Missed the FBAR Deadline? IRS Offers Options

The deadline to file the 2014 FBAR with the U.S. Treasury was June 30, 2015.

What is the FBAR?

If a U.S. taxpayer’s total maximum balances in foreign financial accounts exceed $10,000 at any point during a calendar year, she must file a FinCEN Form 114 (“FBAR”) by June 30 of the following year.

The FBAR is not filed with the tax return. No payment is made with the FBAR. It is a form that merely provides foreign account information to the U.S. government.

There is an incentive to timely file the FBAR: penalties. The IRS can charge a $10,000 penalty―possibly more―per foreign account not timely reported. If a taxpayer has five foreign bank accounts, for example, and does not timely file the FBAR for 2014, the IRS could impose a $50,000 penalty for that year alone. Criminal charges are also possible, depending on the severity of the case.

Some taxpayers face the daunting situation of having not filed FBARs for multiple years. The IRS knows this, and offers several different programs to encourage taxpayers to come forward and clean up the past.

We’ve written about some of the IRS programs, including the Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures. These programs are appropriate for taxpayers who not only failed to timely file the FBAR but also have to file amended tax returns to report and pay additional tax on income related to the unreported foreign accounts.

Sometimes, a taxpayer does not have additional income to report, and just needs to file past due FBARs. What does the IRS suggest doing in this situation?

Check out the Delinquent FBAR Submission Procedures on the IRS website. In this situation, the IRS says to file all FBARs electronically through the BSA E-Filing System, and include a statement why the FBARs are being filed late.

Will the IRS charge FBAR penalties for filing late under these circumstances? Here’s what the IRS says:

The IRS will not impose a penalty for the failure to file the delinquent FBARs if you properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs, and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted.

It sounds like a great deal. Eligible taxpayers should consider taking advantage soon, as there’s no telling when the IRS may change these procedures or no longer offer them.

Of course, keep in mind that a taxpayer with unreported foreign financial accounts should contact a tax professional to discuss her particular facts and circumstances, as each taxpayer’s situation is unique.

Submitted by Brad Polizzano on Wed, 08/05/2015 – 11:10