Reports on foreign bank accounts are due today, June 30. But if this is your first time filing you might have questions and concern that you should address first.
FinCen Form 114 (FBAR) is electronically filed with the Department of Treasury. While technically there is no extension to the deadline, the form does provide space to explain a late filing. In some cases, taking the time to put a plan in place is more important than meeting a deadline.
How does the IRS match up offshore reports with your taxes?
IRS computers match up FBARs with Form 1040 Schedule B information. If you checked the foreign account box, but never filed a FBAR, you may be opening yourself to an audit or investigation.
Is this your first year filing even though you have had foreign accounts with assets of more than $10,000? What types of accounts trigger the requirement? How many years can the IRS go back? Are you worried that filing is an admission of guilt? These are important questions to ask, because the civil and criminal penalties for failure to file are serious.
The statute of limitations is generally six years. But FBAR penalties can add up for each year you did not file. Programs exist to help bring you back into compliance and minimize the penalties. They need to be considered carefully to limit your exposure.
OVDP, streamlined or quiet?
The Offshore Voluntary Disclosure Program allows you to come forward, pay back taxes along with an interest and penalties while limiting your overall exposure. Depending on your circumstances a streamlined disclosure may offer another option.
Quiet disclosure is more problematic. This is when you file amended returns and past FBARs. But the IRS could still audit or investigate you. A GAO report recommended that the IRS follow up on these quiet disclosures and these could become the next area to receive special focus.
Even though your filing may be late, take the time to speak with one of our experienced FBAR attorneys. Planning how to deal with past omissions will limit your potential exposure.