What is the FBAR Used For?Offshore Account Update
Posted in on April 28, 2017
FBAR stands for Report of Foreign Bank and Financial Accounts. The FBAR is a report that has to be made annually if you have more than $10,000 in any combination of offshore bank accounts that you either own or have signature authority on. If the combined balances of any offshore financial accounts exceed $10,000 at any time during the year, FBARs must be filed.
FBARs are intended to ensure that offshore accounts are disclosed so individuals and businesses with money offshore cannot hide their wealth outside of the United States and prevent U.S. authorities from knowing about their assets. Reporting not only helps to fight tax evasion, but it also gives U.S. authorities information they need to try to reduce other types of financial crimes that may occur.
Penalties for not filing FBARs are very serious. Many individuals who have failed to file their annual Report of Foreign Bank and Financial Accounts have found themselves facing penalties that exceed the value of the assets in offshore accounts. Not filing FBARs can result in civil penalties, which make it possible for taxing authorities to obtain large sums of money from accountholders as a consequence of failing to report offshore accounts. It may also be possible to face criminal charges for failing to report offshore investments.
A Boston tax law firm can explain what the FBAR is used for, how it works, and when it must be completed. An experienced attorney can also provide assistance completing and submitting your FBAR and can help you to be proactive in trying to avoid penalties if you were supposed to file FBARs in the past but you did not do so.
Understanding How and Why the Report is Used
The FBAR has been required since the 1970s when the Bank Secrecy Act passed. The goal of the Bank Secrecy Act was to prevent money laundering and related financial offenses by requiring reports of certain types of transactions, including the purchase of more than $10,000 in negotiable instruments.
In addition to reporting requirements imposed upon banks, the Bank Secrecy Act also imposed a reporting requirement on individuals. Individuals were required by the Act to file an annual Report of Foreign Bank and Financial Accounts. Each person with authority over offshore accounts or who owned $10,000 or more in offshore investments would have to file FinCEN Form 114.
FinCEN Form 114 is filed to the office of the Financial Crimes Enforcement Network (FinCEN). It is not filed to the IRS. The form can be filed online and the filing deadline is April 15.
Although the FBAR filing requirement has existed for decades, the U.S. government has gotten serious in recent years about trying to fight global tax evasion. Among the many different steps being taken to try to facilitate better compliance with tax laws is a renewed focus on FBAR mandates. The IRS issued a press release in 2008 reminding U.S. taxpayers of consequences associated with not filing FBARs and U.S. authorities have been aggressively pursuing cases against those who have not filed.
Attorney Kevin Thorn can assist you with complying with FBAR filing requirements and can help you to identify options for trying to reduce penalties if you are afraid that legal action will be taken against you for not filing FBARs in the past.