There are still many US taxpayers who are in the process of understanding IRS FBAR compliance and the genuine risk their activities (or lack of compliance) will come to light. A US taxpayer, include all citizens and those who work or live for more than six months and one day in the United States during any calendar or tax year. US taxpayers are required to file an FBAR with the IRS if they have more than $10,000 in any or all of their accumulated offshore bank, investment or financial accounts at any time in the year – even for a single day.
FBAR stands for Foreign Bank Account Report, and refers to Form FinCEN 114 which replaced the TD F90-22.1 Report of Foreign Bank and Financial Accounts In mid-2013. There are two central questions associated with IRS FBAR compliance:
- “I’m a small fish, how will the IRS ever find out about me?”
- “What is willfulness versus non-willfulness and how will that affect FBAR Compliance?”
How will the IRS find out about your offshore activities? Very simply, your own bank, investment house, financial institution or a foreign tax agency will tell the IRS and provide all the information about you personally and the accounts and transactions associated with you. The vast majority of the world’s banks and financial institutions have agreed to and already provide detailed information directly to the IRS in an electronic format. IRS systems simply compare this information with your tax returns and if an account or accounts are missing flag your return for audit. It’s only a matter of time.
The process of understanding IRS FBAR compliance includes gaining an understanding of the issue of “willfulness” versus “non-willfulness.” This is important when determining the program you will select to come into compliance with IRS FBAR reporting. There are two programs offered by the IRS: Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Domestic Offshore Procedures. The decision between the two programs is based upon the perceived intent of the taxpayer with regard to hiding or failure to disclose offshore accounts and the associated penalties and associated criminal liability.
We invite you to contact Allen Barron for assistance with the process of understanding IRS FBAR compliance throughout San Diego and the Southwestern United States or call for a free consultation at 866-631-3470.