You must file an FBAR if:
- You are a United States “person” (which can include residents in the United States on a visa);
- You had a “financial interest” in, or “signatory authority” over any “financial account” in a foreign county or jurisdiction; and
- The total of all such foreign accounts exceeded $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 have unreported assets overseas and are concerned you may have outstanding FBARs or other filing requirements, schedule a free consultation with the experienced attorneys at JDKatz today.
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