FBAR Requirements Even Apply to Children
While it is not very common for parents or grandparents in the US to open bank accounts in the names of young children, it is a common practice in many other countries, where it can be done to avoid inheritance or other taxes. Many people are unaware that children have the same reporting requirements pertaining to foreign accounts and income as adults. This includes the requirement to file an FBAR for a child who has a financial interest in foreign accounts with $10,000 or more at any time during the year.
On June 11, 2014, FinCen emphasized filing requirements for children in their new instructions for FBARs. According to these instructions, children are responsible for signing and filing their own FBAR report. However, if a child cannot sign or file his or her own FBAR, a parent or other legally responsible adult must do it on the child’s behalf.
Since 2009, the Internal Revenue Service has made it a top priority to bring those with undisclosed offshore accounts into compliance with their U.S. reporting obligations. A key part of this effort has been the Offshore Voluntary Disclosure Program (OVDP), which allows taxpayers to voluntarily disclose their accounts and pay a penalty in exchange for immunity from criminal prosecution.
This year, the IRS announced new streamlined compliance procedures for individuals whose failure to disclose offshore accounts was non-willful. While these streamlined procedures offer a lower penalty, they do not ensure immunity from prosecution. Once the government has information about a taxpayer’s undisclosed account, they are no longer eligible to participate in either of these programs.
With the implementation of the Foreign Account Tax Compliance Act (FATCA), foreign financial institutions in most countries will begin providing information about their U.S. clients to the Internal Revenue Service. Those who still have not come into compliance have a limited window to do so. As of late 2013, the Department of Justice had indicted approximately 120 taxpayers or advisors in relation to a failure to disclose the existence of foreign accounts, with the average sentence being fourteen months.