Requirements for reporting on foreign bank accounts
If you have an overseas financial account, you are likely subject to overseas bank account reporting (FBAR). In particular, U.S. persons such as citizens, residents, partnerships, corporations, and other legal entities must follow FBAR regulations if:
- The US person has an interest, authority to sign, or control over a financial account that is not within The United States
- The value of all combined foreign accounts exceeds $ 10,000 at any time during the calendar year
- ETF accounts
- Foreign stock accounts
- Foreign life insurance
- Investment accounts
- Investment funds
The FBAR must be submitted by April 15th of the following calendar year. Taxpayers receive an automatic extension up to 15th October with an extension of the personal tax return, BUT the FBAR must be filed before or with the income tax return if filed afterwards April 15th and before 15th Octoberth. The FBAR deadline can also be extended if the taxpayer is a victim of a natural disaster such as wildfire or an earthquake. Talk to our dual-licensed international tax attorneys and CPAs if you haven’t been able to meet the deadline for reporting your overseas account.
Determine when a foreign bank account reporting violation occurred inadvertently
There are many steps to consider in determining whether a late or undelivered FBAR return could be considered an accidental breach. When someone accidentally missed their FBAR return April 15th or the advanced 15th October Deadline, the Internal Revenue Service (IRS) would classify this as a non-intentional violation of FBAR requirements. Note, however, that it is not enough for a person to merely claim to have accidentally missed the filing date. The claim needs to be supported by evidence.
Unfortunately, the IRS does not have a complete list of rules that can be used to clearly determine when an FBAR violation was not intentional or willful. Instead, the IRS will look at the entirety of the circumstances to assess whether the taxpayer should be penalized for their breach. The following factors can influence an IRS auditor’s decision in an accidental FBAR violation case:
- The total value of the overseas accounts and the unreported overseas income they have earned
- Whether the taxpayer kept a CPA / EA to file their annual tax return
- Whether the CPA or EA inquired about the taxpayer’s overseas income and overseas financial accounts
- The taxpayer’s status as a US resident taxpayer
- The history of the taxpayer filing tax returns and whether they are often late
- The approximate date that the taxpayer learned of their FBAR and offshore taxable income reporting requirements
These are not the only factors analyzed in a non-deliberate FBAR violation claim. For example, if a taxpayer has shown a pattern of negligence or willful blindness in filing their tax returns and FBARS, it can be a serious problem when reporting tax and offshore information. Our dual-licensed international tax attorneys and CPAs will help you prepare for your FBAR violation or eggshell audit for overseas accounts.
Deliberate violations of foreign bank accounts
If the IRS does not believe that a taxpayer’s FBAR violation was accidental or unintentional, it can claim that it was deliberate or deliberate. In some cases, a taxpayer can even be blamed for willful blindness in relation to their FBAR return obligation.
Willful blindness occurs when taxpayers attempt to protect themselves from information that would inform them of their criminal liability. In general, two factors are used to analyze whether a taxpayer was intentionally blind to the truth:
- The taxpayer has subjective knowledge that there is a high probability that a certain fact is present
- The taxpayer took deliberate steps not to learn the essential facts
Note that depending on the circumstances of your case, you may face civil and criminal prosecution. As such, if you think you may have violated FBAR rules, especially if offshore taxable income has not been reported, do not hesitate to reach out to our dual licensed international tax attorneys and CPAs. Competent legal representation could mean the difference between serious fines and criminal and foreign information reporting to law enforcement or ensuring a tough pass to prosecution and receiving beneficial civil penalties through streamlined or full voluntary disclosure. In certain circumstances, an expat volunteer disclosure program or reporting delinquent overseas information program can even result in zero penalties.
The California International Tax Attorneys and CPAs in the Tax Law Offices of David W. Klasing I have worked on thousands of failed FBAR filing cases and our services are available to you anywhere in the world or in the US. No taxpayer wants to face penalties for violating the FBAR as they can result in fines of thousands of dollars. With the extensive knowledge and experience we have on this subject; We could increase your chances of getting a result that is favorable to your case. Call our law firms for advice at (800) 681-1295 or plan online here.
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Public contact: Dave Klasing Esq. MS-Tax CPA, [email protected]
SOURCE Tax Law Offices of David W. Klasing, PC