If you are a U.S. person with a financial interest or signature authority over a foreign account, remember a new annual due date for filing Reports of Foreign Bank and Financial Accounts (FBAR) takes effect this filing season. The new due date is generally April 15 (April 18 for the 2016 calendar year). The international tax advisors at Moore Stephens Doeren Mayhew explain the ins and outs of the annual FBAR filing requirement, including changes to the 2017 deadline.
The FBAR date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 to coincide with the federal income tax filing season. To implement the statute with minimal burden this year, FinCEN will grant filers failing to meet the FBAR due date of April 18 an automatic extension to October 15.
U.S. persons are required to file an FBAR if:
U.S. persons includes citizens, residents and entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States. The law applies to most areas outside the United States, Puerto Rico and U.S. territories and possessions, such as the U.S. Virgin Islands and Guam.
The FBAR must be received by Treasury on or before the April 15 due date (April 18 for the 2016 filing) of the year immediately following the calendar year being reported.
The U.S. requirement to report on foreign bank accounts has been around for decades, but took on greater importance in recent years, with the Internal Revenue Service (IRS) becoming responsible for enforcement, and penalties being raised to start at $10,000 per non-willful violation – an amount that can increase to $50,000 for ongoing non-compliance.
The government is concerned that taxpayers are attempting to hide money offshore and avoid U.S. tax. Investigators use FBARs to help identify funds used for illicit purposes — or to identify unreported offshore income. The United States also has agreements with many countries that are intended to help identify U.S. taxpayers hiding assets abroad.
Penalties vary by severity, but can climb to $100,000 or 50 percent of the account balance for each willful civil infraction and up to $500,000 and 10 years in prison for criminal violations. To avoid penalties, special rules may apply to delinquent filings.
For assistance determining whether foreign financial reporting applies to you and filing your FBAR, contact our international tax advisors.
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