If you are earning – and saving – money during the time you’re living overseas, chances are you are familiar with the Foreign Bank Account Report (FBAR).
An FBAR is required for all United States citizens, residents, businesses and estates with financial interest in or authority over a foreign financial account or multiple accounts with combined balances that total more than $10,000 at any time during the calendar year. These accounts can be standard bank accounts as well as brokerage accounts and mutual funds.
The FBAR was created to prevent tax evasion among people trying to avoid paying taxes rightfully owed to the United States. The vast majority of FBAR filers, whether they believe the reporting requirement is justified or not, will simply report the balance of their foreign bank accounts, but those with more complex financial situations may also need to report their foreign assets held by a foreign financial institution, like stocks; pensions, assets in a foreign branch of a U.S. financial institution; and/or foreign mutual funds, life insurance or annuities.
Recordkeeping is essential, because the $10,000 threshold can be reached at any time. The account doesn’t have to consistently have more than that amount to count, just one time will do it, and the burden is on the taxpayer to be informed.
Every year people come up with clever ways to sidestep paying taxes, but those who fail to file an FBAR are almost surely going to get caught – and the consequences are severe.
This is a requirement that the U.S. government takes very seriously. FBAR penalties are a priority for the Internal Revenue Service (IRS). According to the agency, those found guilty of recordkeeping violations, filing an FBAR late or not at all – whether willful or not – may be subject to stiff monetary penalties and/or criminal penalties. The deciding factor depends on the unique facts and circumstances in your specific case.
If it is determined your violation was non-willful, you can be assessed up to $10,000 per year. If willful, that amount escalates substantially: Up to $100,000 or 50 percent of the amount, whichever is greater.
FBARs are due at the same as time as annual taxes, April 15, although extensions are available if necessary. This document, the FinCEN Form 114, is not to be filed with federal tax returns. Instead, it needs to be separately submitted electronically using the Financial Crimes Enforcement Network’s BSA E-Filing System. It is possible to file using a traditional paperwork system, but an exemption must be obtained. If you want to get right with law, there are ways to do so through Delinquent FBAR Submission Procedures or Streamlined Filing Compliance Procedures. In addition, if the IRS has not reached out to you about a late FBAR yet and you are not under civil or criminal investigation by IRS, you may file late FBARs. However, it is important to note that this action doesn’t prevent potential penalties from being assessed; it simply keeps them to a minimum.
An author of Namaste UI, published several articles focused on blogging, business, web design & development, e-commerce, finance, health, lifestyle, marketing, social media, SEO, travel.
For any types of queries, contact us on info[at]namasteui.com.