What is the FBAR
The FBAR is an information return, as opposed to a tax return, as it does not generate tax or amounts due. It is required of U.S. citizens, Resident Aliens, and U.S. Companies with financial accounts located outside the U.S., of which the total of the balances of those accounts exceed $10,000 USD at any time during the calendar year. The form is required to be filed by individuals and companies who own, have an interest in, or have signature authority over foreign accounts.
History of the FBAR
The FBAR was actually legislated in 1970 when Congress enacted the Bank Secrecy Act. The purpose of the FBAR reporting is to aid the U.S. government in carrying out criminal, tax and regulatory investigations. In 2003, Congress strengthened the penalties for failing to comply with the FBAR requirement and gave the IRS the task of handling FBAR compliance and enforcement. In 2009, the IRS began offering offshore voluntary disclosure programs, which included FBAR compliance. The FBAR is actually filed with the Financial Crimes Enforcement Network (FinCen) of The Department of the Treasury. While the IRS handles FBAR compliance and enforcement, the FBAR is not part of the tax return and must be filed electronically and separately with FinCen.
What’s the big deal?
In a word, penalties. The penalty for not filing an FBAR form, if required, is $10,000. Willfully failing to file or fully disclose the required information may subject you to criminal charges and penalties up to 50% of the highest aggregate balance at the time of the violation.
What if I haven’t filed?
What do I do now?
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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult tax, legal and accounting advisors before engaging in any transaction.