Time running short to report foreign accounts to IRS

If you haven’t filed a Foreign Bank Account Report (FBAR) this year, there’s still time, but not much.

United States persons with a financial interest in or signature authority over one or more foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year must file FinCEN Form 114, also known as the FBAR (Report of Foreign Bank and Financial Accounts).

Who must file and when

Taxpayers who missed this year’s April 18 FBAR filing deadline to disclose their foreign accounts have an opportunity to electronically submit the FBAR by October 16 and report their foreign accounts for the current tax year.

A United States person includes U.S. citizens, U.S. residents, entities such as corporations, partnerships, or limited liability companies organized under U.S. law, and trusts or estates formed under U.S. law.

Penalties for violations

The IRS takes FBAR reporting seriously. You may be subject to civil monetary penalties and/or criminal penalties for FBAR reporting and/or recordkeeping violations. Assertion of penalties depends on facts and circumstances, according to the IRS.

In March, the Supreme Court handed down a decision in a case where an individual failed to file FBAR forms for five consecutive years, despite having numerous foreign accounts. While the taxpayer’s failure to report was determined to be non-willful, the IRS still imposed hefty penalties totaling $2.72 million. The Supreme Court ultimately reduced the total penalty to $50,000, but that is obviously still a substantial sum.

However, the IRS also says on their website that they “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.”

Also, if the taxpayer has a reasonable cause for the late filing, they may be able to request an extension. However, the IRS will still analyze the facts and circumstances to determine whether the claimed reason for missing the deadline qualifies as reasonable cause.

Professional assistance

If you have foreign accounts and need to report them for 2022 or any year, we can help. The international tax professionals at Sol Schwartz & Associates work with numerous individual and business clients from around the world on their international tax matters, including FBAR filing requirements.

Let us know if you need our help by using the short form below and we will get back to you right away.