Sacramento FBAR Lawyers
There are many reasons as to why some people fail to file FBAR despite significant U.S. government investments into detecting offshore accounts held by Americans. Some people believe that they shouldn’t have to disclose their assets to the government. Others may fail to realize that even a modest amount of overseas assets can make one subject to a disclosure obligation. Still others may be outside of the United States and simply fail to realize that the form is required.
Unfortunately for taxpayers who have not made required FBAR disclosures, the penalties you can face are significant. Furthermore, the IRS and prosecutors from the Department of Justice have a myriad of resources they can make use of in light of FATCA, international tax information sharing agreements, the Swiss Bank program, and other enforcement initiatives. If you have not yet declared offshore accounts or have failed to make these disclosures in some or all recent tax years, the time to address the problem is now while you can still make use of OVDP or other programs to reduce the penalties you face and, depending on the program you enter, protect you from criminal liability.
Who is Required to File FBAR?
The obligation to file Report of Foreign Bank and Financial Accounts (FBAR) is found in a provision of the Bank Secrecy Act (BSA). The obligation requires U.S. taxpayers to disclose the existence of certain foreign accounts and assets when their aggregate value exceeds $10,000. Covered accounts include many foreign financial accounts the individual holds or has signature authority over such as mutual funds, trusts, bank accounts, and brokerage accounts.
The FBAR obligation can only be satisfied online. There is no option to make a traditional filing through the U.S. mail. Taxpayers with an FBAR disclosure duty must log on to the FinCEN BSA online portal to obtain and complete FinCEN Report 114 — Report of Foreign Bank and Financial Accounts. In completing the form individuals must supply an array of personal and financial information including foreign accounts owned separately, foreign accounts owned jointly, accounts where there is signature authority but no financial interest, maximum aggregate value of all accounts, and more information.
What Penalties Can You Face for FBAR Nonfiling
Individuals who fail to file FBAR can face serious penalties even if the filing failure was inadvertent. A simple mistake or innocent error where an individual fails to file FBAR can result in a fine of up to $10,000. Furthermore, that fine can theoretically be imposed for each year where there was an undisclosed account. This means that for an individual unaware of the FBAR obligation for three years, a potential penalty of $30,000 can be imposed.
However, fines are much more severe if the failure to file FBAR is attributed to willfulness. Willfulness is a voluntary or intentional act in disregard of a known legal duty. When it appears that the taxpayer’s failure to file was due to willfulness a penalty equal to the greater of $100,000 or 50% of the foreign account balance can be imposed. This penalty can also be imposed for each year where the accounts went undisclosed. As such, fines for willful violations of FBAR are significant. Furthermore, certain willful violations of FBAR may result in criminal prosecution per 31 U.S.C. section 5322 and 18 U.S.C. section 1001.
OVDP Can Protect You From the Consequences of FBAR Disclosure Failures
If you have failed to make required disclosures and have not already come under investigation, you may be able to enter into Offshore Voluntary Disclosure Program (OVDP). Individuals who enter into the program make a full disclosure of their activities and pay an offshore penalty, but they receive protection against future criminal proceedings. For certain individuals where the risk of criminal prosecution is slight, the Streamlined program may provide for reduced fines. However, caution should be exercised before entering the Streamlined program because it does not provide the same protections.
If you have concerns about your handling of FBAR disclosures, the experienced tax lawyers of the NewPoint Law Group, LLP, can help. To schedule a free and confidential consultation, call 800-358-0305 or contact us online.