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    Important Deadline for Reporting Foreign Bank Accounts is June 30

    Do you have a foreign insurance policy, retirement account, inherited asset, joint account with parents living outside the U. S., or even an online gambling account?  If so, an accounting deadline may be very soon upon you.

    Taxpayers with an interest in or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2015 must file a Report of Foreign Bank and Financial Accounts (FBARs) by June 30.  This is true even if the foreign account did not generate any taxable income.  Electronic filing through the FinCen BSA E-Filing System website is the only way to file, and there is no extension of time offered.

    I'm not prepared.  Can I skip filing?  

    Failure to timely file FBARs can result in civil penalties and possibly criminal sanctions (including imprisonment). The question is whether failure to file is willful or not. Statutory civil penalties might be $10,000 per year for a non-willful failure, but a willful failure to file could be subject to civil penalties equivalent to the greater of $100,000 or 50% of the balance in an unreported foreign account, per year, for up to six tax years.

    Non-willful penalties might be avoided if there is “reasonable cause” for the failure to timely file FBARs.  Also, IRS will generally not impose a penalty for the failure to file the delinquent FBARs if income from the foreign accounts now being properly reported on the FBARs and income taxes have been paid on time -- provided the taxpayer has 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.

    How should I be keeping record of my foreign accounts?

    You must retain records that contain the name in which each account is maintained, the number or other designation of the account, the name and address of the foreign financial institution that maintains the account, the type of account, and the maximum account value of each account during the reporting period. You should retain these records for a period of 5 years from the required filing date and must be prepared to show them if asked. Retaining a copy of all previously filed FBARs is recommended as well.

    This is all news to me.  What now?

    If you have (or have had) foreign accounts that require reporting but are not in compliance, we can help.  There are various options to get you back on track and lessen your penalty risk. Contact us immediately to evaluate your personal options.

    Going forward, what else should I know?

    Be prepared for an accelerated deadline next year.  The calendar year 2016 FBAR will be due by April 15, 2017 (not June 30).  Also, beginning next year, partnerships, trusts, and corporations will also be allowed extension options under rules similar to the rules for the coordination of the individual FBAR due date.  That will be a maximum 6-month extension ending October 15, 2017.

    As our business and personal investments continue to expand throughout the globe, IRS will further scrutinize offshore interests.  Taxpayers living here and abroad need to take these filings seriously and maintain accurate records.  As always, we’re here to help.

     

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