It’s no secret that the IRS has been cracking down on Americans with foreign accounts. In fact, they’ve been so aggressive that they’ve even created a special task force dedicated to finding and prosecuting people with undeclared foreign accounts. But what happens when the IRS finally catches up to you?
Well, if you haven’t been following the news, the IRS has been using a new tool to catch people with undeclared foreign accounts: the Foreign Bank Account Report, or FBAR. The FBAR is a report that must be filed by any American with a foreign bank account worth over $10,000. And if you don’t file it, the IRS can hit you with a hefty fine – up to $10,000 per year!
So, what happens if the IRS finds out that you haven’t been filing your FBAR? Well, they’ll probably start by sending you a notice asking you to file the report. If you don’t comply, they could start levying fines. And if you still don’t comply, they could eventually refer your case to the Department of Justice for prosecution.
So, if you have a foreign bank account, make sure you file your FBAR! Otherwise, you could be in for a world of hurt from the IRS.
-How The FBAR Works-
The Foreign Bank and Financial Accounts Report, or FBAR, is a report that is required to be filed with the US Department of the Treasury by any US person who has a financial interest in, or signature authority over, foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year.
The FBAR is not a tax return, but failure to file it can result in civil and criminal penalties.
Who Must File the FBAR?
US persons include citizens and resident aliens of the United States, and entities such as corporations, partnerships, and limited liability companies that are created or organized in the United States.
A US person with a financial interest in, or signature authority over, foreign financial accounts must file an FBAR if the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.
The $10,000 threshold is an aggregate limit, meaning that it applies to the total value of all foreign financial accounts, rather than each individual account.
What is a Foreign Financial Account?
A foreign financial account includes any bank account, securities account, or other financial account that is located outside of the United States.
It also includes any account that is held in a foreign currency, as well as any account that is held by a foreign financial institution.
What is a Financial Interest in a Foreign Financial Account?
A financial interest in a foreign financial account exists when a person has a legal right to access the account, even if that person is not the owner of the account.
A financial interest also exists when a person has the power to control the disposition of money, funds, or other assets held in a foreign financial account by means of a contract, agency agreement, or other arrangement.
What is Signature Authority over a Foreign Financial Account?
Signature authority over a
-Why You Should File An FBAR-
The FBAR, or Foreign Bank and Financial Accounts Report, is a form that is required to be filed by any U.S. person who has a financial interest in or signature authority over any foreign financial accounts with an aggregate value of over $10,000 at any time during the year.
The FBAR is filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
The purpose of the FBAR is to help the U.S. government detect and prosecute financial crimes, including tax evasion.
taxpayers who fail to file an FBAR can be subject to civil penalties, and in some cases, criminal penalties.
If you have a financial interest in or signature authority over a foreign financial account, you should consult with a tax advisor to determine if you are required to file an FBAR.
-What Happens If You Don’t File An FBAR-
If you don’t file an FBAR, the penalties can be quite severe. The base penalty for failing to file an FBAR is $10,000. However, if the IRS determines that your failure to file was willful, the penalty can be increased to the greater of $100,000 or 50% of the account balance. Additionally, you may be subject to civil and criminal penalties.
-How To File An FBAR-
Are you a U.S. person with foreign financial accounts? If so, you may need to file a Report of Foreign Bank and Financial Accounts (FBAR) with the Treasury Department.
Here’s what you need to know about FBAR filing requirements and how to file an FBAR.
What Is an FBAR?
The FBAR is a form that must be filed by U.S. persons with foreign financial accounts if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.
The FBAR is also known as FinCEN Form 114.
Who Must File an FBAR?
You must file an FBAR if you are a U.S. person with foreign financial accounts and the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.
The definition of a U.S. person for FBAR purposes includes U.S. citizens and resident aliens.
Non-resident aliens are not required to file an FBAR unless they have a financial interest in or signature authority over foreign financial accounts.
What Are Foreign Financial Accounts?
Foreign financial accounts include:
-Insurance policies with cash value
-Any other financial accounts located outside of the United States
What Is the Deadline for Filing an FBAR?
The deadline for filing an FBAR is April 15th of the year following the calendar year being reported.
For example, the FBAR for calendar year 2020 must be filed by April 15, 2021.
However, taxpayers can request an extension of time to file the FBAR.
How to File an FBAR
You must file your FBAR electronically through the Financial Crimes Enforcement Network (FinCEN) website.
You cannot file a paper FBAR.
To file your FBAR, you will need to create a FinCEN user account.
Once you have created an account, you will be able to login and file your FBAR.
-The Bottom Line-
As we all know, the FBAR is a form that is used to report foreign financial accounts to the US government. The form must be filed by June 30th of each year, and it is due to the US Treasury Department.
The bottom line is that if you have a foreign financial account, you must file an FBAR. If you do not, you could face some serious penalties. The US government is cracking down on tax evasion, and they are making it a priority to make sure that everyone is paying their fair share.
If you have a foreign bank account, you should talk to your tax advisor to make sure that you are in compliance with the FBAR requirements. Do not take chances with your taxes – it is not worth it.