Do You (or Did You) Need to File an FBAR with Your 2021 Federal Return?Offshore Account Update
Posted on March 19, 2021 | Share
In addition to filing their federal income tax returns, many U.S. taxpayers also need to file FinCEN Form 114 (commonly known as an “FBAR”) on an annual basis. For those who are required to file an FBAR, failure to do so can have significant consequences, including the potential for criminal prosecution under the federal Bank Secrecy Act (BSA). So, do you (or did you) need to file an FBAR with your 2021 return? Boston FBAR attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:
If You Owned an Offshore Account in 2020, You May Need to File an FBAR in 2021
The FBAR filing requirement applies to U.S. taxpayers who own offshore accounts. Specifically, it applies to U.S. taxpayers who own offshore accounts with an “aggregate maximum value” of $10,000 or more at any point during the tax year. So, if you owned one or more offshore accounts in 2020, and if any one or more of these accounts had a total value in excess of $10,000 at any point during 2020, then you are required to file an FBAR in 2021.
FBARs Must Be Filed with FinCEN, Not the IRS
While the FBAR filing requirement is often associated with the federal income tax return filing requirement, U.S. taxpayers don’t file their FBARs with the IRS. Instead, taxpayers must file their FBARs with the Financial Crimes Enforcement Network (FinCEN) using its BSA E-Filing System.
Technically, FBARs are due on April 15 (even if the IRS extends the income tax filing deadline, as it did in 2021). However, all taxpayers receive an automatic extension to October 15. Since preparing your annual returns should provide you with the information you need to file your FBAR (if applicable), it is a good idea to go ahead and file with FinCEN when you submit your annual return. But, if you are reading this after May 17, 2021, it still might not be too late to get your FBAR in on time.
What Happens if You Fail to File an FBAR?
If you miss the October 15 extended deadline for filing an FBAR, you will need to correct your mistake. In most (but not all) cases, this involves submitting a voluntary disclosure or streamlined filing. When you submit a voluntary disclosure or streamlined filing, you must pay what you owe, but doing so allows you to avoid the risk of facing additional liability in an IRS audit or investigation.
Importantly, if you need to file an FBAR with FinCEN in 2021, you may also need to submit Form 8938 to the IRS. This form is required for U.S. taxpayers who own foreign financial assets (including offshore accounts) worth $50,000 or more. Failing to file Form 8938 can also lead to steep penalties, and submitting a voluntary disclosure is typically the most appropriate way to resolve filing deficiencies here as well.
Request an Appointment with Boston FBAR Attorney Kevin E. Thorn, Managing Partner of Thorn Law Group
Do you have questions about FBAR or Form 8938 compliance? If so, you should discuss your filing obligations with an attorney promptly. To schedule an appointment with Boston FBAR attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 617-692-2989, email firstname.lastname@example.org or inquire online today.