Report of Foreign Bank and Financial Accounts (FBAR )
Foreign bank accounts must be reported to the IRS if a taxpayer has any financial interest, signature or other authority over a bank, securities, or other financial account and the value of all accounts reached $10,000 or more at any time during the year.
FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) must be filed when the FBAR filing requirements are met.
The FBAR is required under Title 31, of the Code of Laws of the United States of America, not under any provision of the Internal Revenue Service Code. Its reporting requirements initiated with the Bank Secrecy Act of 1970 under 31 U.S.C.
The law was originally passed to pursue organized criminals, drug dealers, money launderers and tax evaders. Following 9/11, congress broadened the purpose and the enforcement of the filing of the FBAR. In 2003, The U.S. Treasury Department transferred the administration of the FBAR to the Internal Revenue Service. Since then, The IRS has prioritized the enforcement of filing the FBAR for the importance of the FBAR to track down tax evasion through foreign bank accounts.
The FBAR must be filed on or before April 15th of the year following the calendar year being reported. The FBAR must be filed electronically through FinCEN’s BSA E-Filing System.
The FBAR filing deadline will follow the Federal income tax due date guidance, which notes that when the Federal income tax due date falls on a Saturday, Sunday, or legal holiday, a return is considered timely filed if filed on the next succeeding day that is not a Saturday, Sunday, or legal holiday.
Extension of Time to File. FinCEN will grant filers failing to meet the FBAR annual due date of April 15th an automatic extension to October 15th each year. Accordingly, specific requests for an extension are not required.
Penalties for Failure to File the FBAR
Failure the file the Report of Foreign Bank and Financial Accounts by the due day may result in civil penalties and criminal penalties or both if the filer does not have a reasonable cause why the forms were filed late. The IRS recommend that if you learn you were required to file FBARs for earlier years to file the delinquent FBAR reports as soon as possible and attach a statement explaining why the reports are filed late.
- Penalty for failure to properly file the FBAR may be up $10,000 per violation.
- Penalty for willfully failing to file the FBAR is the greater of $100,000 or 50% of the balance in the account. Also, the person who willfully fails to file the FBAR may be subject to criminal prosecution.