Foreign Bank and Financial Accounts Reporting
The IRS takes foreign bank account reporting extremely seriously. The penalties for failing to report assets in a foreign bank account or other financial account can be severe. It can also cost you more in penalties and interest than you would have owed if you had filed them properly when you were initially supposed to. The tax accountants at 212 Tax can help you understand foreign bank account reporting rules, and prepare & file all of the required forms, so you can stay on the right side of the law.
Should You File an FBAR?
Whether or not you need to report foreign assets to the IRS depends on how much you have in your foreign accounts. If the total combined value of your foreign accounts exceeded $10,000 at any point during the year, you must report these assets to the IRS. Which foreign accounts must you report to the IRS? The following accounts meet the IRS’ definition of a financial account:
- trust funds
- mutual funds
- bank accounts
- brokerage accounts
- any account on which you have signing authority or a financial interest
If you have a financial interest or signature authority in one of these types of foreign financial accounts, you may be required under the Bank Secrecy Act to report the account yearly. If this is the case, you should work with an experienced tax accountant to file your FinCEN Form 114, Report of Foreign Bank and Financial Accounts.
You May Also Need to File Form 8938
In many situations, taxpayers required to file FinCEN Form 114 must also report specified foreign assets on Form 8938, Statement of Specified Foreign Financial Assets. This form is filed with an income tax return, and can include foreign assets that are also reported on a FinCEN 114. To determine if you are required to file this form, reference the comparison of Form 8938 and FBAR Requirements here, and then discuss any questions or concerns with your tax accountant.
Are There Penalties for Failing to Report?
Unlike most tax forms & tax returns, the FinCEN 114 must be filed on time and there are no extensions available. The IRS can distribute stiff penalties, especially if there is a long pattern of willful violations. Fortunately, the IRS does distinguish between willful and non-willful violations – coming forward early often provides a taxpayer with the best opportunity to reach a favorable settlement.
In addition, the IRS determines penalties per account, and not per year or by total assets. That means penalties for multiple unreported accounts can exceed the penalty for one unreported account, even if there are fewer total assets in question.
Streamlined FBAR Filing Procedures & Penalties
Within recent years, the IRS has implemented a number of filing procedures that has streamlined FBAR compliance. One significant change came on September 1, 2012, which resulted in streamlined procedures being available only to non-resident U. S. taxpayers who failed to file required U. S. income tax returns. After this change in procedure was implemented, submissions by these taxpayers were subject to differing degrees of review based on their responses to a risk questionnaire and the amount of tax due.
Almost two years later,on June 18, 2014, the IRS announced that these expanded procedures were now available to a wider population of U. S. taxpayers living outside the United States, as well as select U. S. taxpayers residing within the country. In addition to the expanded eligibility for the streamlined procedures, there have also been a number of changes to the penalties distributed to those who have failed to report required income. For more information on how the penalties have changed, visit the IRS website.
Offshore Voluntary Disclosure Program
For taxpayers who have failed to report required foreign financial assets, the Offshore Voluntary Disclosure Program is often the best way to fulfill tax and information reporting obligations. After many taxpayers and tax practitioners expressed a strong interest in the continuation of the program following its closure in 2011, the IRS reopened this program in January 2012, and has since been offering taxpayers the opportunity to get current with regard to unreported income from offshore accounts. To determine your eligibility for the Offshore Voluntary Disclosure Program, consult with your tax accountant or attorney as soon as possible. These programs could be suspended or shut down at any time, especially because the IRS and other parts of the US government have now started to enter into deals with several foreign banks, basically forcing them to turn over names and other details of U.S. taxpayers who hold accounts at their institutions.
Schedule a Foreign Bank Account Consultation at 212 Tax
Dealing with the IRS can be very stressful, especially when it comes to dealing with foreign accounts and foreign income. Many taxpayers, however, are not aware that they do not have to answer certain questions when asked. When you secure foreign bank account reporting and filing services from 212 Tax, you can get the peace of mind you deserve. We can help you file past and future foreign bank account reports accurately and on time. We also have a short list of very experienced tax attorneys whom we have worked with for several years and would be happy to share them with you.
To speak to a tax accountant, fill out the easy consultation form in the sidebar, or call us to schedule an immediate consultation.
Notice: 212 Tax & Accounting Services does not intend any of the above information to be used as legal advice. We are not attorneys; therefore, if you are uncertain of the legal ramifications of your tax situation, contact an experienced tax attorney for further consultation and guidance.
Foreign Bank Accounts, Income and Taxes