FBAR Penalty

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FBAR Penalties

Tax Relief: The purpose of this page is to discuss the nature of the FBAR Penalty and offer visitors of our website up-to-date information on the following important questions. First, why is filing an FBAR required? Second, Who must file the FBAR? Third, what are the consequences of not filing? Lastly, how can taxpayers resolve foreign bank account reporting problems? In addition to answering these questions from the perspective of both taxpayers and tax professionals, our goal is to also provide taxpayers in need the information required to resolve these tax problems themselves through relevant links and resources from the IRS.

Background: Why filing is required
In the post 9/11 environment the United States Government in conjunction with agencies such as the Treasury Department and the IRS have instituted a number of important policies all intended to decrease money laundering in the expressed effort to support terrorism. The FBAR requires individuals with holdings in foreign accounts to report their offshore holdings to reduce the likelihood of using funds for terrorist activities and to reduce tax evasion abroad.

Who must file?
According to the IRS Workbook on the Report of Foreign Bank and Financial Accounts all United States persons with any controlling interest in a foreign account exceeding $10,000.00 USD in a given calendar year must file.

Defining a “person” in the legal sense as it pertains to this Report is relatively simple. A “person” is a United States citizen, a resident of the United States, or a domestic partnership, corporation, trust or estate. If you meet any of these criteria, the requirement applies to you. Even if you only have signing authority on a foreign account and you meet the above criteria, the requirement applies to you.

Consequences: What happens if I fail to file?
Failure to file can result in penalties, interest and even criminal consequences depending on the nature of your failure to file. The IRS classifies failure to file under a number of different sub-categories. There are two primary categories that determine specific penalties, viz. negligence or non-willful violations and willful non-filing. The penalties are much more severe for willful non-filing.

Non-willful and/or negligent penalties can range from less than or equal to $500.00 to $10,000.00 for each act and up to $50,000.00 if the taxpayer has a history of failure to file. There are no criminal penalties associated with these acts.

Willful non-filing can result in both civil and criminal penalties and the penalties are very severe. You can expect a fine of up to $500,000.00 and/or 50.00% of the account balance at the time of the violation for willful non-filing and you may also face up to ten years in prison for failure to file. The most sever penalties are for filing false information knowingly and for failing to retain accounting records of your offshore holdings.

Solutions: How to resolve FBAR problems

First and foremost, always file the FBAR if the rules apply to you. Many taxpayers are confused about how to properly file. Seeing as though the form is not an IRS form, but a Department of the Treasury form, the confusion is quite understandable. You can download the most recent FBAR form HERE.

If you are unsure if the filing requirement applies to you, you can contact your local IRS office and speak to an IRS agent. If you would prefer to speak to an independent tax consultant, feel free to call IRSTaxReliefNow.org for a free consultation at (888) 332-8959.

Some taxpayers have been mislead lately by advertisements in the media that FBAR penalties can be minimized to “pennies on-the-dollar.” These claims, by and large, are patently false. Taxpayers should always be concerned about specific reductions in penalties “guaranteed” by tax consultants, CPA’s, Enrolled Agent’s or tax attorneys.

You may have heard of a program called “Voluntary Disclosure” as a means of minimizing specific penalties associated with the FBAR requirement. Voluntary disclosure programs are typically offered by the IRS for limited periods of time giving taxpayers the ability to disclose their foreign holdings without severe penalties. You can call your local IRS office to determine if a voluntary disclosure program exists at present or call IRSTaxReliefNow.org at (888) 332-8959 and a representative will research the program and let you know if it is available.

If you have been contacted by the IRS about a penalty or if you feel you should have filed, you may want to consider speaking to a tax professional to understand your rights, obligations and options before you speak to an agent of the IRS. This will help you understand what your options are and what you can expect as a potential outcome. In some cases, penalties associated with the filing requirement may be limited if a competent professional reviews your financial and tax situation thoroughly. To learn more, contact IRSTaxReliefNow.org for a free consultation at (888) 332.8959.

To research this matter yourself, consider the following links: