The next Report of Foreign Bank and Financial Accounts (FBAR) filing deadline is June 30th and the IRS is pretty specific; unlike federal income tax returns, extensions are not available. Therefore, if you don’t file by the June 30th date, expect to be up against hefty penalties. A recent Forbes Article by Robert Wood called FBAR Penalties: When Will IRS Let You off with a Warning? reminds us that the IRS is no longer giving an “amnesty pass” for unreported offshore bank accounts and assets. If you still need to report yours, here is information you need to know to avoid future IRS tax issues down the road:
Income reporting: Must report all income sources
As Wood’s article in Forbes reports, all US citizens and permanent residents must report income from all sources on their tax returns, even if they paid taxes to another country.
If you have an interest in a foreign bank or financial account, you are obligated to check “yes” on the Schedule B of your Form 1040 and file an FBAR.
This report is required from anyone who has a financial interest in or signature authority or other authority over any financial account in a foreign country. Using form number TD F 90-22.1, an FBAR must be filed if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.
FBAR Penalties More Severe Than Tax Penalties
If you fail to file the proper FBAR paperwork by the June 30 deadline, the IRS penalties are steep; often worse than tax penalties and some violent penalties. Here’s how they can be applied:
- Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation.
- The penalty for willful violations could reach the greater of $100,000 or 50% of the account amount for each violation. Separate violations = each year of non-filing.
- Criminal penalties are very serious and can result in a $250,000 fine and 5 years of imprisonment.
- Violating FBAR requirements and another law? You could be looking at $500,000 in fines and/or 10 years in jail.
According to the article, the IRS will issue a warning before it penalizes a taxpayer especially to this degree. In my experience with such cases, taxpayers who came forward and were proactive with their reporting, had a better shot at avoiding IRS tax problems such as FBAR penalties and criminal prosecution than the ones who were contacted by the IRS.
If you have omitted to report your offshore income or assets, at this late and crucial stage you will want to hire the services of an expert tax attorney or tax resolution specialist to take your case. These experienced tax professionals can help you by taking over communication with IRS on your behalf, file required disclosures, amend tax returns, file FBAR reports. They will also negotiate an offshore tax settlement for tax relief that gets you into tax compliance and the IRS off your back.
Read the full FBAR Penalties: When Will IRS Let You off with a Warning? article for more information.
More Tax Help, IRS News and Tax Relief Tips:
- Major Tax Issues for Those Who Willfully Ignore FBAR
- Swiss Pressured to Reveal All Offshore Accounts
- Treasury Proposes Multilateral Agreement for Offshore Compliance
- Tax Resolution Services Offers Returning Veterans Free Tax Advice
- FATCA-No Tax Relief for Americans Living Abroad