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SEE OUR CUSTOMER REVIEWSHave you been reporting foreign bank accounts?
The government is cracking down, and FBAR audits are on the rise. Learn how to stay ahead of the game and be fully prepared for an FBAR audit.
Contact Gordon Law Group for a confidential case evaluation today!
An FBAR audit is a IRS review of a U.S. person’s FBAR filing. FinCEN is a bureau of the U.S. Department of the Treasury responsible for ensuring that U.S. persons disclose their offshore accounts and assets.
FinCEN Form 114, also known as the Foreign Bank Account Report (FBAR), is required for United States citizens, residents, and entities to report their foreign financial accounts.
The FBAR collects information about financial accounts held outside the United States to help combat tax evasion and other financial crimes.
Individuals and entities with a financial interest in or signature authority over one or more foreign financial accounts with an aggregate value of $10,000 or more during the calendar year must file an FBAR.
However, failure to file an FBAR can result in significant FBAR penalties.
It’s not uncommon for a person to be subject to an audit due to an error on their FBAR or a perceived issue.
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There’s no set trigger for an FBAR audit, but some common reasons include the following:
To avoid triggering an FBAR audit and potential penalties for noncompliance, it’s crucial to keep accurate records and follow FBAR guidelines.
Michael Brandwein, Esq.
Partner; Manager – Tax Compliance
Are you worried about the financial consequences of FBAR non-compliance?
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During an FBAR audit, FinCEN reviews your FBAR filing and may request additional documentation or information to ensure compliance with FBAR requirements if necessary.
If you have offshore trusts and foreign assets and have yet to report, you will more likely receive an initial notice via mail.
Letter 4265, also known as the FBAR Appointment Letter, notifies taxpayers about scheduling an FBAR audit or examination.
While the number of warning letters has declined, the number of IRS FBAR audits has significantly increased over the past few years.
If you receive Letter 4265 from the IRS, they have identified that you may still need to file this form or may have filed it incorrectly.
Taking this letter seriously is important because failure to comply with FBAR requirements can result in significant penalties. However, if you take action in response to Letter 4265, you can avoid or mitigate these penalties.
To prepare for an FBAR audit, you should keep accurate records and documentation of your foreign financial accounts and any transactions involving them.
You should also be familiar with FBAR guidelines and clearly understand their foreign financial holdings.
We strongly recommend consulting with an experienced FBAR lawyer to increase your chances of avoiding a potential audit.
Are you struggling to file your foreign asset disclosures? Let our team of skilled FBAR attorneys take the reins and guide you toward a solution for your situation.
Whether you’re filing for the current year or correcting past years, we’ll make sure you choose the right path to avoid costly penalties and save you thousands.
We take care of everything, from completing your foreign disclosures to speaking with the IRS on your behalf.
With our proven track record of more than 100 streamlined disclosures with no errors or rejections, you can trust us to handle everything with ease and precision.
Don’t let the stress of foreign asset disclosures hold you back.
Daniel Urban, Esq.
Manager – Tax Controversy
The FBAR statute of limitations is 6 years. This is how long the government can typically impose civil penalties for FBAR violations.
The clock starts ticking on the due date of the FBAR report, after which the government has up to 6 years to assess civil penalties.
However, it is important to note that the FBAR statute of limitations for violations may be longer than 6 years and can extend to as much as 10 years from the date of the violation, especially when tax fraud is suspected.
To minimize the risk of enforcement action, comply with all tax and financial reporting requirements and maintain accurate records and documentation of foreign financial accounts.
Failing an FBAR audit may result in penalties, including fines and criminal charges. The amount of the fine may depend on the severity of the noncompliance or the determination of willful or negligent noncompliance.
US expats who fail to comply with FBAR reporting requirements can be at higher risk of being the target of an FBAR audit.
Non-compliance can result in the assessment of civil penalties and, in some cases, even criminal prosecution.
Although FinCEN regulates FBAR filing, the IRS can enforce FBAR penalties for filing late or not filing at all. The severity of penalties depends on whether your failure to file was willful or non-willful.
You can receive an FBAR penalty for any of the following reasons:
A non-willful violation refers to a failure to file an FBAR due to ignorance of the requirement or a mistake. In cases of non-willful violation, the maximum penalty is $10,000 per violation.
A willful violation, on the other hand, refers to a conscious and intentional disregard of the FBAR filing requirement.
In cases of a willful violation, the maximum penalty is $100,000 or 50% of the balance in the foreign accounts at the time of the violation, whichever is greater.
In more severe cases, a willful violation can also result in criminal charges, including fines and imprisonment.
To help avoid an FBAR audit, make sure you file all necessary forms on time. In addition to the FBAR, there are other offshore disclosure forms that may need to be filed depending on your specific situation including FATCA Form 8938.
In addition to FBAR, if a US person receives a gift or inheritance from a foreign person or transfers cryptocurrency to a foreign trust or estate, they may need to report these transactions on Form 3520, which is also subject to IRS audit.
Filing these forms accurately and on time can help ensure compliance with IRS regulations and reduce the likelihood of triggering an audit.
It’s also important to keep accurate records and report all income and assets as required by law. By staying organized and proactive, individuals can minimize their risk of an FBAR audit and potential penalties for non-compliance.
Once the FBAR audit has started, you will not be able to qualify for the FBAR amnesty programs.
If you didn’t know about your FBAR filing requirements or can otherwise show you acted non-willfully, you may qualify for an FBAR amnesty program and avoid harsh penalties.
If you filed the FBAR on time but made a mistake or forgot to include important information, you can request an FBAR amendment.
The IRS will decide if you acted willfully or non-willfully to determine which program you qualify for.
The FBAR amnesty program is designed to encourage US taxpayers who have failed to file FBARs to come forward and voluntarily disclose their previously unreported foreign bank accounts to the IRS.
If you forgot about a foreign bank account that may have been dormant for years, the IRS considers this a non-willful act.
Taxpayers who acted non-willfully are eligible for the following submission procedures:
If you didn’t file and your actions were willful, you should call an FBAR lawyer immediately to discuss your options.
You can also use the Voluntary Disclosure Program. While there are no guarantees, this program typically allows you to avoid criminal charges in exchange for paying IRS penalties.
Are you concerned about potential noncompliance with FBAR reporting? Don’t risk facing costly FBAR penalties and additional consequences.
Our FBAR lawyers can help you navigate the FBAR audit process with confidence.
Don’t wait until its too late. Schedule your consultation today and put you mind at ease knowing your FBAR audit is in capable hands.
Submit your information to schedule a confidential consultation, or call us at (847) 580-1279
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