FBAR, You and the Law

A Report of Foreign Bank and Financial Accounts, more commonly referred to as FBAR, is an IRS report that you must file when you have a financial interest in or signature authority over a foreign financial account. This form is referred to as form TD F 90-22.11 if you have a financial interest over at least one financial account that is located outside the borders of the United States. Any account that you have offshore that exceeds $10,000 is subject to the filing of this form during the calendar year that your taxes are due. While there are exceptions as to who must file it is always good to have professional help or refer to the FBAR Forms instructions for additional information. Many people feel that if an account does not produce income they are exempt from this filing but that is not true.

The Internal Revenue Service introduced the Offshore Voluntary Disclosure Initiative that allows you to come clean and report all of your offshore accounts since 2003 if you have not filed the correct FBAR forms yet. The OVDI required that you provide copies of your previous tax returns, amend those returns as necessary file the complete TD F 90-22. The next step required that you waive the tax assessing time period for the IRS while they investigate your situation, meaning that you will not be protected by the statute of limitations for these years. The FBAR penalties can be up to and include as much as 25% of the aggregate balance of all your offshore accounts. Then and only then if you have paid all the penalties and taxes you may file a form 906 to close out the case. However, if you are under criminal or civil investigation you are not eligible to participate in the OVDI program.

FBAR forms are required to be filed every year that you hold a financial interest in an offshore account. Incorrect reporting may result in severe FBAR penalties that could put you in jail. Not filing past forms is the way that most people get into trouble with this type of process. They may also attempt to file more than one form at the same time by mailing them separately and this is just as bad as not filing them at all. It is important that you file according to the law in order to avoid FBAR penalties.

Regardless of your tax liability, you are still required to file the correct FBAR forms within the filing deadline in order to avoid filing penalties. You should never try to avoid filing these forms unless you are willing to risk serious consequences that include prison. While the instructions and the rules regarding the filing requirements are complicated you can navigate these waters by yourself, but it is recommended that you obtain professional guidance in order to avoid even more severe fbar forms. If you have never filed before it is unlikely that you can stay below the radar forever and once you are caught the penalties are severe so at this time it is best to find the best help you can and get the FBAR Forms filed and out of your way.