FBAR Filing | FBAR Representation | FBAR Reporting | FBAR Services
Who has to file a FBAR?
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
FBAR is a Government tool – Report of Foreign Bank and Financial Accounts (FBAR)
The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law.
The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.
IRS has reported that since the inception of the FBAR Program the Federal Government has collected over $4.4 Billion.
At the end of this year they will be over 80 countries that have signed a tax treaty to turn over information to the US government regarding the financial interest of taxpayers in the United States thus more need for Fbar representation.
IRS is dedicating many more tax dollars and manpower because of the large stream of revenue this generates. Taxpayers should beware, the IRS is coming full force.
FBAR Tax Representation and Tax Relief for IRS FBAR Problems
Hopkins CPA Firm P.C. is a professional tax firm specializing in tax services and relief for any IRS problems or tax situations pertaining to FBAR tax or Offshore Tax Issues. We are FBAR representation specialists.
The U.S. Government has been very active in Offshore Activity and has dedicated millions of dollars to the FBAR cases for revenue source it generates in the form of civil and criminal penalties. Because of this the IRS is training many new agents to become specialist in FBAR. In addition, the Government has sought out the assistance of foreign countries in identifying expatriates who have interests in foreign financial accounts.
Who should File FBAR, Reporting and Filing
Report of Foreign Bank and Financial Accounts (FBAR)
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). See the ‘Who Must File an FBAR’ section below for additional criteria.
Current FBAR Guidance
FinCEN introduces new forms
On September 30, 2013, FinCEN posted, on their internet site, a notice announcing FinCEN Form 114, Report of Foreign Bank and Financial Accounts (the current FBAR form). FinCEN Form 114 supersedes TD F 90-22.1 (the FBAR form that was used in prior years) and is only available online through the BSA E-Filing System website.
The system allows the filer to enter the calendar year reported, including past years, on the online FinCEN Form 114. It also offers an option to “explain a late filing,” or to select “Other” to enter up to 750-characters within a text box where the filer can provide a further explanation of the late filing or indicate whether the filing is made in conjunction with an IRS compliance program.
Anyone with $10,000 in one or more foreign financial accounts (determined by taking the maximum balance of each account at any time during the year, summing the maximums, and comparing the sum to $10,000) must file Form TD F 90-22.1 (the FBAR).
The form must be received on or before June 30th, so that means you need to take care of this now if this reporting requirement applies to you. There are no extensions available for the FBAR.
Exception to FBAR Reporting Requirements
Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
- Certain foreign financial accounts jointly owned by spouses;
- United States persons included in a consolidated FBAR;
- Correspondent/nostro accounts;
- Foreign financial accounts owned by a governmental entity;
- Foreign financial accounts owned by an international financial institution;
- IRA owners and beneficiaries;
- Participants in and beneficiaries of tax-qualified retirement plans;
- Certain individuals with signature authority over but no financial interest in a foreign financial account;
- Trust beneficiaries; and
- Foreign financial accounts are maintained in a United States military banking facility.
Look to the form’s instructions to determine eligibility for an exception and to review exception requirements.
Reporting and Filing Information
A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income.
Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040, the “Other Information” section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder’s reporting obligation.
The FBAR is not filed with the filer’s federal income tax return.
The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR.
The FBAR is an annual report and must be received by the Department of the Treasury in Detroit, MI, on or before June 30th of the year following the calendar year being reported. While FinCEN strongly encourages individuals to electronically file FBARs, the form can be mailed to one of the two addresses below, provided that the mailing is received by June 30, 2013:
File by mailing the FBAR to:
United States Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621
If an express delivery service is required for a timely filed FBAR, address the parcel to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mail room, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
Delivery messenger service contact telephone number: (313) 234-1062.
Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.
Electronic Filing for FBAR Forms – MANDATORY Beginning July 1, 2013
On June 29, 2011, FinCEN announced that all FinCEN forms must be filed electronically with certain exceptions. The FBAR was granted a general exemption from mandatory electronic filing through June 30, 2013. E-filing is a quick and secure way for individuals to file FBARs. Filers will receive an acknowledgement of each submission. For more information about FBAR e-filing, read the FinCEN news release.
New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938)
Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR.
A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web page.
FBAR Penalties, procedures and applications.
The IRS has been delegated authority to assess FBAR civil penalties. There are civil penalties for negligence, pattern of negligence, non-willful, and willful violations. Each case is different and the results vary from cases to case.
IRS penalties are be asserted only to promote compliance with the FBAR reporting and record keeping requirements.
In exercising IRS discretion, tax examiners consider whether the issuance of a warning letter and the securing of delinquent FBARs, rather than the assertion of a penalty, will achieve the desired result of improving compliance in the future. We hope!
FBAR civil penalties have varying upper limits, but no floor.
The IRS audit examiner discretion is necessary because the total amount of penalties that can be applied under the statute can greatly exceed an amount that would be appropriate in view of the violation. You must hope the tax examiner is fair and uses good judgement.
IRS tax examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether penalties should be asserted and the total amount of penalties to be asserted.
Because FBAR penalties do not have a set amount, IRS has developed penalty mitigation guidelines to assist examiners in the exercise of their discretion in applying these penalties.
The FBAR mitigation guidelines are only intended as an aid for the examiner in determining an appropriate penalty amount.
The IRS tax examiner must still consider whether a warning letter or a penalty amount that is less than what would be called for under the mitigation guidelines would be more appropriate given the facts and circumstances of a particular case.
FBAR penalties are determined per account, not per unfiled FBAR, for each person required to file.
IRS penalties apply for each year of each violation.All the more need for competent and experienced FBAR representation.
As noted above, however, examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether penalties should be asserted and the total amount of penalties to be asserted.
Call us at (361) 360-3855 professional consult for FBAR representation and FBAR filing.