FBAR 2014 – IRS looking to be much more Aggressive – Filing & Paying 1-866-700-1040
Just why is IRS being more aggressive on FBAR Cases?
Simply put, that’s where the money is!
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First 3 years of FBAR reporting
After the first three years of a full-court press by the Internal Revenue Service regarding FBAR filing, reporting, paying and the receiving of amended tax returns, the IRS collected over $5 billion.
With this sort of money on the line do not expect the IRS to go away soon.
As a matter of fact, the latest IRS budget has shown that they are going to put a considerable amount of their enforcement revenue on the foreign tax compliance act FTCA).
Some of the reports indicate that the return on investment is anywhere from 3 to 1 to 6 to 1 so don’t expect this to go away soon.
What is helping IRS to be more aggressive.
Country by country is giving into the IRS demands to turn over financial records that belong to US citizens and Americans that should’ve filed tax returns and who have failed to do so.
Nobody ever thought that Lichtenstein would fall into the United States demands however it did cave in to US pressure. As a result the dominoes start to fall.
As a result the IRS is using their criminal enforcement to go ahead and force people into becoming fully compliant. The Internal Revenue Service keeps on their website a list of all those that have fallen to FBAR along with her current sentences matching the penalty of their crimes.
I should also state that many of these taxpayers with unfiled FBARs are very simple and do not require much effort to get fully compliant. I would imagine that 90% of all Fbar cases fall in the simple to easy category.
It best to reach out to the Internal Revenue Service before they reach out to you.
If the IRS reaches out to you first, without question you could be involved in a criminal prosecution. However, if you reach out to them it is very doubtful that you will have to worry about any criminal activities.
The whole goal here is to keep this a civil matter and make sure you file and pay the correct amount of taxes so you can avoid fear and worry at a later date.
Implement Foreign Account Tax Compliance Act (FATCA) 2013 and beyond
This initiative will provide the resources for the IRS to implement changes required by of FATCA included in the Hiring Incentives to Restore Employment (HIRE)(PublicLaw111-147).
ROI of $3.7 to $1.
New reporting, disclosure, and withholding requirements will produce additional annual enforcement revenue of $115.4 million once the new hires reach full potential in FY 2016,an ROI of $3.7 to $1.
Address International and Offshore Compliance Issues.
This initiative will strengthen enforcement activities to address offshore tax evasion and expand the IRS’s global presence and pursuit of international tax and financial crimes. The IRS continues to address tax-avoidance schemes involving offshore activity.
This request will address the significant growth in international activities in the global tax environment and produce additional annual enforcement revenue of $192.8 million, once the new hires reach full potential in FY 2016,an ROI of $4.5 to $1.
Who is required to File and Pay
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions.
The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law.
Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.
Recent FBAR Guidance
On February 24, 2011, the Treasury Department published final regulations amending the FBAR regulations. These regulations became effective March 28, 2011, and apply to FBARs required to be filed with respect to foreign financial accounts maintained in calendar year 2010, and for FBARs required to be filed with respect to all subsequent calendar years.
The FBAR form and instructions (PDF) have been revised to reflect the amendments made by the final regulations.
Financial Crimes Enforcement Network (FinCEN)
On May 31, 2011, the Financial Crimes Enforcement Network (FinCEN) issued FinCEN Notice 2011-1 (PDF), revised June 6, 2011, to provide filing deferral to certain individuals with signature authority over, but no financial interest in, foreign financial accounts of their employer or a closely related entity.
The filing deadline for employees and officers to report signature authority over these accounts was extended to June 30, 2012, for the following individuals:
An employee or officer of an entity under 31 CFR § 1010.350(f)(2)(i)-(v) who has signature or other authority over and no financial interest in a foreign financial account of a controlled person of the entity; or
An employee or officer of a controlled person of an entity under 31 CFR § 1010.350(f)(2)(i)-(v) who has signature or other authority over and no financial interest in a foreign financial account of the entity, the controlled person, or another controlled person of the entity.
For purposes of FinCEN Notice 2011-1, a controlled person is a United States or foreign entity more than 50 percent owned (directly or indirectly) by an entity under 31 CFR § 1010.350(f)(2)(i)-(v).
On June 17, 2011, FinCEN issued Notice 2011-2 (PDF) to provide filing deferral for certain officers or employees of investment advisors registered with the Securities and Exchange Commission who have signature authority over, but no financial interest in, foreign financial accounts of their employer.
The filing deadline for employees and officers to report signature authority over these accounts was similarly extended to June 30, 2012.
Due to additional questions and concerns regarding the signature authority filing exceptions within Notice 2011-1 and Notice 2011-2, FinCEN twice extended the revised filing deadlines imposed by those two notices.
On February 14, 2012, FinCEN issued FinCEN Notice 2012-1 (PDF), extending the reporting deadline to June 30, 2013, for signature authority reporting of the employees and officers identified in Notice 2011-1 and Notice 2011-2, to the same extent of reporting as originally set forth in those notices.
More recently, on December 26, 2012, FinCEN issued Notice 2012-2, further extending this same filing deferral to June 30, 2014.
All other U.S. persons required to file an FBAR this year are required to meet the June 30, 2013 filing date.
On Jan 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program following continued interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.
Who Must File an FBAR
United States persons are required to file an FBAR if:
1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
Exceptions to the Reporting Requirement
Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
a. Certain foreign financial accounts jointly owned by spouses;
b. United States persons included in a consolidated FBAR;
c. Correspondent/nostro accounts;
d. Foreign financial accounts owned by a governmental entity;
e. Foreign financial accounts owned by an international financial institution;
f. IRA owners and beneficiaries;
g. Participants in and beneficiaries of tax-qualified retirement plans;
h. Certain individuals with signature authority over but no financial interest in a foreign financial account;
i. Trust beneficiaries; and
j. Foreign financial accounts maintained on a United States military banking facility.
Reporting and Filing Information
A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040, the “Other Information” section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder’s reporting obligation.
The FBAR is not filed with the filer’s federal income tax return.
The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR.
You may not request an extension for filing the FBAR. The FBAR is an annual report and must be received by the Department of the Treasury in Detroit, MI, on or before June 30th of the year following the calendar year being reported. While FinCEN strongly encourages individuals to electronically file FBARs, the form can be mailed to one of the two addresses below, provided that the mailing is received by June 30, 2013:
File by mailing the FBAR to:
United States Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621
If an express delivery service is required for a timely filed FBAR, address the parcel to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mail room, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
Delivery messenger service contact telephone number: (313) 234-1062.
Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.
Electronic Filing for FBAR Forms – MANDATORY Beginning July 1, 2013
On June 29, 2011, FinCEN announced that all FinCEN forms must be filed electronically with certain exceptions.
The FBAR was granted a general exemption from mandatory electronic filing through June 30, 2013. E-filing is a quick and secure way for individuals to file FBARs. Filers will receive an acknowledgement of each submission.
For more information about FBAR e-filing, read the FinCEN news release.
New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938)
