Are you a U.S. citizen or resident with a foreign bank account? If yes, you may be required to file a Foreign Bank Account Report (FBAR). This regulation applies to U.S taxpayers with a financial interest (or signature authority) in accounts with an aggregate value of $10,000+ during a calendar year.
In recent years, the IRS has issued sweeping changes to how U.S. tax payers must report interest on foreign bank accounts. The IRS always required tax payers to report income earned in foreign accounts. These new regulations tighten enforcement and include very stiff penalties for non-reporting.
You face two types of penalties (willful and non-willful) if you do not file a FBAR. The IRS can assess these penalties per account for each year you fail to file. If you have10 foreign accounts and you do not report those accounts for 5 years, you face 50 separate penalties. The IRS requires filings even when the foreign account does not generate income.
If the IRS determines your failure to file is a non-willful violation, you can receive a fine of $10,000 per violation. If the IRS decides you willfully failed to file, you can incur penalties of $100,000+ or 50% of the amount in the account for each violation. In extreme situations, you can also face criminal prosecution with the risk of a fine of $250,000 and 5 years of imprisonment.
The IRS applies the FBAR filing requirements to a U.S. “person” in these categories:
- A U.S. citizen
- A U.S. Green card holder
- Individuals with signing authority over a non-U.S. account (some qualifications apply)
- Foreign nationals in the U.S. for extended periods (on H-1B or other types of Visas)
- Domestic partnerships, trusts and corporations
Special Note: This regulation does not exclude minors.
In certain circumstances, individuals are not required to file a FBAR. These circumstances include:
- Foreign accounts maintained by a U.S. military bank
- Accounts owned by a government entity
- U.S. persons covered by a consolidated FBAR
- Trust and IRA beneficiaries
- Accounts owned by an international financial institution
Many accounts come under the FBAR filing requirements, including bank accounts, brokerage accounts, securities, mutual funds, pension accounts, trusts, partnerships, insurance policies, etc.
If you have a foreign bank account and need assistance in filing or understanding your FBAR requirements, we can help. The TPI Group helps clients come into compliance with FBAR regulations.
If you have failed to file in the past, we may be able to help you take advantage of the IRS Offshore Voluntary Disclosure program to mitigate some penalties.
Contact us today for a confidential assessment of your situation.