Not just for the uber-wealthy, foreign or “offshore” accounts are common for many people, including those who have immigrated to or are temporarily working in the United States. Although having a foreign bank account can be beneficial for many reasons, failure to report those accounts can lead to jail time and massive fines.
Regardless of the foreign country in which you keep your assets, the IRS requires you to pay taxes back home. To crack down on those who would use foreign accounts to avoid paying taxes, the U.S. Treasury has an agreement with more than 100 countries that requires the bank information of U.S. citizens with foreign accounts to be reported back to the U.S. government. With the certainty of disclosure by foreign countries, the importance of properly reporting your foreign accounts voluntarily has never been greater.
For those with a financial interest in (or signatory authority for) a foreign account worth more than $10,000, the IRS requires a special form to be filed each year. A “Report of Foreign Bank Reports” or “FBAR” must be filed separately from your federal tax return for every year the combined value of the taxpayer’s accounts exceeds $10,000, regardless of whether the taxpayer is an individual, business, or other legal entity. Unless an extension is granted, the FBAR must be filed by April 15 of the next year after the year being reported.
Failure to properly report your foreign bank accounts will result in fines and penalties. FBAR penalties range from $12,549 to $124,588 (or 50% of the amount in the account, whichever is higher) for each violation, with willful violations receiving the highest penalties. Criminal FBAR violations can even result in incarceration.
Reporting your foreign bank accounts with FBAR filing.
It can be tricky to determine which foreign bank accounts meet the FBAR filing requirement. Types of foreign accounts that require disclosure through an FBAR filing include, but aren’t limited to:
- Bank accounts
- Brokerage accounts
- Mutual funds
Other foreign accounts, such as certain accounts jointly owned by spouses, may be exempt from the FBAR requirement, but may require other additional filings. The best way to determine whether your foreign bank accounts meet the FBAR requirement—and to avoid heavy fines and possible incarceration—is to have an experienced tax specialist review your accounts. Depending on the total value of your foreign assets, an additional form “Statement of Specified Foreign Financial Assets” also known as an 8938, may also be required.
Prevent Foreign Bank Account Report violation fines with the tax specialists.
Your foreign bank accounts could lead to heavy fines and even jail time if not disclosed in a timely manner with an FBAR filing. Protect your foreign assets and prevent IRS FBAR violation penalties by contacting the experienced tax specialists at Key Tax Group today. We specialize in assisting clients with the FBAR filing process to ensure assets are protected both at home and abroad.