For 2015, the deadline of June 30th, 2016 is just around the corner and penalties can be severe. The U.S. Internal Revenue Service (IRS) has been aggressively pursuing tax evaders and taxpayers involved in wrongful transactions in foreign countries. The requirement to file FBAR is designed to help the Department of Treasury and the IRS investigate and trace monies used for illegal transactions as well as identify unreported income generated and/or stashed out of the country.
Over the years, several “taxpayers” and U.S. tax residents have attempted to hide their income through deceptive means such as:
- Anonymous Foreign Entities aka Sociedad Anonima (S.A.)
- Hiding income in foreign countries and offshore brokerage accounts
- Using nominee entities overseas
- Insurance plans abroad
- Foreign credit and debit cards
- Foreign trusts
- Other methods
A yearly FBAR is required by US Treasury for all American citizens and residents who have interest in, or are signatories in foreign financial accounts that had a value of more than $10,000 at any one time during the financial year. Even if the current value is under $10,000 or all the money has been withdrawn, FBAR should still be filed if the financial account had hit this threshold at any point during the year.
Remember, the FBAR is not submitted with the tax return, it is filed separately. For 2015 the deadline is June 30th, 2016. Unlike the Corporate and Personal deadlines, the FBAR filing due date is not extendable.
Penalties for Failing to File an FBAR
Failing to submit your FBAR can result in severe penalties. Failure to file or a late filing results in a minimum $10,000 fine. Additionally, if a taxpayer is found guilty of negligence to file their FBAR, the minimum forfeiture is half the account’s value or $100,000 whichever is bigger. In some cases, the penalties can result in jail time as well. Your FBAR must have the name, address and account numbers of every financial institution that you have had over $10,000 during the course of the year.
If you have any foreign investments and need to file a Foreign Bank Account Report, or not sure whether you need to file one, give us a call. At Rosillo & Associates, we take care of your tax needs for long term financial success.