IMPORTANT NOTICE: FAWCO Tax & Banking Disclaimer
FAWCO Club leaders, please also see FBAR-related Important Club FBAR Information.
In a nutshell - who must file an FBAR: A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year (per FBAR instructions - click here for that 22-pg. pdf document including definitions for Financial Account, Joint Account, Foreign Financial Account. Financial Interest, Person, Signature Authority, United States Person, as well as any exceptions to the FBAR filing requirements).
FBAR Filing Deadline: The FBAR is a calendar year report and must be filed on or before June 30 of the year following the calendar year being reported. There is no provision for requesting an extension of time to file an FBAR.
Note: The FBAR is not filed with a federal tax return. When the IRS grants a filing extension for a taxpayer’s income tax return, it does not extend the time to file an FBAR.
How to file an FBAR (or amend a previously filed FBAR): Effective July 1, 2013, the FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The online FinCEN Form 114 includes a fill-in blank for the applicable year. If an amended FBAR filing, there is also a place to indicate that, as well as the BSA Identifier No. of the original FBAR filing (assigned beginning in 2013 with electronic filings).
Compliance: If someone has failed to file an FBAR, the new IRS Streamlined Procedures “voluntary” disclosure program for non-U.S. residents not only waives failure to file penalties but also allows filing amended FBARs.
If only FBARs are past due: Someone who filed their U.S. tax returns and paid any taxes due, or were not required to file a U.S. tax return, should simply file those FBARs required for any of the delinquent 6 years. Per FAQ #17 on IRS.gov, Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers page, “… if you reported, and paid tax on, all taxable income but did not file FBARs, do not use the voluntary disclosure process. For taxpayers who reported, and paid tax on, all their taxable income for prior years but did not file FBARs, you should file the delinquent FBARs according to the FBAR instructions … The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.
Reason for Late Filing of FBARs: On the first page of the online FinCEN Form 114 it also includes this question - “Reason for Filing Late”.
If only FBARs are past due and, pursuant to above the filing is not being made in conjunction with an IRS compliance program, on their electronic filing the filer should check the reason but does not need to include any further explanation of the late filing. If none of the reasons to choose from are applicable (e.g. “Did not know that I had to file”; “Did not know my account qualifies as foreign”), by choosing “Other” for a text box, the filer could add their reason, e.g. “Did not know I was required to report this/these signature authority only foreign financial account(s)”.
If delinquent FBARs are being filed in conjunction with an IRS compliance program, by choosing “Other (Please provide explanation below)”, the filer can (up to 750 characters) also provide their required explanation. However, including as to any IRS determination of non-willful or willful penalties, it is recommended that these filers first consult an international tax attorney.
On IRS.gov, see also Delinquent FBAR Submission Procedures; Report of Foreign Bank and Financial Accounts (FBAR); New Filing Compliance Procedures for Non-Resident U.S. Taxpayers.
Record Keeping: Per FinCEN, “The records of accounts required to be reported on an FBAR must be retained for a period of 5 years from June 30th of the year following the calendar year reported and must be available for inspection as provided by law. Retaining a copy of the filed FBAR can help to satisfy the record keeping requirements.” Note: After filing the filer will receive by e-mail from BSA/FinCEN referencing a Receipt No., as well as a BSA Identifier No. These confirmations will also indicate the date the FBAR was filed.
Penalties for failure to file an FBAR (if the IRS identifies and contacts the U.S. Person before delinquent FBARs submitted)
- the civil penalty is $10,000 for each non-willful violation
- if the violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation
and each year someone did not file is a separation violation
Also excerpted from answer to FAQ#6 on IRS.gov, Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers page, “Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322. … Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.
Statute of Limitations: The statute of limitations for asserting FBAR penalties is six years from the date of the violation, which would be the date that an unfiled FBAR was due to have been filed. The new Streamlined Procedures also requires back FBAR filings of the past 6 years.
More Info: For more information, and answers to questions, see IRS.gov or bsaefiling.fincen.treas.gov.
Also feel free to contact us at . And, in confidence, do also let us know if you have a story to share, e.g. an IRS experience.
We also have a running comprehensive Q&A article - Understanding the FBAR and Your Reporting Requirements - which includes FAQs on Basic Filing Info (Who, What, When); Technical (doing it electronically); Compliance; and, Assistance.
Elaine Terlinden November 8, 2014
