Offshore account holders who fail to comply with Foreign Bank and Financial Accounts Reporting (FBAR) regulations could face massive fines and even prison time. The IRS is warning anyone with financial interests in, or signature authority over, overseas accounts valued at $10,000 or more to disclose before it’s too late.
In 2010, lawmakers passed the Foreign Account Tax Compliance Act (FACTA), which requires foreign governments and banks to hand over identifying information about depositors. More than 100 countries are on board, which means the days of brushing foreign assets under the carpet are over.
Penalties for Not Coming Clean with the IRS
The consequences of not complying with FBAR laws can be significant. Those who fail to disclose foreign assets could face:
- A $10,000 per-account, per-year fine for non-willful violations.
- Either 50% of account balances or $100,000 for every year of willful FBAR noncompliance — whichever is more. Criminal penalties are also possible.
- Criminal penalties and up to $10,000 for not filing the Statement of Specified Foreign Financial Assets. The IRS can also impose a $10,000 per month penalty for parties that still don’t file after receiving IRS notices.
- Up to 75% of tax underpayment civil penalties, in addition to any past-due tax.
- Criminal penalties that may include 5-year prison sentences and financial penalties up to $250,000 for individuals and $500,000 for corporations.
Options for FBAR Compliance
Complying with disclosure regulations can be intimidating — especially for folks with past issues. But never fear, you have options!
Offshore Voluntary Disclosure Program (OVDP)
While the penalties associated with the OVDP can be steep (up to 50% of the account’s highest value), they’re still better than willfully failing to disclose foreign assets. Plus, those who participate can receive amnesty from criminal prosecution. This program is not available to those who are already under investigation.
Easier and less expensive, the Streamlined Program is available to individual taxpayers who can certify that their noncompliance was not willful. Like the OVDP, individuals who are already under investigation are not eligible.Contact An FBAR Lawyer Who Can Fix Things »