It’s well-known that Americans living abroad should file US tax returns, but requirements such as filing FBARs are often overlooked. So why should you care? In short, failing to file the FBAR can attract the IRS’s attention and lead to some harsh penalties. We’ve compiled the things you need to know about FBAR reporting, so you can stay away from any IRS trouble or tax problem.
Foreign Bank Account Reports (FBAR) were established as part of a US initiative to discover tax cheats hiding money in offshore accounts. FBARs have been around for years but were not strictly enforced by the IRS until a few years ago. Under this new initiative, the IRS requires people with money in overseas bank accounts to disclose those accounts if their balances exceed the threshold. It’s important to remember that those filing FBARs aren’t taxed on the balance of the accounts or anything of the sort; it’s just a requirement so that the IRS knows what money lies abroad.
For expats with foreign financial accounts, ignoring FBAR requirements can result in costly penalties and other legal repercussions. The US government has increased its efforts to investigate and prosecute expats who fail to declare their foreign assets. Therefore, there is a greater risk of non-compliance with FBAR regulation than ever before.
Fortunately, there are several easy ways to comply with your FBAR requirements and avoid a huge tax problem. Throughout this guide, you will learn everything you need to know about the FBAR.
The FBAR must be filed by anyone with a foreign account balance of $10,000 or more during the tax year (i.e., any US tax resident). It doesn’t matter if the balance reaches $10,000 for just one day (or even one minute!).
FBAR filing thresholds are also aggregate amounts. For example, if you have multiple accounts, the total balance of all your accounts would trigger a filing requirement. If you think that keeping $4,000 in one account and $7,000 in another will prevent you from filing, this is not the case.
All foreign financial accounts where you have a financial interest or signature authority are subject to FBAR filing requirements.
Therefore, if you were a signatory on one of your employer’s bank accounts, this account should be reported on your FBAR form. It is also important to report joint accounts with your spouse on the FBAR form.
Almost all foreign bank account holders will file FBARs to report their balances. In addition, you must also report:
The most important aspect of maintaining your FBAR is keeping records. Forms must include the following information:
It is also common for expats to file one year but not the next. Therefore, it is important to make good record keeping a habit. The best thing to do here is to leave this to tax professionals. Contact our tax office and let Bronx Tax Services handle your FBAR filing.
FBAR filing is different from filing your federal tax return. Not the IRS, but the Department of Treasury is responsible for filing the FBAR.
FBARs should be filed electronically through the BSA e-filing site using FinCEN 114.
You will need to enter all pertinent account information into the online system. It is possible to have a third party prepare it for you (e.g., a tax consultant), but you must file FinCEN 114a to give the party authority to do so.
If your partner and you only hold joint accounts, then you can file the FBAR on their behalf by having your spouse sign FinCEN Form 114a.
If your spouse has other accounts, they must file FBARs separately (i.e., individual foreign financial accounts). Your joint accounts must be included on each of your individual FBAR forms when filing separately. Contact our tax office and start talking with a tax accountant if you have problems reporting joint accounts.
Every year, the FBAR must be filed by April 15th. There is an automatic extension to October 15th if you miss this deadline.
In the case of non-willful failure to file (meaning you weren’t aware of your reporting obligation), the fine can be $10,000 per violation.
In cases where you purposely avoided filing, you may face a fine of $100,000 or 50% of the account balance at the time of the violation, whichever is more.
As you can see, this is a serious IRS trouble, and penalties can pile up quickly if you are many years behind in your FBAR filing! That’s why we recommend working with tax professionals. Count on SCL tax Services In & Near Bronx, NY, and enjoy a smooth, worry-free tax journey.
The first thing you need to do is not panic! Two amnesty programs have been set up by the IRS to assist Americans who have FBAR forms that are past due. Streamlined Filing Procedures is the program expats find most helpful. It is open to both US citizens living in the US and those living abroad who have failed to file due to an unawareness of their obligations.
If you haven’t already done so, you will file the last three years of Federal Tax Returns as well as the last six years of FBARs. FBARs will be reported electronically, just as if you had filed them on time, with a special notation confirming your participation.
If you are behind in your FBAR filings, getting caught up is extremely important. Streamlined Procedures carry no penalties when you file, but if the IRS finds out before you file, you will be ineligible for this program and subject to the maximum penalties.
As foreign financial institutions now have to notify the IRS of foreign accounts, the chances of getting caught have increased since the FATCA legislation was introduced in 2010. You will be at the mercy of the IRS for hiding the foreign account(s). That’s something no one wants!
Our experienced tax professionals are to help! Whether you need business taxes, bookkeeping services, or a payroll service, SCL tax services In & Near Bronx, NY, has the right tax accountant for you. We can help you take care of all your tax issues hassle-free! Just Call us at 347-305-4348!
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