The Internal Revenue Service (IRS) is holding foreign financial account holders responsible for not reporting their accounts. Those who need to report accounts are encouraged to do so proactively. A failure to properly report can lead to both civil and criminal prosecution.
Who needs to report?
United States “persons” with interests in foreign accounts valued over $10,000 during a calendar year are required to report these accounts under the Banking Secrecy Act (BSA). The term “US person” is generally used for those who are citizens or residents of the U.S. as well as those who are doing business in the United States. It is important to note that this term is not limited to individual persons, but also includes businesses.
Are people reporting their assets?
Compliance with these filing requirements is on the rise. A recent report by Forbes notes that there were 1,163,229 FBARs filed in 2015 – a record high. People are complying for good reason. A failure to properly document these accounts can result in criminal charges leading to monetary fines and potential imprisonment.
What should I do if I need to report?
Those who have qualifying accounts should file a Report of Foreign Bank and Financial Accounts (FBAR). This separate form is needed even if the information is included on federal income tax returns and the account is not currently producing any taxable income. The deadline for filing the FBAR is approaching, June 30th.
The FBAR is just one of a number of forms that may be required. Those who have foreign accounts or who have received notice of an audit from the IRS are wise to seek legal counsel to help ensure their legal rights are protected. Steps can be taken to avoid criminal prosecution.