In 1970, the United States, in an effort to detect and prevent money laundering, passed the Bank Secrecy Act (BSA). The BSA has several reporting and detection mechanisms, including the Foreign Bank Account Report (FBAR).
According to the IRS, … “[a] United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and
estate, must file an FBAR to report:
- a financial interest in or signature or other authority over at least one financial account located outside the United States if
- the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.”
The IRS defines a foreign financial account as an account at a financial institution located outside the US.
When the BSA was originally passed, several interest groups tried to have it declared unconstitutional because they believed the BSA violated due process and the right against unwarranted search and seizure. During the appellate review process, there was a period of inaction in the enforcement of the BSA, but by the 1980s enforcement was in place.
What are the FBAR filing requirements?
The FBAR is due on April 15, the same day your tax return is due. It you cannot file by that date, you can get an automatic extension to October 15 that you do not need to request.
While the FBARs and tax returns are filed on the same day, that does not mean they are filed together. The FBAR is filed electronically on the BSA eFiling system: https://bsaefiling.fincen.treas.gov/main.html
You may file a paper document, but you must first call the FinCEN Regulatory helpline at 1-800-767-2825 to request an exemption from the e-filing requirement. If you wish to have someone else file the FBAR for you, use FinCEN Report 114a, which you keep for you records unless asked for it by the IRS or FinCEN.
The IRS FBAR instructions require that records be kept on every foreign account reported on an FBAR. These records should include the following information:
- Name on the account,
- Account number,
- Name and address of the foreign bank,
- Type of account, and
- Maximum value during the year.
There is no specified requirement for the document this data must come from. It can be bank statements or even the FBAR filed, as long as the records are complete. You are required to retain these records for five years from the due date of the FBAR.
FBAR Penalties for failing to file for foreign accounts.
Civil monetary penalties for FBAR reporting violations or for failure to keep records range from $12,921 for a non-willful violation of transaction to $129,210 or 50 percent of the amount not reported for a willful violation of transaction.
THEVOZ Attorneys can help you accurately file your FBAR in a way that is compliant with the law. More importantly, we will work with you if you discover you have failed to adequately comply with FBAR and/or have failed to file income taxes for a period of time. It is not uncommon to be non-compliant for both FBAR and taxes, but we can help you get compliant through procedures that made available by the IRS for taxpayers found to be non-willful in their non-compliance. Willful violators also have an IRS procedure available that THEVOZ can assist you with, but it is much more complicated and arduous.