Hyden, Miron & Foster, PLLC Law Blog

Friday, May 17, 2019

Delinquent Foreign Bank Account Report

A Foreign Bank Account Report (FBAR) refers to FinCEN Form 114. It is a form that must be filed with the IRS by a US citizen and resident who owns or has signatory authority over a financial account that is outside of the country. You must report your foreign bank accounts to the IRS whenever the total value of all of your foreign bank accounts reaches an amount that is greater than $10,000 at any point of time throughout the year. Whether it is a savings account, checking account, or a securities or brokerage account, the foreign bank account must be reported to the IRS I a timely manner. If you have a delinquent FBAR, there are special procedures you must follow to file the past due report. You may also face penalties for the delay.

How Do I File a Foreign Bank Account Report That Is Past Due?

How to file a past due FBAR will depend on several factors including whether or not the failure to timely report was willful or merely an oversight. If you did not know that you were required to file FBAR or have a good reason as to why you were delayed in the filing, you can usually just file the FBAR online with the IRS without penalty. If you have already reported all of your US tax returns and paid tax on the foreign bank account income that will be included in the FBAR, you will also likely be able to file online with the IRS without penalty.

If you failed to report the FBAR, tax is owed, and your failure to report was not willful, but you may have a history of delays and mistakes in past filings, you may be able to use streamlined filing compliance procedures. This allows you to report or amend 3 years of tax returns and 6 years of unreported FBAR without being penalized. You must submit a statement explaining the non-willfulness of your delayed filing. Using the streamlined filing compliance procedure will allow you to submit the delinquent FBAR without penalty, but your returns may still be selected for an audit.

What are the Penalties for Delinquent Foreign Bank Account Reports?

Sometimes, even unintentionally delinquent FBAR are subject to penalties. The penalties can be costly and reach upwards of $10,000. The penalty may very well be waved, however, if there is a valid reason provided for the delay. For willful violations, the financial consequences can be severe. The penalty for willful failures to timely file an FBAR will usually be 50 percent of the highest aggregate balance of all the unreported foreign bank accounts. The largest possible penalty, however, will be 100% of the highest aggregate balance of all the unreported foreign bank accounts. In recent years, the IRS has come to realize that a penalty exceeding the 100% mark may run afoul of the Eighth Amendment’s prohibition against excessive fines and penalties.

Knowledgeable Tax Attorneys

For all of your tax questions, the knowledgeable and experienced attorney at Hyden, Miron & Foster, PLLC have answers. Contact us today.

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