Reporting of foreign bank and financial accounts or FBAR is required for anyone that holds accounts overseas. This includes brokerage, banking, trusts, mutual funds or any other type of foreign account. Anyone who has financial interests in the United States that has at least one account outside of the United States as well must file one of these reports. Those that have an account that aggregates value in their accounts over $10,000 must also report this to the IRS. There are some exceptions, which a CPA can outline if applicable.
Reporting Foreign Account Information
You will need to note any information in this report on your 1040 at the end of the year filings. Those that are self employed will not need to fill out an FBAR at each quarter. Unlike standard tax forms, the FBAR is due July 1 and can be filed electronically. Those that fail to report this information in a timely manner could be charged a fine, similar to those that fail to meet the February deadlines for a 1099 form. Fines can climb as high as $100,000 or half of the value of the account when the violation is discovered. This will be applied to every account that is found to be in violation as well, which will add up very quickly.
Updating Your Forms
Those that have been filling out their offshore claims forms consistently will need to work with a tax preparer to ensure that they are using the updated versions of the forms. At the end of September 2013 a new system was added that will need to be used for the 2014 calendar year.
- You now have the option to explain a late filing
- You can provide further explanation for the contents of an account
- You may file in conjunction with other tax forms
- You may have a third party file on your behalf when filing electronically
- Effective June 30, 2015 some deferral forms will only be valid with a signature
These forms are generally being adopted to make it easier for employers and individuals to filer notice of their offshore holdings without penalty. Most forms are now available online and can be submitted electronically by you or your tax firm if it is determined that this is required for you. There is also a new voluntary disclosure program that gives people a chance to disclose any information that may have been missed in 2009-2012 filings without penalty.
Voluntary Disclosure Program
This program was founded to give people a chance to disclose foreign assets that may have been neglected in previous tax filings including their FBAR. There is no closing date for this program at this time, so there is no current risk of missing deadlines for disclosure. Reviews of any submissions under this program will be completed by the IRS and it will be determined if any follow-up is necessary. In most cases these measures were initiated to assist non-United States citizens become compliant with the IRS, but those within the U.S. that are low-risk this can be an opportunity to correct any mistakes in previous filings.