Foreign Bank Account Reporting RequirementsOffshore Account Update
Posted on February 13, 2015 | Share
Those who earn income from offshore financial accounts must report the offshore accounts to the Internal Revenue Service (IRS) and must also declare the money earned. While most people understand this requirement because U.S. citizens are required to pay taxes on all income, there is also another legal mandate that not everyone knows about that applies to almost everyone with foreign bank accounts.
The Internal Revenue Service requires every account holder and every signatory with offshore accounts to file an annual Report of Foreign Bank and Financial Accounts (FBAR) form. The requirement kicks in as soon as the accounts have an aggregate value of $10,000 or more over the course of the year.
This means that if you have your name on one or more accounts that reach $10,000 at any point, you have an obligation to file an FBAR. Forbes recently warned that many signatories are not aware of this obligation. If you are an owner or signatory on foreign accounts and you have not filed FBARs, you need to talk to a Boston IRS attorney about your options.
FBAR Reporting Requirements
Joint accounts and family accounts are common, and there are many situations where someone is a signatory on an account but does not receive any income from it. Even if you have not earned any money at all from having your name on an offshore account, you are still subject to FBAR reporting requirements.
A failure to file FBARs has serious consequences. There is a fine of $10,000 per account per year for each nonwillful violation of reporting requirements. A signatory on an account who does not earn income from it could thus face major civil penalties. Having your name on five accounts and not filing FBARs on those accounts for two years could lead to $100,000 in penalties.
A willful failure to file FBARs has penalties that are even more severe. Violators will be assessed civil fines up to 50 percent of the account value. If there were multiple years of non-reporting, penalties can exceed the total value of the account. One Florida man, for example, faced penalties of 150 percent of the value of the account that he had offshore.
The penalties for not reporting foreign accounts are more severe than for typical tax evasion. Willful failures to report can lead to criminal charges in addition to the civil penalties. A person convicted of a willful failure could face up to 10 years of imprisonment.
Signatories whose names are on offshore accounts and have not complied with reporting requirements need to understand the options available to them. Filing amended tax returns and participating in voluntary disclosure programs may be options to reduce or avoid civil fines and penalties. Kevin Thorn, a Boston tax lawyer with the Thorn Law Group, can provide assistance to those who are concerned that they will become the target of an IRS investigation for not properly reporting their offshore accounts. Act quickly, as the IRS has been targeting offshore investors. Do not end up in financial trouble. Call our office today.
For a consultation, contact Kevin E. Thorn, Managing Partner, at firstname.lastname@example.org or (617) 692-2989