Do if I Get a Notice From the IRS About Not Properly Reporting Foreign Accounts on an FBAR?
If you get a notice from the IRS about failing to properly report foreign financial accounts in prior years, contact a professional tax advisor immediately. The two major tax professional you consider talking to is either a tax attorney or tax CPA that specialize in international tax reporting. They will be able to provide you more information on the IRS notice and take care of any outstanding tax filing obligation the IRS notice cites.
These IRS notices can be onerous, and may even cite criminal or civil penalties related to your failure to properly report prior foreign financial accounts. The tax advisor you engage should be able to help prepare and file any outstanding FBAR obligations, and even potentially take you through an IRS voluntary disclosure program or help reduce the imposition of penalties cited by the IRS notice.
Here, if you believe that you could be subject to criminal penalties related to the improper reporting of foreign bank accounts, you should consult a tax attorney. Tax attorneys are uniquely qualified to represent you with criminal tax issues as they can provide you with attorney-client privilege over your conversations related to your prior reporting. Tax CPAs do not have the ability to provide you this same type of attorney-client relationship protection.