Santa Barbara FBAR and Offshore Tax and Information Reporting Combo Tax Attorney & CPA
Are you a U.S. citizen, resident alien, or U.S. business owner who has offshore bank accounts or other foreign assets? If so, you may be required to report the assets by filing an FBAR, also known as FinCEN Form 114.
There are costly penalties for failure to file an FBAR, making consistent compliance essential for any taxpayer who wishes to avoid fines – or prison time. Work with a knowledgeable and experienced tax attorney, like the Santa Barbara tax lawyers at the Tax Law Office of David W. Klasing, to ensure that you are in compliance with the law.
What is FBAR?
“FBAR” is an acronym that refers to the Report of Foreign Bank and Financial Accounts. The FBAR is an information form that certain taxpayers must file with the Financial Crimes Enforcement Network (FinCEN), which, like the Internal Revenue Service (IRS), is part of the U.S. Department of the Treasury. The official title of the form is FinCEN Form 114, previously known as Form TD F 90-22.1. The FBAR filing requirement exists due to the Bank Secrecy Act (BSA), which was passed by Congress in 1970.
Is FBAR the Same as FinCEN Form 114?
Yes. FBAR and FinCEN Form 114 refer to the same form. This form should be filed with FinCEN, not the IRS. To file his or her FBAR, the taxpayer must use the BSA E-Filing System. Before filing an FBAR, you should consult an experienced international tax law attorney to ensure that you meet the filing requirements, have completed all FBAR forms correctly, and are taking appropriate steps to mitigate or avoid penalties related to nondisclosure of foreign accounts.
What is the Difference Between FBAR and FATCA?
The FBAR is a form, whereas FATCA is a law. The acronym “FATCA” refers to the Foreign Account Tax Compliance Act, which was passed by Congress as part of the HIRE Act in 2010. The Bank Secrecy Act (BSA) requires certain taxpayers to file an FBAR, whereas FATCA requires certain taxpayers to file an information form titled Form 8938 (Statement of Specified Foreign Financial Assets).
Some taxpayers are only required to file an FBAR, while others must file both an FBAR and Form 8938. It depends on the nature and value of the taxpayer’s foreign assets, along with the taxpayer’s status (or lack thereof) as a “specified individual,” “specified domestic entity,” or “U.S. person.”
Who is Required to File an FBAR?
You must generally file an FBAR if you meet the following criteria:
- You are a “U.S. person” for tax purposes, which means a U.S. citizen, a resident alien, or a U.S. trust, estate, or business entity.
- You have “a financial interest in or signature or other authority over” reportable foreign accounts or assets.
- Note: For FBAR purposes, reportable assets include foreign bank accounts, foreign mutual funds, foreign-issued life insurance, and certain assets held by trusts. Reportable assets exclude foreign partnership interests, foreign hedge funds, foreign real estate, and foreign government benefits.
- The combined value of your reportable foreign assets was higher than $10,000, even briefly, at any point during the tax year.
To reiterate, the above FBAR requirements are separate from FATCA/Form 8938 requirements, which may also affect you. If you have offshore assets or income, it is prudent to discuss both sets of regulations with an experienced tax compliance attorney.
What is the FBAR Filing Deadline?
Unless the taxpayer obtains a filing extension, the FBAR is due on April 15, the same date as your federal income tax return. With the FBAR filing extension, which is granted automatically, the due date extends to October 15. Note that, in some years, the timing of weekends or federal holidays may impact deadlines slightly.
When timing your FBAR submission, keep this crucial caveat in mind: “Unlike tax returns,” the IRS cautions taxpayers, “the FBAR is considered filed on the day it is received by the IRS. Postmarks are not considered evidence of timely filing.”
What Are the Penalties for Failure to File an FBAR?
Failure to file an FBAR or Form 8938 can result in the imposition of severe penalties, including criminal penalties in cases where the taxpayer’s actions constitute tax fraud (i.e. willful failures to comply). For non-willful violations, the following civil penalties may be imposed:
- For non-willful FBAR violations (i.e. failures to file FinCEN Form 114), a penalty of up to $10,000 per unreported account
- For non-willful FATCA violations (i.e. failures to file Form 8938), a penalty of up to $10,000 per violation, capped at a maximum penalty of $60,000
If the violation was willful – in other words, if the taxpayer deliberately sought to conceal assets or income from the U.S. government – he or she faces criminal penalties, including the threat of prison time. For example, the willful FBAR penalty can be up to 50% of the amount of the undisclosed offshore financial accounts, or $100,000 – whichever figure is greater – in addition to prison time, probation, and/or supervised release if the taxpayer is criminally prosecuted.
What Should I Do if I Have Unreported Offshore Bank Accounts or Foreign Assets?
If you have unreported foreign bank accounts or other undisclosed assets overseas, it is crucial to immediately contact an IRS tax lawyer for further guidance. If you have not already been contacted by the IRS or other government agencies, you may be able to shield yourself from criminal prosecution by swiftly making a voluntary disclosure following the IRS’ updated procedures, which were established in 2018 to replace the now-defunct Offshore Voluntary Disclosure Program (OVDP).
See our 2011 OVDI Q and A Library
See our FBAR Compliance and Disclosure Q and A Library
See our Foreign Audit Q and A Library
International FBAR Lawyers in Santa Barbara, CA
Taxpayers should be forewarned that the new voluntary disclosure procedures are more rigorous, demanding, for instance, that the taxpayer submit to a screening by the IRS Criminal Investigation division (IRS-CI), known as a “pre-clearance request.” In light of these changes – which have also brought about increased penalties – it is critical for taxpayers to have nuanced, step-by-step legal guidance from a dedicated attorney.
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