By Veronica Pamoukaghlian, Senior Technical Writer
Today, not reporting foreign bank accounts to the IRS can lead to unthinkable penalties. If you who have kept an overseas account at a non-US bank without disclosing this information to the IRS, a mere $10,000 account might lead to penalties of hundreds of thousands of dollars. The longer this situation has been going on, the more astronomical penalties may be.
However, if you choose to voluntarily disclose information about your overseas accounts, you could be subject to significantly lesser penalties.
While US laws have been designed to discourage the hiding of large fortunes offshore, certain individuals may be unknowingly at fault; for example, immigrants to the US who still possess assets in their country of origin.
In the past, it was hard for the US to track overseas accounts, primarily due to bank secrecy practices. But thanks to the Foreign Account Tax Compliance Act (FATCA) the US has made deals requiring over 100 countries to report information about accounts held by US taxpayers. This includes numerous Swiss banks and financial institutions based out of “fiscal paradises;” a kind of paradise the new legislation is steadily eradicating.
A tax evasion report by the US Government Accountability Office revealed that by December 2012 the IRS’s offshore programs had resulted in 39,000 disclosures leading to payment of $5.5 billion in taxes and penalties, with 6% of penalty amounts over $1 million.
Because the IRS is constantly striking deals with new financial institutions, your overseas bank may be next. If the US finds your accounts before you report them, penalties will be significantly higher. In some cases, you may even face criminal charges.
FBAR Deadline June 30th 2015
US taxpayers and companies with a greater than 50% direct or indirect financial interest or signature authority over foreign financial accounts are required to file the FBAR if the aggregate value of the accounts at any time in the calendar exceeds $10,000.
The annual report for 2014 must be filed electronically on or before June 30, 2015. There are no extensions whatsoever. If you reported your foreign financial accounts within your 2014 federal income tax return, you are still required to file an FBAR.
FBARs must be filed online by the deadline. It is common knowledge that many taxpayers only disclose information about foreign accounts after financial institutions reach a resolution to provide information to the IRS. By that time, penalties can almost double.
The only way to minimize penalties for foreign account activities is to file an FBAR following all the IRS´s requirements. If you have never filed an FBAR, you may also need to report activities from previous years.
Filing an FBAR without a clear strategy, especially when filing for several years into the past, can be a mistake. It is important to seek expert advice to decide what kind of compliance program is best for you, and to carefully plan your offshore account reporting.
If you want to find out about the legal status of your foreign accounts or are unsure whether filing an FBAR at this time might be the right move, give us a call. All inquiries are kept strictly confidential and subject to the attorney – client privilege.
Securing the services of an attorney experienced with foreign account reporting is crucial in order to avoid legal trouble and minimize financial losses. We have helped numerous taxpayers across the United States and the world with foreign account reporting questions and amnesty filings.
For more information, contact attorney Bethany Canfield at or by telephone (414) 223-0464.