The registration deadline for interests in foreign bank accounts is June 30. This means it is now less than a month away.
For holders of foreign accounts, this date is akin to the filing deadline in April for individual tax returns. You've got to get FBAR on your radar or risk substantial penalties.
Formally, the required form is called the Report of Foreign Bank and Financial Accounts. But it is widely known by the abbreviation FBAR.
This year, June 30 falls on a Saturday. This does not mean, however, that the required receipt date for FBAR will be pushed back until the following Monday - even though individual tax return filers were given until April 17 this year when the traditional due date of April 15 fell on a Sunday.
A taxpayer must file an FBAR if the total value of his or her foreign accounts is more than $10,000 at any point during the year.
Failing to file a required FBAR is a serious matter. The civil penalties can get very expensive, especially if the IRS finds the violation to be "willful."
But pricy penalties are not the only potential consequence for an FBAR violation. There is also the prospect of possible prison time. The length of the prison sentence could be up to five years - and twice that long if the FBAR violation occurred during the violation of another law.
To be sure, sometimes the IRS merely issues a warning letter for failure to comply with FBAR, rather than seeking fines or imprisonment. But given the stakes, it is better to be safe than sorry and take proper steps to avoid putting yourself in this position at all.
Source: "FBAR Penalties: When Will IRS Let You Off With A Warning?" Forbes, Robert W. Wood, 6-4-12