An important part of the tax collection process involves individuals properly reporting their financial assets and worldwide income. The U.S. government also requires the reporting of foreign financial assets through a process known as a Report of Foreign Bank and Financial Accounts.
More commonly referred to as FBAR, these reporting requirements mean that you must include additional documentation with your tax return. Form 114 is sent to the Department of the Treasury electronically through the FinCen network. Failure to comply could result in financial penalties. Thankfully, resolving any FBAR issues could be possible with the help of an experienced tax controversies lawyer. Let a Bethesda FBAR lawyer advise you on the best way to proceed.
Not everyone is required to file an FBAR. This can make the process confusing, given that many individuals are unaware that they are required to comply. A Bethesda attorney could advise whether a taxpayer’s failure to timely file an FBAR was willful or non-willful.
FBAR compliance applies to more than just U.S. citizens. The law specifically applies to any “United States person” that owns certain accounts overseas. In addition to citizens, a “United States person” also covers lawful foreign residents residing in the country. Domestic businesses, trusts, and estates might also be required to comply with FBAR.
These requirements are broad, but they do not apply to every account held by an institution outside of the United States. There is a minimum requirement that determines when filing is necessary. Specifically, financial assets and accounts must only be reported if the aggregate value is than $10,000 on any day in the year. This does not include the value of any real property held overseas – only financial accounts.
There are also other exceptions to FBAR compliance. For example, funds that are held in U.S. military banking facilities do not qualify, even when those facilities are overseas. However, overseas retirement accounts and IRAs are not exempt. It is important to speak to an attorney before assuming any financial accounts are exempt from FBAR compliance.
FBAR compliance must occur every year that a “United States person” owns financial accounts that meet the $10,000 minimum value. The deadline each year is April 15, which applies to the accounts owned the year prior. While there is an automatic extension until October 15, there is no leeway after that.
There are times when a taxpayer’s only option is to make an FBAR submission after the deadline. This delinquent filing could bring an individual into compliance without a penalty but it must be done carefully. A Bethesda FBAR attorney could determine if a taxpayer would benefit from a late filing.
This procedure is for those who were unaware that they had a responsibility to report. They will need to include a written explanation for why they did not comply, and they cannot take advantage of this if they were previously notified of their failure to file an FBAR, or if they did not file Form 8938.
The penalties associated with FBAR noncompliance only go back to the previous six years. For that reason, it is unnecessary to provide delinquent FBARs from before that time.
Some individuals might think that all they need to do is file Form 8938 to the IRS to report their financial assets held outside of the country. The FBAR, which goes to the Treasury Department, is just as important. It is not difficult to maintain FBAR compliance, but you may require legal counsel to determine if you need to file, or how to disclose in the event you are out of compliance.
Reach out to a Bethesda FBAR lawyer to learn if you have an obligation to report or disclose your foreign financial accounts.
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.