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Millions of Americans have foreign bank accounts in nations around the globe. However, geography alone does not excuse overseas accounts from federal reporting requirements. If you hold an offshore account which you fail to disclose to the IRS, you risk subjecting yourself to harsh civil penalties and even criminal prosecution. The fines alone can climb into the tens or hundreds of thousands, and you could be sentenced to as long as a decade in prison. Understand your obligations starting with FBAR filing instructions.
Needless to say, these are consequences no one wants to face — but fortunately, you may not have to. However, you need to act fast by filing an FBAR as soon as possible. The experienced team of accountants and attorneys at The Tax Law Offices of David W. Klasing can help. As an experienced dual CPA and California tax attorney, David W. Klasing can guide you through the filing process, review the appropriate documentation, and most importantly, help you feel confident that you are in full and timely compliance with the law.
Deadlines are of critical importance when it comes to making an offshore disclosure, so don’t wait until it’s already too late. To set up a reduced-rate initial consultation, call our law offices right away at (800) 681-1295.
What Are the FBAR Filing Requirements?
FBAR, which refers to TD F90-22.1 (Report of Foreign Bank and Financial Accounts), stands for Foreign Bank Account Report. However, as of September 30, 2013, TD F90-22.1 has been replaced by FinCEN Report 114. Under the Bank Secrecy Act (BSA) of 1970, which is sometimes referred to as the Currency and Foreign Transactions Reporting Act, all U.S. taxpayers must file an FBAR if they hold an offshore account with a value greater than $10,000. These U.S. taxpayers include all of the following:
- Citizens
- Corporations
- Estates
- Limited Liability Companies (LLCs)
- Partnerships
- Residents
- Trusts
On the other hand, there are also exceptions who do not need to file an FBAR. These exceptions may apply to the following:
- Beneficiaries or owners of U.S. IRAs (Individual Retirement Arrangements).
- Correspondent accounts, also referred to as Nostro accounts.
- Foreign financial accounts which are owned by either a government entity or an international financial institution, or which are held with a U.S. military bank.
- Individuals who are either beneficiaries of or participate in a tax-qualified retirement plan.
- Some foreign accounts which are jointly owned by spouses.
- Some persons who have signature authority over a foreign financial account. Note that these individuals must not have financial interest in the account.
- Trust beneficiaries, provided that a U.S. individual reports the account on an FBAR which has been filed on behalf of that trust.
- U.S. persons who are already covered by a consolidated FBAR.
Of course, you should consult with an experienced CPA and tax lawyer to confirm whether or not you must file.
According to a report issued by the U.S. Government Accountability Office (GAO) in March of 2013, some of the most common locations of offshore accounts cited in 2008 included Switzerland, Canada, and the United Kingdom. It should also be noted that Puerto Rico, American Samoa, the Northern Mariana Islands, the U.S. Virgin Islands, and Guam are also subject to filing requirements.
A final point to make about FBAR is that unlike a federal tax return (which should be filed separately), you cannot get an extension if you miss the deadline of June 30, 2015. Therefore, it is extremely important that you initiate the filing process immediately if you have any concerns about your offshore account.
How to File an FBAR
As of July 1, 2013, FBAR filing instructions were updated. Your FBAR must be filed via the BSA E-Filing System used by FinCEN (Financial Crimes Enforcement Network), which is a bureau of the U.S. Department of the Treasury. More specifically, you must use the BSA E-Filing System to electronically complete and submit FinCEN Report 114.
Despite its somewhat misleading title, the additional form of FinCEN Report 114a (Record of Authorization to Electronically File FBARs) is not intended for submission to FinCEN when you file your FBAR. Form 114a is actually meant for your personal records, and must be submitted to FinCEN or the IRS only where specifically requested.
In addition to Form 114, certain taxpayers with foreign assets may also have to submit Form 8938 (Statement of Specified Foreign Financial Assets). This form is meant to be filed with your income tax return, and may include the foreign accounts noted in your FBAR filing. Form 8938 is three pages long, and will prompt you for information such as the number and maximum value of your deposit accounts and the descriptions and identifying numbers of your assets.
The penalties for failure to disclose your offshore accounts can be devastating, and could have lasting negative repercussions for your career and your future. To schedule an initial reduced-rate consultation with an experienced California FBAR lawyer, call The Tax Law Offices of David W. Klasing at (800) 681-1295, or contact our law offices online today.
