All you need to know about FBAR

All you need to know about FBAR

The Foreign Bank Account Report (FBAR) was established in 1970 because the Bank Secrecy Act (BSA) created various financial reporting obligations to identify and collect evidence against money laundering, tax evasion, and other criminal activities. One of these new obligations was the FBAR, which requires any person considered a US tax resident with a foreign account balance of $10,000 or more at any point in the tax year to report.  Filing does not increase one’s tax bill as the FBAR is purely a reporting tool used by the IRS to keep track of money held oversees.  In contrast to income tax returns, the FBAR is submitted electronically with the Department of the Treasury at the BSA e-filing site.  

With the attacks of 9/11 in 2001, the FBAR became much more prominent, and the USA Patriot of 2001 Act further required the Treasury Department to submit recommendations to improve FBAR policies and procedures. These modifications to key components of the FBAR altered its role from fighting terrorism to now include international tax compliance. In 2003, filings jumped by 17%, due in part to an increase of penalties issued by the IRS for failure to file FBAR’s.

The penalties for FBAR non-compliance can be severe and escalate quickly, ranging from $10,000 per non-willful violation to $100,000 or 50% of the balance for willful avoidance. Since many taxpayers are in non-willful violation because of simple ignorance, the IRS created an amnesty program called Streamlined Filing Procedures allowing taxpayers to get caught up without penalty. It is extremely important to take advantage of this program; if the IRS discovers a failure to file before coming forward, the taxpayer will be ineligible for the Streamlined Filing Procedures and subject to the maximum penalties.

To examine all the requirements of the FBAR and get help with filing, consult your tax professionals at Delgado & Associates. 

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