Every United States person, whether citizen, permanent resident or resident alien, must file an FBAR with the U.S. Treasury Department under certain circumstances. FBAR is the Foreign Bank Account Report, or FINCEN form 114.
If you are an owner, nominee or signer on one or more foreign accounts worth $10,000 or more, you must file the FBAR.
Cases concerning tax compliance as it relates to offshore accounts can be complicated. If you have not disclosed to the government any bank accounts you own or sign on that are in a foreign country, you should obtain legal help to do so. Tax compliance is essential, and the IRS offers offshore account amnesty programs. However, keep in mind that the Internal Revenue Service is very serious about cracking down on people who do not come forward to report their offshore accounts.
The so-called “streamlined program” announced by the IRS in 2012 was disappointing to many offshore account holders because it was primarily available only to non-resident non-filers. There were also different degrees of review based on the taxpayer’s answers to a risk questionnaire as well as the amount of tax that was due. The IRS revamped the program, and it is now available to some U.S. residents and to more U.S. taxpayers who are living abroad.
Penalties can be catastrophic
While tax compliance is mandatory for those with foreign accounts and income, the problem for some people is fixing the past and how best to approach that issue. FBAR violations are harsh. The penalty for a willful violation can be equal to 50 percent of the amount in any offshore account not reported. In fact, the court has even imposed a penalty of as much as 150 percent of the funds in an undisclosed offshore account. The bottom line is that you have the right to have money or investments anywhere outside the U.S., but you must be transparent about them. If you lapsed in this responsibility, you can seek legal assistance to get back on track with the IRS.