Reporting Foreign Bank Accounts

If you have a foreign bank account that you failed to disclose you could be subject to penalties or worse from the IRS.

Allow the foreign tax attorneys at Kugelman Law to help you disclose your foreign bank accounts through FBAR procedures to properly avoid penalties and serious consequences.

The IRS requires U.S. taxpayers to report foreign bank accounts regardless of whether the account generates income. The reporting requirement is triggered when the combined value of foreign bank account(s) exceed $10,000 during the tax year.

The accounts must be reported on a Fincen Form 114, Report of Foreign Bank and Financial Accounts (FBAR). All U.S. taxpayers, regardless of U.S. residency, are required to timely file FBAR forms reporting each account.

For U.S. taxpayers who did not file FBARs, the IRS established the Delinquent FBAR Procedures.

The IRS takes these matters seriously. Whether intentional or not, failure to disclose foreign accounts and assets could result in significant financial penalties.

Do I Qualify for Delinquent FBAR Procedures?

In order to be eligible for Delinquent FBAR Procedures, there are several criteria that you must meet.

  • First, you must have acted in good faith.
  • Second, you must not have had any unreported foreign-sourced income.
  • Third, you must not be under civil audit or criminal investigation by the IRS or otherwise contacted by the IRS regarding delinquent FBARs.

Disclosing Foreign Accounts With No Unreported Income vs. With Unreported Income

Generally speaking, Delinquent FBAR Procedures are available only where there was no unreported income associated with foreign accounts. A taxpayer must demonstrate reasonable cause in late filing the FBARs.

However, in circumstances where a taxpayer did timely report foreign income, the IRS will be skeptical that the taxpayer acted with reasonable cause. Those taxpayers should consider the Streamlined Offshore Procedures.

Penalties and Criminal Prosecution

The IRS prioritizes enforcement in this area because many U.S. taxpayers have concealed income with foreign accounts and assets. Consequently, civil and criminal penalties are steep. Taxpayers that do not successfully disclose assets through the various disclosure programs may be liable for penalties outlined below.

Keep in mind that the statute of limitations does not begin until a taxpayer files the necessary forms disclosing the asset. Thus, these penalties may be assessed years after the fact.

Non-willful failures to file FBARs are penalized by fines of up to $10,000 for each non-willful violation.

Willful failures to file FBARs are penalized $100,000 or 50 percent of the amount in the account, whichever is greater.

Closing a foreign bank account does not absolve you of previous reporting requirements and could be considered a sign of willful violation of FBAR rules.

The foreign tax attorneys at Kugelman Law can guide you through Delinquent FBAR Procedures to help you achieve compliance and avoid penalties so contact us today!

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