Got Unreported Assets Overseas? The Clock is Ticking
Foreign Bank Account Reporting (FBAR) Deadline June 30, 2015
Did Grandpa leave you his foreign bank account when he passed away? If you have foreign bank accounts holding more than $10,000 in the aggregate anytime during 2014, you are required to file an FBAR (Report of Foreign Bank Accounts) by June 30th (the 2014 FBAR must be received by the IRS by June 30, 2015). It doesn’t matter whether the foreign accounts generate income or not; just owning them, or having signature authority, requires you to file. There is NO extension to file the FBAR.
What’s the big deal?
Failure to file can result in serious consequences. The sanctions for not completing the FBAR include numerous severe civil penalties and potential prosecution followed by a term in federal prison.
What are your options for prior years?
No longer does one size fit all. Under the “Offshore Voluntary Disclosure Program” (OVDP), taxpayers must file 8 years of amended tax returns and FBARs and pay the additional income tax, penalties and interest as well as a 27.5% “FBAR-related” penalty on the highest balance of their foreign assets in the 8 year period. In June 2014 the IRS announced major changes to the program. Taxpayers who did not report foreign income or assets but whose non-compliance was “non-willful”, do not need to enter the OVDP, but can participate in the Streamlined Filing Compliance Procedures (“SFCP”) by filing only 3 years amended returns and 6 years of FBARs. No income tax penalty and only a 5% “FBAR-related” penalty are due. Under the new rules, any taxpayer seeking to participate in the OVDP, who at any point in the 8 year look back period had an account at a bank which has been publically identified as a target of an IRS criminal tax investigation or as having reached a non- prosecution agreement with the IRS, will be subject to a FBAR penalty of 50% (not 27.5%) on all foreign accounts and assets. Close to 100 Swiss banks are currently negotiating to enter into Non-Prosecution Agreements with the IRS, so the risk of facing a 50% penalty is growing.
We work with several law firms who specialize in this area and help their clients navigate the intricacies of the Voluntary Disclosure Program. For a summary of the Foreign Asset Reporting Requirements please click here: Foreign Asset Reporting . For assistance with your FBAR or entering the OVDP, please contact our Tax Manager, Steven Citron.