Awards & Recognition
Failures to disclose foreign financial accounts via a Report of Foreign Bank and Financial Accounts (FBAR) filing and omissions (FinCen Form 114) of foreign sources of income unfortunately are common in occurrence. Despite the ease in which a filing failure can occur, the consequences for failing to comply with FBAR disclosures can be extremely harsh. Even more troubling is the likelihood that assessments of costly FBAR penalties are likely to increase exponentially with the upgrade in functional capability to tax evasion watchdogs at the federal government.
The requirements for US taxpayers to disclose certain foreign financial accounts is one effort by the US government to erode the banking secrecy protections, such as those found in traditional tax havens, to combat the problem of offshore tax evasion. In response to IRS efforts to crack down on offshore tax evasion, more than 50,000 American taxpayers have voluntarily come forward to disclose their past tax problems and take advantage of the reduced penalties provided by Offshore Voluntary Disclosure.
Those who live and work in San Diego are more likely to have a FBAR filing obligation due to the international character of the city. San Diego is an international trade hub and home to major commercial ports. These cultural and business connections to foreign nations and markets makes it more likely that those connected to San Diego may have foreign accounts to disclose.
If you are trying to deal with international tax law issues such as FBAR filing requirements, you should have the assistance of a FBAR attorney in San Diego. At the Tax Law Offices of David W. Klasing, our San Diego international tax attorneys have the knowledge and resources to ensure that our clients avoid running afoul of any sneaky FBAR disclosure requirements, which often carry substantial penalties. To speak to one of our foreign tax attorneys in San Diego today, call our offices at (800) 681-1295.
When is there an obligation to disclosure foreign accounts through FBAR?
An FBAR obligation can arise for US taxpayers who have a connection to a foreign financial account. Typically, this means that the US taxpayer had an interest in or signature authority over a single foreign financial account or multiple accounts. Recent decisions by the courts have expanded the definition of what qualifies as an interest in a foreign account. The obligation to file FBAR and disclose a foreign account arises when the aggregate balance contained in the foreign accounts exceeds $10,000.
All forms of foreign accounts that hold financial assets are included for the purposes of meeting FBAR filing requirements. Accounts that are commonly considered for FBAR reporting requirements include bank accounts, investment accounts, life insurance policies, pension accounts, and mutual funds. If you are unsure of whether your foreign asset should be considered for minimum FBAR filing requirements, contact one of our San Diego FBAR attorneys today.
FBAR must be filed online via the BSA e-fling system located on the Financial Crime Enforcement Network’s web portal. A taxpayer who must disclose a foreign financial account makes this disclosure via FinCen Form 114.
When is the Deadline for Filing FBAR?
If you meet the requirements for filing FBAR in a given tax year, your filing will be due on April 15, coinciding with the deadline for federal income tax return filings. However, FBAR filing may automatically be extended to October 15. You will not need to file additional paperwork to claim the extension. You must properly indicate the extension on your FBAR filing paperwork. Ensure that you are timely on your FBAR filings by using the capable San Diego FBAR tax lawyers and CPAs at the Tax Law Offices of David W. Klasing. Also make darn sure that you file your FBAR with or BEFORE you file your federal tax return if you extend and file after 4/15 as it will be considered delinquent if otherwise.
What are the penalties for a failure to file FBAR?
If a taxpayer fails to satisfy their FBAR obligations, upon conviction, severe penalties can be imposed. The chief factor in determining the severity of the FBAR penalties that will be sought is whether the IRS believes that your disclosure factor was willful or merely the product of an unintentional oversight. If it is believed that your disclosure failure occurred for reasons like:
- You were unaware of FBAR.
- You inherited a foreign bank account but did not address it in a timely manner.
- You paid tax on the account, but failed to file FBAR.
- Another person owned the account in your name without your knowledge.
If your FBAR violation was for one of these reasons, the IRS is more likely to seek a conviction for a non-willful failure. A non-willful failure can be punished by a penalty of $10,000 per an undisclosed account for every year the account or accounts were undisclosed.
However, an IRS agent is free to choose to disbelieve your explanation for FBAR disclosure failures and may choose to pursue charges for a willful failure to file FBAR. Willful acts are voluntary or intentional violations of a known legal duty. Examples of willful violations of FBAR can include:
- The intentional failure to learn about your FBAR obligations through willful blindness.
- Engaging in conduct to conceal the foreign accounts including setting up international corporations or trusts.
- Traveling to foreign countries to retrieve the money contained in foreign financial accounts in cash, in US dollars.
Willful violations of FBAR can be punished by a fine of the greater of 50% of the account balance or $100,000. Because there is a 5 year review period when the violation is willful, the penalty will often exceed the original account balance. In addition to monetary penalties criminal charges can also be brought.
When Should You Consider Hiring an FBAR Attorney in San Diego ?
It is never too early to seek the counsel of international tax law professionals when it comes to foreign tax law compliance. However, an FBAR lawyer can be particularly helpful when a taxpayer discovers that they have erroneously failed to file one or more FBARs over the past several years. If you receive a penalty notice for a failure to comply with FBAR regulations, you should immediately contact a San Diego FBAR attorney.
If you discover that you have fallen out of compliance with FBAR requirements but have not received a penalty notice, it is possible that the federal government has not discovered the noncompliance yet. However, you should still speak to a San Diego FBAR attorney as soon as possible, as there are methods such as the Offshore Voluntary Disclosure Program which can help to reduce the penalties you may potentially face as a result of FBAR noncompliance
The Offshore Voluntary Disclosure Program (OVDP) can provide a way out of FBAR problems
If you suspect that you may have failed to make mandatory FBAR disclosures in the past, time is often of the essence. The Offshore Voluntary Disclosure Program provides noncompliant taxpayers reduced penalties and allows them to come back into compliance in exchange for disclosing their tax improprieties voluntarily. However, because a voluntary disclosure is required the program is unavailable if you have already come under investigation. Furthermore, if your foreign financial institution is publicly identified by the IRS, you will face a higher penalty rate than you otherwise would.
Speak to Us Today About Your FBAR Concerns in San Diego
If you do not act now to shore up your defenses against potential FBAR penalties, you will likely regret it later. To schedule a reduced rate initial consultation to discuss your tax concerns, call an experienced FBAR attorney in San Diego at the Tax Law Offices of David W. Klasing at (800) 681-1295.
