FBAR Frequently Asked Questions

What is an FBAR?

Mandatory Foreign Bank Account Reporting (FBAR) was initiated in the 1970’s in an attempt to stop money laundering by criminal elements. The law was gradually expanded so that by the early 2000’s, most persons who had lived overseas were subject to the reporting. If you have accounts of any type with total combined value of more than $10,000, you are probably subject to the reporting requirements of this law. Accounts belonging to another family member (or any person) where you have the ability to access the account will also subject you to FBAR penalties if they are not timely reported.

What are the penalties for nonfiling or late filing?

FBAR penalties come in 2 forms: Criminal and Civil.

Criminal penalties include 5 years in prison and a $500,000 fine for each year that an FBAR was not filed.

Civil Penalties may be assessed as willful or nonwillful. Willful does not have the layman’s definition that you would expect. Willful merely means that the law presumes that you should have been aware of the requirement to file the FBAR forms and you did not file. Civil penalties are $100,000 or 50% of the value of the accounts (whichever is higher) for each year that an FBAR was not filed. Nonwillful penalties, often referred to as innocent penalties, are generally imposed on persons who filed timely, complete and accurate income tax returns and did not fail to report ANY of their foreign income on their income tax returns. Nonwillful penalties are $10,000 for each year that a required FBAR form was not filed.

The government has great latitude in deciding how to impose the penalties. Even if you believe that you are an innocent violator, the government may think otherwise.

Should I file an FBAR this year?

Yes. You should always file the current year FBAR form, even if the government might discover that you did not file for other previous years.

What should I do about past FBARs that I did not file?

There is no easy answer to this question. For some people, the Streamlined program is the best. For others, the regular OVDI disclosure is the best. For others, filing some or all of the returns in a “Quiet Disclosure” may be the best course. And for some, perhaps nothing should be done except to wait to see if the government discovers your omission. There are risks associated with each of the options, and none of the options are perfect. The answers to these questions require a professional analysis and assessment of how many years are involved, how much money was in the accounts, where were the accounts, was there unreported income from the accounts or from other overseas sources and what is your education level, among other factors. Attorneys or account\ants who advise you to take any of the possible courses of action without an in depth analysis of your accounts, income, education and length of residence in the U.S. are not doing you any favors. The risk of something going wrong increases by a hundred times if a full analysis of your situation is not done before any action is taken.

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