For many taxpayers, filing an annual report of report of Foreign Bank & Financial Accounts (FBAR) is an essential part of satisfying one’s tax obligation and the FBAR instructions are fairly straight forward. In general, U.S. taxpayers and others with sufficient connections to pay taxes to the United States must file FBAR when the balance of his or her foreign account or accounts exceeds $10,000. Even an inadvertent failure to file FBAR can result in a penalty of $10,000 for each instance of noncompliance. When the failure to file FBAR appears to be willful – the product of a voluntary or intentional action – penalties escalate and often exceed the original account balance. Failure to file FBAR can cause significant financial turmoil and may spill-over and cause additional tax problems due to an audit or investigation including potential criminal exposure. Whether if you are in Los Angeles or Orange County we can represent you in one of our convenient nearby tax offices.
Therefore, it is essential for taxpayers to satisfy their FBAR form filing obligation each and every year. (Here is information for FBAR form filing)Taxpayers can work to file their FBAR individually or, for peace of mind, they can work with a tax professional. Understanding the steps involved in the filing and disclosure process can help you make a wise decision regarding how you will handle your FBAR filing duty.
By What Date Must I File My 2015 & 2016 FBAR Filing?
For 2014, 2015, and tax filings for most years past, the filing deadline for FBAR was June 30. The June 30 FBAR filing deadline was a hard limit on the amount of time you had to make a timely filing because no extension was available. However, starting in 2017 for the 2016 tax year, there is a new FBAR filing date.
Starting with 2016, the FBAR filing deadline has been moved to align with the traditional tax filing calendar. That is, provisions contained within the Surface transportation & Veteran’s Healthcare Choice Improvement Act of 2015 moved the FBAR filing deadline for the 2016 tax year to April 15, 2017. Under the new deadline extensions will be possible.
Thus, we are in a transition period for FBAR reporting. To be clear the upcoming and recently passed FBAR deadlines are:
- June 30, 2015 for the 2014 tax year.
- June 30, 2016 for the 2015 tax year.
- April 15, 2017 for the 2016 tax year (extendable with individual extension) .
Working with an experienced tax attorney who handles FBAR and offshore disclosures for many taxpayers can give you peace of mind that your filing will be properly handled in a timely manner.
Taking the Instructions then Filing FBAR
While up until 2013 taxpayers had the choice between filing in an electronic or traditional format, this is no longer an option. All taxpayers are now required to handle all aspects of their FBAR reporting duty through the Financial Crimes Network’s (FINCEN) Bank Secrecy Act portal. From the FINCEN web portal taxpayers can access FINCEN Form 114 which is utilized for one’s FBAR filing. After accessing the form on the website, the taxpayer must complete the form in an accurate and comprehensive manner.
If you have questions regarding items on FINCEN Form 114 you should consult a tax professional. However, a brief description of some of the items requested includes:
- Filing name – This is a filer-determined name that will be used to track the FBAR. The name must be unique. Jane Doe’s 2015 FBAR or ACME123 Corporation’s 2015 FBAR would be acceptable names.
- Authorized third-party filer – This box should only be checked if the taxpayer has engaged with a tax professional. If the taxpayer is filing his or her own FBAR this box should be left blank.
- S. TIN – Individuals and entities with a Taxpayer Identification Number should enter it here. However, not all individuals will have a TIN. Instead, they should provide the identifying information requested in item number 4.
- Information on financial accounts – Taxpayers must provide information regarding foreign financial accounts held independently and held jointly. Separately owned accounts should be entered into Section II, item 15 including the maximum value of the account during the past year. The type of account should be entered into box 16, the financial institution into box 17, and the account number should be entered into box 18. Additional financial institution information should be provided in boxes 19-23. Similar information regarding jointly owned accounts should be entered into Section III of the form.
- Signature authority accounts – Accounts where the taxpayer holds signature authority but does not hold an actual interest in the asset or property must be disclosed in Part IV of FINCEN Form 114.
- Consolidated FBAR information – Certain entities directly or indirectly owning more than half of an interest in another entity may file a consolidated reported. To indicate that a consolidated report is being filed item 2d in Section I should be selected and Section V of the FBAR should be completed.
The above covers only the basics of obtaining FBAR instructions and completing an FBAR. For many taxpayers, specific advice from a tax professional will be necessary. The FBAR lawyers at The Tax Law Offices of David W. Klasing can provide on-point guidance for annual FBAR filings, FBAR problems, and other concerns regarding offshore accounts. To schedule a reduced-rate FBAR consultation call us at 800-681-1295 or contact us online today.