Missing the deadline doesn’t have to cause a midsummer night’s nightmare, but you do need to wake up and get into compliance.
It’s July. Some of you have celebrated Independence Day. Others have celebrated Canada Day. A lucky few may have made time to celebrate both. If your fiscal year ended on June 30, it’s time for your fresh fiscal start. If you’re on a calendar year, it’s time to assess progress toward annual goals and make any necessary mid-course corrections. But there’s another group out there who may have just realized they might have a U.S. Foreign Bank Account Reporting (FBAR) obligation that should have been filed by June 30.
Who Has to Report?
Here’s a quick look at who needed to report by June 30, 2015, and steps you should take if you were required to report but haven’t yet.
If you are a:
- United States person that has a
- Financial interest in or signature authority over
- Foreign financial accounts,
You must file an FBAR if:
- The aggregate maximum value of those foreign financial accounts
- Exceeds $10,000
- At any time during a calendar year.
The term “U.S. person” may cover more people than you think. It includes U.S. citizens, Green Card holders or U.S. residents, but it can also apply to foreign nationals. For example, a Canadian citizen or resident with U.S. citizenship may be required to file, as well as a Canadian citizen who is treated as a U.S. citizen for tax purposes due to the amount of time spent in the United States.
Another important thing to note in the definition is “signature authority.” Even if it’s not your money, you may have a filing requirement if you have the authority to move money in and out of the accounts. For instance, if you have signature authority over foreign accounts at work, you may have an FBAR reporting requirement.
What If I Was Supposed to Report But Didn’t?
The penalties that may be assessed for the failure to file an FBAR can be severe, so it’s important to consult with a professional who is experienced in the area and understands the process in order to avoid some pitfalls for the unwary. At Freed Maxick, our first step to get you back in compliance is a fact-finding call to learn the specifics of your situation and help determine the appropriate path to get you back into compliance
Depending on your circumstances, the proper path to come back into compliance with FBAR rules could be to enter into one of the programs the IRS has made available, such as the “Offshore Voluntary Disclosure Program” (OVDP) or one of the two Streamlined Filing Compliance Procedures programs.
It could also be filing the reports under the delinquent FBAR submission procedures. Your accountant should work with you to choose the program best suited for your specific facts and circumstances.
Then, the next steps would be to gather the necessary info, coordinate the US tax filing positions with any tax filings in foreign jurisdictions that may be involved, and get all of the required filings prepared and submitted. If the failure to file stretches back several years, FBARs may be required as far back as 8 years (depending on the program used for submission), and there may also be an additional Foreign Account Tax Compliance Act (FATCA) obligation as far back as 2011.
Professional representation at this point is critical to make sure that you avoid a “quiet disclosure,” which could lead to significant unintended consequences with the IRS. It is important to get back in compliance with the law as quickly as possible, but if you don’t take some of the steps in the proper order you can wind up causing additional difficulty. Using a professional to guide you through the process is highly recommended, especially when the stakes are so high.