The Bank Secrecy Act rules require taxpayers with financial accounts outside of the United States which total more than $10,000 in the aggregate to file an annual report – called the Report of Foreign Bank and Financial Accounts or “FBAR” – with the IRS. For certain taxpayers with offshore accounts totaling more than $50,000, Form 8938 (Statement of Foreign Financial Assets) may also be required to be filed each year. Taxpayers must file these forms even if they only have signatory authority over the accounts (alone or with others) and no actual legal claim to the funds in the accounts. Failure to comply with the various offshore asset reporting requirements can result in civil penalties, criminal prosecution, and even jail time.
Generally, you have to file an FBAR if, for any tax year, you meet the following requirements:
- You are a United States “person” (which can include residents in the United States on a visa);
- You have a “financial interest” in, or “signatory authority” over any “financial account” in a foreign county or jurisdiction; and
- The total value of all such foreign accounts exceeds $10,000 at any time (even for a day!) in a given year.
The FBAR rules place a reporting obligation on a wide range of individuals. First, the reporting obligations may fall not just on United States citizens, but can also include taxpayers who are legally residing in the United States on a visa. Second, the reporting obligations may fall on somebody who is simply named as a joint owner on the account, even if the legal claim to the funds in the account rests with the other joint owner. Merely having the ability to withdraw or transfer funds on an overseas account (called “signatory authority”) in excess of $10,000 triggers the FBAR reporting requirements. Many taxpayers with outstanding FBAR obligations didn’t know about the reporting obligations until recently, and are therefore considered to be “non-willful” violators as opposed to “willful” violators intentionally evading U.S. detection of their overseas accounts. Although less severe than penalties for willful violators, penalties for non-willful violators can be draconian. Non-willful violators face a civil monetary penalty of up to $10,000 per account, per year under the FBAR regime, and may face additional penalties for unreported income associated with the foreign accounts.
Because the IRS understands that many people were unaware of their FBAR reporting obligations, the IRS has implemented voluntary disclosure programs for those individuals with outstanding FBAR-filing obligations who wish to avoid potential criminal investigation. These programs offer reduced civil monetary penalties for taxpayers coming forward with unreported accounts, and ensure that taxpayers will not face criminal penalties for coming clean.
Our attorneys have experience handling offshore asset disclosures ranging from relatively small cases to millions of dollars in unreported assets. In addition to assisting clients comply with the requirements of the IRS’ offshore voluntary disclosure programs, we also assist clients in making disclosures outside of these programs (so-called “quiet” disclosures). While taxpayers must report their overseas accounts to comply with the law, there are alternatives to the draconian penalties associated with the IRS’ voluntary disclosure programs.
If you might have an off-shore bank account reporting issue in Miami-Dade, Broward, Monroe, Collier or Lee County Florida, schedule a consultation with the experienced attorneys at EPGDLaw today, located in beautiful Miami, FL. Call us at (786) 837-6787 or e-mail us to schedule a consultation.