The Association of Americans Resident Overseas – AARO – recently conducted a 4 month survey to see how Americans with offshore financial accounts were adapting to the mandatory electronic FBAR filing regimen. For decades, U.S. taxpayers with offshore accounts had to paper file FBAR reports each June. Now, FBARs must be filed electronically. The survey results suggest that many taxpayers are still not filing FBARs. If the side of the foreign accounts is large, there is the opportunity to earn a large IRS Whistleblower Program award.
Short for Report of Foreign Bank and Financial Accounts, an FBAR must be filed for every offshore account when the aggregate balance of those accounts exceeds $10,000 (in U.S. dollar equivalents). Last summer, the AARO decided to survey members about their experience with the new electronically filed FBAR form. Although 247 people responded, we don’t know how accurate the results are and if they are reflect the views of tens of thousands of Americans who still have not reported their offshore holdings.
Of the 247 taxpayers that completed the survey, only 218 filed an FBAR. In our experience, most expats living abroad have reportable foreign accounts, suggesting that compliance rations are still low. Perhaps more telling, 16 of those folks had just filed their first FBAR. Because the survey was aimed at folks who had filed FBAR forms, we don’t really know the percentage of taxpayers that are still noncompliant.
Did people timely file? Not always. The survey found that 26 of the 218 FBAR filers did so late.
Of those that did file, many used the service of an offshore tax service. (Although we can file FBAR forms for clients, it is normally much more cost effective to self file.) For those who want to avoid the hassle and use an economical offshore service, we send folks to Greenback Tax Services.
Taxpayers who completed the survey had a wide variety of complaints from privacy concerns to problems with the electronic filing system to concerns about the necessity for even reporting foreign accounts.
Included on the list of recommendations by the AARO is a suggestion to raise the filing threshold from $10,000 to $50,000. If the threshold was pegged to the consumer price index, $10,000 in 1970 dollars equates to $60,864 today.
A second suggestion by the AARO is to exclude “same country” accounts. The AARO thinks that taxpayers who can show they are fiscally domiciled in another country and have accounts in that same country should not be required to report those accounts because the host country is already “fully aware” of the accounts. While we agree that the entire offshore reporting regimen needs to be improved, this suggestion isn’t likely to pass. Uncle Sam doesn’t care what the host country knows; it wants to know what foreign assets belong to Americans.
What does it all mean? First, the survey isn’t very useful to determine how many millions of Americans remain out of compliance. Because participants were drawn from the pool that had already filed FBAR. We presume the compliance rate remains quite low.
Second, the survey suggests that there are still millions of Americans or U.S. taxpayers not in compliance. That means tens of thousands of opportunities to earn an IRS Whistleblower Program award.
The IRS offers awards to people with inside information about unreported income, unfiled returns and unpaid taxes. With penalties so very high on unfiled FBARs, the potential awards are also high.
No one likes paying taxes but if we pay taxes, why should someone else get away with not paying their fair share?
Do you have information about someone with unfiled FBAR forms or unreported foreign accounts? Your information may be worth money. Whistleblowers can collect up to 30% of whatever the IRS collects from delinquent taxpayers. And the process is totally confidential.
Ready to learn more? Visit our IRS WHISTLEBLOWER tax fraud information page. Ready to get the process rolling or have specific questions? Contact us online, by email at or by phone at 202-800-9791. All inquiries are protected by the attorney – client privilege and kept in confidence.