The Report of Foreign Bank and Financial Accounts (“FBAR”) Form TD F 90-22.1 is used to report an interest in foreign financial accounts.
Who Must File
Any U.S. person with a financial interest or signature authority must file an FBAR if the balance in the account exceeded $10,000 during the year. A U.S. person includes a U.S. citizen, U.S. resident and entities like corporations, partnerships, limited liability companies and trusts and estates.
The FBAR must be received by June 30. Most other tax forms allow for mailed by a certain date. This is not the case with the FBAR. It must be received by June 30. The other thing to keep in mind is that this form is not sent to the IRS. It needs to be filed with the US Treasury. Here is the address:
U.S. Department of The Treasury
P.O. Box 32621
Detroit, MI 48232-0631
As will all correspondence with the tax authorities, we recommend it be sent certified mail, return receipt requested. This will provide you with the proof of mailing.
Penalties for Non-Filing
The penalties for failure to file the FBAR can be brutal. The non-willful failure to file penalty is up to $10,000. If the violation is willful the penalty can be the greater of $100,000 or 50% of the account balances.
The IRS is currently running a so-called “Offshore Voluntary Disclosure Initiative.” The purpose of this program is to provide amnesty and allow taxpayers to come forward and avoid criminal prosecution. Generally the penalty is 27.5% of the highest value of the account over the past 8 years. For taxpayers to enter this program they must file all of the returns and pay of the tax, interest and penalties associated with this.
The FBAR is not a Substitute for Form 8938
Certain taxpayers are required to file Form 8938, Statement of Specified Foreign Financial Assets. This form is attached with an individual’s income tax return when it is filed. The FBAR is not a substitute for Form 8938. There are areas in the forms where there is duplication. However, the filing of the FBAR and the Filing of Form 8938 must be made in accordance with the instructions to the forms.
Will you file your FBAR on Time?
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Tom Scanlon, CPA, CFP® has over thirty-five years experience in public accounting with an extensive background in the areas of financial, tax and estate planning.
