Complying with Requirement to Report a Foreign Bank Account
Who Must File
There are certain exceptions when it comes to the FBAR filing requirements.
*Any type of financial account operating as part of a United States military banking facility.
*Certain types of foreign financial accounts that are owned jointly by a married couple.
*A United States person who is trust a beneficiary reporting an account when a FBAR is filed on behalf of the trust.
*A United States person who is part of a FBAR consolidated filing.
*A United States person who is a beneficiary of a retirement plan that is tax-qualified.
*A United States person who is a beneficiary or participant of a plan that is tax qualified.
*Any financial account being used by a governmental entity.
*Any foreign financial account being used by an international financial institution.
Determining Reporting Obligation
In certain situations, a United States person may be required to report a foreign financial account even if it produced no taxable income. The requirement to file a FBAR can be determined by answering questions about foreign accounts on a tax return. FBAR is a calendar year report. It is required to be filed on or before April 15. Beginning in 2013, the filing of a FBAR is required to be done electronically. The FinCEN’s BSA E-Filing System must be utilized.
Failure To File
FBAR Should a United States person be required to file an FBAR and not do it, they could be given civil monetary penalties. It is possible for the IRS to give a civil monetary penalty and that has been adjusted for inflation. The penalty should not exceed $12,400 for each violation that is willful and does not have a reasonable cause. A penalty could be over $124,500 or 50 percent of the balance in an account at the time of the violation.
Reporting any and all foreign bank accounts became a major issue in recent years. This is when the IRS began to pursue taxpayers who appeared to be engaging in abusive offshore transactions. Many taxpayers have attempted to evade or avoid paying income tax by hiding their funds in offshore bank accounts. There is no amount of income so small it is not worth reporting. It is always best to be in compliance. It is best to avoid the penalties associated with noncompliance for not reporting a foreign bank account.