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Can you report a foreign bank account using Turbo Tax?

Going through the prompts on Turbo Tax is straightforward until you reach the question about whether you have a foreign bank account. If you answer yes, you need to understand that the failure to disclose could open you to serious civil penalties.

You can no longer file the Report of Foreign Bank and Financial Accounts (FBAR) form through Turbo Tax.

FinCEN Form 114 replaced the traditional FBAR form. You file this form with a bureau of the Treasury Department, the Financial Crimes Enforcement Network. Electronic filing is possible through the BSA e-filing website.

Do you really need to file?

The requirement is very broad. The Internal Revenue Service itself estimates that millions of U.S. taxpayers have unreported foreign bank accounts.

This disclosure requirement applies to dual nationals and green card holders who maintain an account in their home country, as well as Americans residing abroad. Even being listed as a signatory on your parent's foreign account can trigger the requirement.

An aggregate of $10,000 in foreign financial assets is the threshold. What about assets invested in stocks that reached $10,025 for two days in 2015 before a market correction? You would need to report the assets to the IRS.

The IRS has focused significant attention on offshore accounts for the last decade. FBAR filings have subsequently increased nine out of the past ten years as more individuals learn of the requirement. Hiding money in unreported offshore accounts makes the "Dirty Dozen" list of Service priorities again in 2016.

Just learning of the requirement

If you have failed to disclose an account for many years, how do you come into compliance and avoid penalties for failing to file the FBAR form?

The penalties for failing to file a timely FBAR are very serious. The word draconian comes to mind. Civil penalties can range up to $10,000 per year for a non-willful failure. If there was any indication that the failure was willful, civil penalties increase up to 50 percent of the balance in an unreported offshore account up to $100,000. In some egregious cases, criminal charges are also possible.

Depending on your circumstances, options exist to minimize potential liabilities. You cannot wait. Speak with an experienced tax attorney to resolve this tax issue right away.

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