How To Best Report Foreign Bank Accounts To IRS

report foreign bank account

When you report foreign bank account information to the IRS, you prevent the IRS from assuming that you are laundering money, hiding drug money and trying to evade tax liabilities. Possible illegal activity from bank accounts outside of the USA shine a bright light onto all foreign bank accounts. Yes, that includes yours if you have a financial account held in a foreign country. However, if you have money in a foreign bank within the USA (example: You have money in the Bank of Tokyo located in San Francisco, CA), you are exempt from these IRS rules.

What Should be Reported in FBAR?

The FBAR (pronounced F-BAR) is a Report of Foreign Bank and Financial Accounts. It is not a tax form but it is part of The Bank Secrecy Act. This Act requires US citizens and resident aliens to report foreign bank account information to the US Treasury. Financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit or other account at a financial institution. Also included are futures or option accounts, insurance policies & annuities, policies with cash value, and mutual fund shares. In fact, the report includes non-monetary assets such as gold too.

Does this apply to me?

You must file the FBAR if you are a United States Citizen or resident alien who a) has financial interest or signatory authority over one or more financial accounts outside of the USA and b) the aggregate value of such accounts exceeds $10,000 at any time during the calendar year. The due date for all FBAR filings is June 30 each calendar year and there is no ability to request an extension. Yes, the IRS has strict deadlines on how you report foreign bank account information.

Are There Penalties?

You can face big penalties, including jail time, if you fail to report the FBAR. Inadvertent failure to file is a maximum penalty of $10,000. Willful violation carries a fine of $100,000 or half the value of the account and criminal prosecution. Fines can be up to $250,000 and up to 5 years in jail.

How To Stay Out Of FBAR Trouble?

1. Report any offshore accounts to IRS
2. Don’t file your tax paperwork yourself. File the correct documents at the correct time by using a tax professional.
3. Report any gifts or inheritances from abroad.
4. Report your interests in foreign trusts.
5. Report your ownership in foreign businesses.

So, are you realizing that you had a reporting requirement that you did not meet? As long as you did report all your income and you paid all your taxes but merely failed to attach the required reporting forms, you MAY be able to submit the forms and pay no penalties.

Talk to us at Paragon Accounting & Tax Solutions. We are a Woodstock CPA firm that specializes in small business monthly accounting, bookkeeping, payroll and tax preparation within Woodstock, Canton, Marietta, Roswell and Alpharetta.