If you have foreign bank accounts, or if you own a business that has foreign bank accounts, you may be required to file FinCEN Form 114, Report Foreign Bank and Financial Accounts (FBAR), with the U.S. Treasury Department’s Financial Crimes Enforcement Network on an annual basis. Here are five important facts about FBAR compliance from New Jersey foreign bank account lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:
1. If Your Foreign Bank Accounts Exceed $10,000 at Any Point During the Tax Year, You Need to File an FBAR
The requirement to file an FBAR applies if you own foreign bank accounts that exceed $10,000 in value at any point during the tax year. If you own multiple accounts that have an aggregate value of $10,000, you need to file an FBAR that discloses each account. Likewise, if you have one account that exceeds $10,000 in value at any point and another that stays below the $10,000 threshold, you must still report both accounts.
2. The FBAR Filing Requirement Applies to All “United States Persons”
The requirement to file an FBAR applies to all “United States persons.” This includes United States citizens living in the U.S. and abroad, U.S. residents, U.S. businesses, and U.S. trusts and estates.
3. FBARs are Due on April 15, But Do Not Get Filed with the Internal Revenue Service (IRS)
FBARs are due on April 15, just like your annual income tax returns. However, you do not file your FBAR with the IRS. FBARs must be filed with the Financial Crimes Enforcement Network, and they must be filed electronically using the federal government’s Bank Secrecy Act (BSA) E-Filing System.
4. The Penalties for Failing to File an FBAR (or Filing a False FBAR) Can Be Substantial
Failing to file an FBAR can carry steep penalties. Civil fines for non-willful violations can be in the tens of thousands of dollars, and they can exceed $100,000 if a violation is deemed willful. Businesses can also face enhanced penalties for “pattern[s] of negligent activity.”
Willful FBAR violations can also carry criminal penalties. Depending upon the circumstances involved, these penalties can include up to a $500,000 fine and 10 years of federal imprisonment.
5. The IRS Can Audit Six Years’ Worth of FBAR Filings (or Failures to File)
While FBARs must be filed with the Financial Crimes Enforcement Network, the IRS is responsible for enforcing taxpayers’ FBAR filing obligations. Pursuant to the Internal Revenue Manuals, the IRS can audit up to six years’ worth of FBAR filings. With each individual violation carrying its own civil or criminal penalties, individuals and businesses that have committed multiple violations can be at risk for substantial liability and/or terms of imprisonment.
Request a Confidential Consultation with a New Jersey Foreign Bank Account Lawyer
Do you have questions about your FBAR filing obligations? Or, are you facing an IRS audit pertaining to your offshore bank accounts? To schedule a confidential consultation with New Jersey foreign bank account lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 201-355-8202, email ket@thornlawgroup.com or contact us online today.
