During the past year(s), did you have a foreign bank account or a financial interest/signature authority in any foreign account? If so, be aware…the IRS wants to know about it.
If the combined aggregate value of all those foreign bank accounts exceeded $10,000 at any time during the calendar year, even if just for 1 day, you are required to file FinCEN Form 114, Foreign Bank Account Report (FBAR) with the US Treasury. The online filing of the FBAR is separate from the individual tax return and is due by April 18th, 2017 for tax year 2016. Before 2016 it was due by June 30th. If more time is needed to file it, taxpayers can now request a 6-month extension of time to file (i.e., same extension period as Form 1040). This reporting may be applicable to US citizens, US residents and domestic entities including but not limited to Partnerships, Corporations, S-Corps, Limited Liability Companies, trusts and estates. The FBAR is e-filed here.
Additionally, if the aggregate value of these accounts exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year, the taxpayer must report these assets on Form 8938, Statement of Specified Foreign Financial Assets under Foreign Account Tax Compliance Act (“FATCA”). Form 8938 is filed with the IRS as part of your personal or business tax return. The account thresholds are different for married and single taxpayers and are higher for those individuals who live outside the United States. The FATCA requirement is in addition to the long-standing FBAR filing requirement. Even though there is similar and often identical information disclosed on both the FBAR and FACTA forms, filing one form does not relieve a taxpayer of the requirement to file the other form.
Non-compliance with the FBAR or FATCA can result in severe penalties starting at $10,000 for failure to file and up to $100,000 or more for willful violations. Criminal penalties may also be imposed.
US taxpayers who fail to voluntarily report their interests in foreign financial accounts can become compliant with their obligations in one of the following four ways:
- Streamlined filing compliance procedures for non-willful conduct
- Delinquent FBAR submission procedures
- Delinquent International information return submission procedures
- Offshore Voluntary disclosure program