Many people living and working in the United States have bank accounts or other financial accounts in foreign countries. When these accounts reach a certain value, the owner must file a Report of Foreign Banks and Financial Accounts (FBAR).
If you have significant holdings in other countries, consult an Alexandria FBAR lawyer who could ensure you are compliant with reporting requirements. A seasoned tax lawyer could also assist you in preparing and submitting any FBARs that you failed to file in previous years.
An FBAR is a statement that discloses a person’s or business’s foreign financial holdings if they exceed $10,000 at any point in the year. Its purpose is to discourage U.S. taxpayers from using foreign accounts to launder money or hide income. U.S. citizens living abroad and U.S. residents with signatory authority over foreign accounts must file an FBAR if their holdings exceed the threshold.
The FBAR requirement is not a way to tax money held abroad; it is just an informational reporting requirement. A reporter files the FBAR electronically, directly with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department. The FBAR does not go to the Internal Revenue Service (IRS) with other tax forms.
The $10,000 threshold represents the sum of all foreign holdings—a person with multiple accounts could be responsible for filing an FBAR even if no single account exceeded the threshold value in a calendar year. If the account is in a foreign currency, its value in U.S. dollars is determined by using the U.S. Treasury’s Financial Management Service Date for December 31 of the calendar year being reported. Determining the value of foreign financial accounts can be complicated, and an Alexandria attorney could help a taxpayer determine whether they must submit an FBAR.
The requirement to report financial accounts in other countries applies to U.S. citizens, persons residing in the U.S., estates formed in the U.S., and any other entity organized under U.S. laws. Holdings subject to the reporting requirements include bank accounts, brokerage accounts, trusts, insurance policies with cash value, and mutual funds.
If the assets are in a retirement account or Individual Retirement Account, then the owner, participant, or beneficiary does not need to file an FBAR. Similarly, if the assets are in a trust, a beneficiary need not file an FBAR if the trust’s agent or trustee filed an FBAR. If spouses jointly own all accounts, one spouse could file the FBAR on behalf of both spouses, regardless of whether they file their taxes jointly or separately. However, the non-reporting spouse must sign the FinCEN Form 114a authorizing their partner to file on their behalf.
The FBAR is due on April 15, but the Treasury Department provides an automatic extension until October 15 without the need to request one. An Alexandria FBAR attorney can provide further clarification in reporting deadlines.
Taxpayers are sometimes unaware they have foreign holdings in an estate or mutual fund, or they might believe the amount they own is negligible. Some people might even be unaware of the need to report foreign accounts to U.S. tax authorities. The IRS allows people to file delinquent FBARs without a penalty in certain cases.
A taxpayer could submit a delinquent FBAR stating the reason for failing to file on time was not willful. This procedure is available to anyone who properly disclosed any foreign income associated with the accounts on their income tax forms and paid any applicable tax. However, penalties might be assessed if the taxpayer:
If the taxpayer also failed to file income tax returns for the years they failed to file FBARs, an Alexandria attorney could investigate whether they qualify for one of the IRS’ amnesty programs. The “lookback period” for filing FBARs is six years – anything earlier than that will not produce a penalty.
There are penalties for a willful failure to file an FBAR. However, when the failure to file was not willful, bringing the filings up to date resolves the issue in almost all cases.
Taxpayers with foreign financial accounts may not realize they must report them separately to FinCEN. Even when you are aware of your need to file an FBAR, gathering and reporting the information can be tedious.
An Alexandria FBAR lawyer handles the compiling and reporting of your overseas financial assets and could bring you into compliance if you have failed to file them in the past. Call today to schedule an appointment with us.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Vienna, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.