Should You Submit an IRS Voluntary Disclosure if You Failed to File an FBAR or Form 8938?

If you live in New Jersey and have an offshore bank account—or multiple offshore bank accounts—there is a good chance that you need to file a Report of Foreign Bank and Financial Accounts (FBAR) or Form 8938 on an annual basis. In fact, you might need to file both of these forms each year. So, what if you haven’t? New Jersey international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

When Are You Required to File an FBAR and/or Form 8938?

The FBAR and Form 8938 are two separate forms that U.S. taxpayers must use to report their offshore accounts under two separate sets of circumstances. Depending on their circumstances, taxpayers may need to file one or both forms annually:

• FBAR Filing Requirements: Taxpayers must file an FBAR each year that the aggregate value of their offshore accounts exceeds $10,000 at any point during the calendar year.
• Form 8938 Filing Requirements: Taxpayers must file Form 8938 each year that the aggregate value of their “foreign financial assets,” including offshore accounts, exceeds $50,000 on the last day of the tax year or $75,000 at any point during the year (increased thresholds apply to married taxpayers filing jointly and taxpayers living overseas).

Taxpayers must file their FBARs with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) by October 15, while they must file Form 8938 with the Internal Revenue Service (IRS) when they submit their annual returns.

What if You Haven’t Disclosed Your Offshore Accounts to the IRS or FinCEN?

If you haven’t disclosed your offshore accounts to the IRS or FinCEN, you will want to come into compliance as soon as possible. Offshore account disclosure violations carry steep penalties, including criminal penalties in some cases.

In this scenario, coming into compliance typically means either submitting a streamlined filing or a voluntary disclosure to the IRS (while taxpayers must file their FBARs with FinCEN, the IRS enforces both Form 8938 and FBAR compliance). Streamlined filings are used to correct inadvertent and unknowing offshore account disclosure violations, while voluntary disclosures are used to correct “willful” non-filings.

With both types of filings, a cautious and informed approach is essential. Taxpayers need to be very careful to ensure that their disclosures serve their intended purpose of avoiding an audit or investigation. If taxpayers aren’t careful, their delayed disclosures could do more harm than good—and they could see their disclosures used against them during IRS enforcement proceedings or in federal court.

Discuss Your Options with New Jersey International Tax Attorney Kevin E. Thorn

Are you behind on your offshore account disclosures (filing an FBAR and/or Form 8938)? If so, we encourage you to contact us promptly for more information. To discuss your options with New Jersey international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call us at 201-842-7696 or tell us how we can reach you online now.