FinCEN Form 114, better known as a Report of Foreign Bank and Financial Accounts (FBAR), is a federal tax form that must be filed by taxpayers who own or have a financial interest in certain types of offshore accounts. The FBAR rules are complicated and failing to properly file FBARs when required can lead to substantial IRS penalties. Here, New Jersey international tax attorneys answer 10 frequently-asked questions (FAQs) about FBARs:
Q: When am I required to file an FBAR?
You must file an FBAR if you own or have a financial interest in offshore accounts that have an aggregate value of $10,000 or more at any point during the relevant tax year.
Q: How often are FBAR filings required?
FBARs must be filed on an annual basis. Each year that your offshore accounts meet or exceed $10,000 in value, even briefly, you are required to file an FBAR in order to disclose your foreign financial holdings to the IRS.
Q: What are the penalties for failing to file an FBAR?
The penalties for failing to file an FBAR vary depending upon whether the failure is determined to be non-willful or willful. Non-willful violations carry a civil fine of $10,000 per year per account. Willful violations can be prosecuted as federal tax crimes, with penalties including up to 10 years in prison and a fine of $100,000 dollars or 50 percent of the account balance at the time of the willful violation.
Q: Is failing to file an FBAR a criminal offense?
Willful failure to file an FBAR is a criminal offense. As a result, when facing an IRS audit or investigation in relation to your offshore holdings, it is imperative that you vigorously dispute any allegations of intentional misconduct.
Q: What is a FATCA letter?
A FATCA letter is a request from a foreign financial institution (FFI) regarding your tax filing status in the United States. The purpose of the letter is to allow the FFI to determine whether it must provide information about your foreign accounts to the IRS.
Q: What should I do after receiving a FATCA letter?
If you have received a FATCA letter, you must comply with the FFI’s request for information. You must also promptly assess your FBAR filing requirements, as the FFI is required to disclose any relevant information about your offshore holdings to the IRS.
Q: What if I don’t know whether I need to file an FBAR?
If you are unsure whether you need to file an FBAR, you should speak with an international tax attorney promptly in order to determine your reporting obligations to the IRS.
Q: Can I dispute the penalties for failing to file an FBAR?
Yes. If you believe that you have been unfairly penalized in relation to your FBAR filings, you can file an appeal.
Q: What if I unintentionally failed to file an FBAR?
If you unintentionally failed to file an FBAR, you can mitigate your liability for penalties by making a voluntary disclosure. For many taxpayers, this means taking advantage of the IRS’s streamlined filing procedures.
Q: Should I hire an accountant or an attorney to help with my FBAR filings?
If you need help understanding your reporting obligations in New Jersey, you should speak with an international tax attorney. While an accountant can help with certain tax-related issues, due to the legal implications associated with offshore filing compliance (or non-compliance), a New Jersey international tax attorney is your best option for dealing with any FBAR-related issues. Call 201-355-8202 or reach out online to learn more.