Federal tax authorities have extended the deadline for FBAR filings to June of 2013.
May 05, 2012 /24-7PressRelease/ -- For people or business entities with foreign accounts, tax season extends well past April. Indeed, those with foreign accounts find themselves facing a second round of tax season in the middle of summer.
Unfortunately, simply noting foreign accounts on an annual tax return is not enough; an additional form is required later in the year. Although technically not a tax form but a disclosure statement, the Foreign Bank and Financial Accounts form is commonly referred to as the FBAR. Officially, it is known as TDF 90-22.1. It is filed with the IRS in addition to disclosure of foreign income on tax returns and is due June 30th of every year.
Many financial experts note the IRS is paying particular attention to obtaining taxpayer compliance in this arena. Unfortunately, this projection is supported by numerous prosecutions for undisclosed foreign accounts by the IRS. One example was present in 2008, when the Justice Department requested information regarding accounts from Swiss banks and filled charges against major executives alleging conspiracy to defraud the United States.
In addition to the threat of prosecution, efforts by the IRS to help encourage compliance have also included repeated extensions of deadlines for many self-reporting programs.
The most recent extension was announced by the Treasury Department's Financial Crimes Enforcement Network (FinCEN). This extension pushes the deadline for FBAR filings to June of 2013 and applies specifically to signatories of foreign financial accounts.
A Brief Overview of FBAR
In an attempt to keep track of these accounts, the Bank Secrecy Act was passed in 1970. This piece of legislation provides authority to the Department of Treasury under the guise of tracking foreign accounts and examining them for potential money laundering, tax evasion or other criminal activities. This led to development of the FBAR as a means for people to voluntarily provide information about foreign accounts.
In 2003, compliance with FBAR requirements was estimated to be less than 20 percent. At the time, FinCEN was in charge of the FBAR, and in an effort to raise the degree of compliance the network delegated enforcement to the IRS. This was justified by the vast amount of resources accessible to the IRS. As a result, the FBAR has evolved into a valuable tool for the IRS to uncover tax abuses.
It is important to note there are many reasons to hold a foreign account. Some individuals hold accounts in locations where they often vacation, others in areas of the world where family members still live. Regardless of the reason, these accounts often make good legal and economical sense.
Although it is not illegal for U.S. citizens to hold foreign bank accounts, anyone holding these accounts is required to report them. The IRS requires reporting since foreign financial institutions may not have the same requirements present in the U.S.
FBAR Filing Requirements
According to the IRS, an FBAR is required when:
-A United States person has a financial interest or the authority to sign for at least one financial account outside of the U.S.; and
-The accounts in the aggregate exceed $10,000 at any time during the reported calendar year
A United States person is defined as a taxpayer. This includes residents and citizens as well as entities like partnerships and corporations. Anyone fitting in this category with a bank account, brokerage account, mutual fund, trust or other financial account in a foreign country is required to file an FBAR with the IRS every year. Generally, hedge and private equity funds do not qualify.
In addition to those who have direct access to funds, even individuals serving merely as signatories with no actual ownership of the accounts are required to file.
Repercussions for Failing to File
Those who fail to file face a wide range of penalties. These penalties are often far worse than failing to disclose existence of a foreign account on an annual tax return.
A non-willful failure to file carries a civil penalty of $10,000 per violation, per year. If, after an investigation, the violation is found to be willful, the penalty reaches over $100,000 or half of the amount in the account for each violation. Again, each year is reviewed individually and can be deemed a separate violation. As a result, these penalties accumulate very quickly.
Criminal tax penalties may also apply in some situations. If a violation is found willful or a record of the account was not retained, a $250,000 monetary penalty can be applied along with five years imprisonment. If other laws were violated at the same time, the penalty can jump to a monetary fine of up to $500,000 and up to 10 years of imprisonment.
Navigating the tax system can be difficult, especially when filing dates are often changing. If you are connected to a foreign financial account and there is a possibility a needed FBAR was not filed, it is important to seek the counsel of an experienced foreign bank accounts attorney to review your unique situation and determine the best course of action.
Article provided by Brown, PC
Visit us at www.browntax.com
Press release service and press release distribution provided by http://www.24-7pressrelease.com