What are the penalties for failing to file an FBAR? Key information!

The penalties for failing to file an FBAR (Foreign Bank Account Report) can be quite significant, and they vary depending on whether the failure to file is deemed non-willful or willful. Here’s an overview of the potential penalties:

Non-Willful Penalties:

For non-willful violations, the maximum civil penalty is $10,000 per violation. This penalty can be applied for each year an FBAR is not filed.
The IRS has the discretion to determine the penalty amount based on the facts and circumstances of the case. In many cases, they may assess a lower penalty, especially if the failure to file was unintentional or due to ignorance of the requirement.
Willful Penalties:

For willful violations, the penalties are more severe. The greater of $100,000 or 50% of the balance in the account at the time of the violation can be assessed as a civil penalty for each violation.
In some cases, criminal penalties, including fines and imprisonment, may also apply for willful failure to file an FBAR.
It’s important to note that the determination of whether a violation is non-willful or willful is fact-specific. Willful violations are considered more serious and may involve actions taken with the intent to evade taxes or conceal assets. Non-willful violations may result from mistakes, negligence, or a lack of awareness of the FBAR filing requirement.

In addition to these civil and potentially criminal penalties, taxpayers who fail to file an FBAR may also face other consequences, including the assessment of interest on unpaid taxes and potential audits by the IRS.

To avoid FBAR penalties, it’s crucial to stay informed about your reporting obligations, keep accurate records of your foreign financial accounts, and consult with a tax professional who specializes in international tax matters if you have questions or concerns about FBAR compliance. If you have failed to file FBARs in the past and believe your failure was non-willful, you may consider participating in IRS amnesty programs like the Streamlined Filing Compliance Procedures to come into compliance and potentially reduce penalties.

Understanding the strain of lagging in your US tax commitments, we at Xerxes Associates LLP are equipped with the expertise to help US expats become up-to-date with their filings. For further information on your obligations or assistance in determining the most suitable options, contact us today or submit an enquiry online.

Contact us via www.xerxesllp.com or fill out our contact form to discuss your expat tax situation with us.

Do you need to file an FBAR (Foreign Bank Account Report) as an American expat living in the UK or any other foreign country?

You will typically use the FinCEN Form 114 (formerly TD F 90-22.1). Here are the steps to file your FBAR:

Determine if You Need to File: You must file an FBAR if you are a U.S. person (this includes U.S. citizens, resident aliens, and certain non-resident aliens) and you have a financial interest in, or signature authority over, one or more foreign financial accounts, and the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.

Collect Account Information: Gather information about your foreign financial accounts, including the account numbers, names of the financial institutions, and maximum values of each account during the calendar year. This information will be used to complete the FBAR.

Online Filing: As of my last knowledge update in September 2021, the FBAR must be filed electronically through the Financial Crimes Enforcement Network (FinCEN) website. Visit the official FinCEN website and use the BSA E-Filing system to create an account and submit your FBAR.

Provide Required Information: Complete the FinCEN Form 114, providing information about your foreign financial accounts, and the maximum value in each account during the calendar year. Make sure to double-check the information for accuracy.

File Before the Deadline: The deadline for filing the FBAR is typically April 15th, with an automatic extension available until October 15th if needed. Be aware that these dates might change, so verify the current deadline with the IRS or FinCEN.

Keep Records: Retain copies of your filed FBAR and any supporting documentation for your records. The IRS recommends keeping these records for at least six years.

Penalties: Be aware of the penalties for failing to file an FBAR when required. Penalties for non-compliance can be substantial.

Since tax and reporting requirements can change, it’s advisable to consult with a tax professional who specializes in international tax matters or seek the most up-to-date guidance from the IRS or FinCEN to ensure compliance with FBAR reporting obligations. Additionally, consider consulting with a tax professional to ensure that you are meeting all of your U.S. tax reporting requirements as an American expat living in the UK.

What is FBAR? For US Expats in the UK

FBAR stands for Foreign Bank Account Report. It is a form that certain U.S. persons are required to file with the U.S. Department of the Treasury to report their financial interest in, or signature authority over, financial accounts located in foreign countries. The FBAR is required under the Bank Secrecy Act (BSA) and is used to help the U.S. government track and combat money laundering, tax evasion, and other financial crimes.

U.S. persons, including U.S. citizens, resident aliens, and certain non-resident aliens, are generally required to file an FBAR if they have a financial interest in, or signature authority over, one or more foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year. Failure to file an FBAR when required can result in significant penalties.

It’s important to note that FBAR is separate from the reporting requirements related to foreign financial accounts on your federal income tax return, which are typically reported on the Foreign Account Tax Compliance Act (FATCA) Form 8938. It’s essential to consult with a tax professional or refer to the official IRS guidance to ensure compliance with FBAR reporting requirements, as these rules can be complex and subject to change.