FBAR deadline & foreign financial asset reporting update

June 12, 2012 | By: Robert A. Green, CPA

The IRS provides additional guidance on FBAR versus new form 8938. See these helpful links.

Basic Questions and Answers on Form 8938

U.S. tax residents, don’t miss the FBAR (TDF 90-22.1) filing deadline of June 29, 2012 for 2011 FBAR reports TDF90-22.1. Otherwise, you may be subject to very large penalties. Non-resident aliens are not subject to these filing requirements if they do not have a green card.

There’s also another foreign tax form for 2011 tax returns, Form 8938 Statement of Foreign Financial Assets.

In prior years, many taxpayers overlooked or conveniently did not report their foreign financial accounts. Unfortunately, the IRS lumps all taxpayers into the category of tax cheat, assuming they are hiding money in offshore bank accounts. The IRS famously busted several Swiss banks and extended the busts to banking by Americans in India, Israel, Asia, and many tax havens throughout the world. In our opinion, IRS penalties should be designed for penalizing blatant tax cheats and not taxpayers who inadvertently overlooked quirky filings and did report their foreign income. The law differentiates between negligence and reasonable cause. Inadvertent overlooking is unfortunately usually subject to negligence penalties.

That’s where our top tax attorney Mark Feldman provides value. He can try to qualify you for a lower or full penalty abatement. The worst thing to do is to ignore this matter and wait for the IRS to bust you and then lower the boom with full penalties and perhaps even criminal charges.

Speak with us soon and you can work with our tax attorney with attorney-client privilege. Our CPAs can handle all your tax filings in association with your tax attorney, thereby preserving attorney-client privilege on our CPA services, too.

Side note. Per the IRS website, “If you are a U.S. citizen or resident alien residing overseas, or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an automatic two-month extension to file your return and pay any amount due without requesting an extension. For a calendar year return, the automatic two-month extension is to June 15.” Like other taxpayers, you can request an automatic extension until October 15 (see our Mar 29 blog).

An email message from the AICPA to it’s members:

The U.S. government has become increasingly concerned about, and focused on, offshore tax evasion. One tool the government has to combat such tax evasion is the Report of Foreign Bank Accounts (TDF 90-22.1) or FBAR.

The FBAR is required to be filed by two categories of U.S. filers:

1. Owners of foreign accounts

2. Those with signature of authority over foreign accounts, but no financial interest in the accounts.
The threshold for filing an FBAR is only $10,000 in aggregate for all foreign accounts. The amount per account is measured at the highest point during the year. The $10,000 threshold has not been indexed for inflation by Treasury since the early 1970s.

Note that the potential civil and criminal penalties for failure to timely file an FBAR are severe. The FBAR is required by the US Bank Secrecy Act of 1970 (“BSA”). The BSA is a law enforcement statute and is not part of the tax code. Instead, the BSA is part of the general Treasury Department Regulations. Because of this, the Departments of Treasury and Justice have the ability to impose both monetary civil as well as criminal penalties for the failure to timely file an FBAR.

The FBAR rules are highly complex. Accordingly, if there is any chance you own a foreign account or have signature of authority over a foreign account please contact your assigned CPA with Green NFH immediately.

If you have any questions about FBAR and Form 8938, as well as any foreign tax matters, contact us for help. We have CPAs and tax attorneys highly experienced in international tax matters for Americans abroad and non-resident aliens conducting investing or business in the U.S.