The Foreign Bank Account Report (FBAR) is a form required by the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The purpose of the FBAR is to report foreign financial accounts held by US taxpayers that exceed certain thresholds. Failure to file an FBAR or filing an incorrect FBAR can result in severe penalties. In this article, we will provide you with complete information about the FBAR penalty IRS.
What is the FBAR Penalty?
The FBAR penalty is a civil penalty imposed by the IRS on taxpayers who fail to file an FBAR or who file an incorrect FBAR. The penalty can be significant and can range from $1,000 per violation to the greater of $100,000 or 50% of the balance in the account at the time of the violation.
When is an FBAR Required?
US taxpayers must file an FBAR if the aggregate value of their foreign financial accounts exceeds $10,000 at any time during the calendar year. Foreign financial accounts can include bank accounts, securities accounts, mutual funds, and other types of financial accounts held outside of the United States.
What are the Consequences of Failing to File an FBAR?
Failing to file an FBAR can result in significant consequences, including:
- Civil penalties: The IRS can impose significant civil penalties for failing to file an FBAR, including penalties for wilful and non-wilful violations.
- Criminal penalties: In severe cases, the failure to file an FBAR can result in criminal penalties, including fines and imprisonment.
- Interest and fees: The IRS can also charge interest on any unpaid taxes and penalties, as well as fees for late payment or failure to file.
How to Avoid FBAR Penalties?
To avoid FBAR penalties, it is crucial to ensure that you file an accurate and timely FBAR each year. Here are a few steps you can take:
- Keep accurate records of all foreign financial accounts, including the account number, name and address of the financial institution, and the maximum balance during the year.
- Work with a tax professional to ensure that you accurately report all foreign financial accounts on your tax return and file the FBAR as required.
- File the FBAR by the deadline, which is typically April 15th, with an automatic extension until October 15th each year.
The FBAR penalty is a severe penalty that can result in significant financial consequences for US taxpayers who fail to file or file an incorrect FBAR. It is essential to keep accurate records of all foreign financial accounts and work with a tax professional to ensure that you accurately report all foreign financial accounts and file the FBAR as required. By following these steps, you can avoid FBAR penalties and maintain compliance with US tax laws.