Late Filing FBAR: The Late Filing FBAR rules are complicated. We have developed an introductory guide to help you submit FBAR with your IRS Streamlined Filing Submission. The FBAR is the Foreign Bank Account Reporting Form. It is an important aspect to any streamlined procedure submission. The FBAR was developed by FinCEN (Financial Crimes Enforcement Network) and enforced by the IRS. The form is also referred to as FinCEN Form 114. In recent years, the IRS has taken an aggressive position towards foreign accounts compliance and unreported foreign income.
Late Filing FBAR (How to Submit to IRS)
The Late Filing FBAR rules vary, depending on the facts and circumstances of the delinquent filer. The IRS has updated the Delinquent FBAR & Streamlined Filing rules. For reference, the FBAR is different than FATCA (Foreign Account Tax Compliance Act), and has been around for 50-years. Here are 10-Important Tips when it comes times to submit the FBAR under the Streamlined Procedures:
*At our main site, we have many resources devoted to FBAR. The focus of this article is to reintroduce the basics.
FBAR is More than Just Bank Accounts
While the phrase Delinquent FBAR may lead you to believe (understandably so) that the reporting is limited to foreign bank accounts – that is incorrect. The FBAR includes Foreign Bank and Financial Accounts.
Common types of accounts to report on the FBAR, includes:
- Bank Accounts
- Stock Accounts
- Investment Accounts
- Mutual Funds
- Pension & Retirement
- Foreign Life Insurance Policies
What if The Money Does Not Have to Belong to You?
If your name is associated with the account, either as the owner, co-owner or signatory – then you typically have to report the money.
Practice Pointer: Under the streamlined procedures, you can seek to have the value of money that does not belong to you excluded from the penalty base of the delinquent FBAR penalty computation, since that money is not yours.
FBAR Threshold Filing Requirement
The threshold filing requirements are relatively low. It is based on an aggregate value of all accounts, not each individual account value. And, if the total aggregate value of all the accounts exceeds more than $10,000 – you have to report all the accounts.
Open, Closed, and Dormant Accounts
If an account is opened, then it is reported on the FBAR. If the account is dormant (but open) then it is also reported on the FBAR. This is very common in countries such as India, where the accounts sometimes never “officially” close. As to closed accounts, they are reported one more time in the year following the closure.
Example: Account was opened in 2010 and closed in 2019. In 2020, when a person files the 2019 FBAR, they will include the account that closed (one last-time), because technically the account was still open at some point in 2019.
Maximum Balance vs. Year-End Balance
For the FBAR, the applicant submits the maximum balance. Sometimes, depending on the country, institution, and type of account (such as a passbook account), this may not possible. There are options to assist you with how to report in this type of scenario, and the options will depend on your specific facts and circumstances.
Year-end value is used solely for the Streamlined Procedures, in order to calculate the 5% penalty — not to report the FBAR. If the maximum value is not known, sometimes the year-end value may work as a substitute FBAR value.
Closed Accounts & Late FBAR Reporting
The Streamlined Procedure penalty is based solely on the December 31st value of the accounts. So, if the account is reported on the FBAR but closed in the same year, it is not computed into the penalty.
Because unless the account was closed on 12/31, then the 12/31 (December 31st) value of an account closed before that date would be zero.
Double-Counting & Late FBAR Streamlined Penalty
This may be one of the five most common questions we receive (and a very good question). The FBAR is not used to total your foreign account balances. Rather, the FBAR is used to report the balances. So, if you transferred the same money 5-times during the year, it may appear you have 5x the value of the money.
The reason the IRS uses the year-end value when computing the streamlined penalty, is to avoid any double-counting.
Sometimes, a joint account is owned 50% by each account holder. Sometimes it is an uneven split, and sometimes one of the owners of the account is only on the account in namesake. A common example of the latter is when a parent includes the child on the account. These are all issues that can be dealt with at the time of submission, and generally the penalty can be avoided on any money that is not owned by the streamlined applicant.
Other International Information Reporting Forms in Addition to Late FBAR
The FBAR is only one of many different international information reporting forms. It is the most commonly filed form, and also carries the stiffest penalties.
Some other forms to also be aware of, include:
- Form 5471
- Form 5472
- Form 8621
- Form 8865
- Form 8938
Forgot an FBAR Account After Your Streamlined was Submitted?
This is neither tragic nor fatal. Everyone makes mistakes. If you missed an account during the submission process, it can rectified – usually without much issue or impact on the submission package.
We Specialize in Streamlined & Offshore Voluntary Disclosure
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
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How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
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