The venerable Report of Foreign Bank Accounts (better known as the FBAR) has gone through a few changes of late. First the form had a face lift. The mouthful of the TD F 90-22.1 was replaced by the FinCEN Report 114. FinCEN stands for the Financial Crimes Enforcement Network. The information reported by the FBAR and the other laws around it remained the same. Just the physical form changed.
Now the Department of the Treasury have announced a change in the FBAR due date, beginning for tax year 2015. In years past the FBAR was due on June 30. Now it will be due the same day as individual tax returns, April 15, or October 15 with the filing of an automatic six month extension. Although this means taxpayers have less time to get their FBARs filed, it does streamline the process by having most everything due on the same date.
The FBAR is used to report your interest in foreign or offshore accounts and assets. A US person must file an FBAR if they have a financial interest or signature authority over at least one financial account located outside the country and the aggregate value of all foreign accounts exceeds $10,000 at any time during the tax year. The form must be filed whether or not taxes are due on those assets. The penalty for failure to file a required FBAR is steep (willful violations may be the greater of $100,000 or 50% of the value of the accounts) and can even include criminal proceedings.
In recent years the FBAR and offshore accounts in general have made frequent news. The Departments of the Treasury and Justice have made increased efforts to crackdown on undisclosed offshore assets. To this end they have negotiated agreements with foreign governments and financial institutions for the automatic sharing of information on US depositors. Many of those agreements derive from the 2010 Foreign Account Tax Compliance Act or FATCA.
The good news for taxpayers is that the IRS has a program for voluntary disclosure of offshore assets. The aptly named Offshore Voluntary Disclosure Program (OVDP) allows taxpayers to file past FBARs and pay reduced penalties (currently 27.5% usually, though the IRS can change that rate in the future) to avoid criminal prosecution. A streamlined version of the OVDP is also available. This features penalties reduced even further from what the OVDP usually offers and is overall a quicker process to go through. The streamlined OVDP is only available to taxpayers whose nondisclosure of offshore assets was not willful.
Horowitz Law Offices has represented numerous taxpayers in connection with the OVDP and regularly represents taxpayers before the IRS, the Illinois Department of Revenue and the Chicago Board of Finance in connection with tax matters. You are welcome to contact us at (312) 787-5533 or firstname.lastname@example.org