On April 4, 2019 the IRS issued News Release 2019-63 reminding taxpayers of their obligation to file their annual Report of Foreign Bank and Financial Accounts (FBAR). This reporting requirement applies to U.S. citizens and resident aliens, and includes those with dual citizenship. In addition to the requirement to file the FBAR report, income earned from the foreign bank account or financial asset must be reported on a federal income tax return and the assets or accounts may have additional reporting requirements on a federal income tax return. Failure to adhere to these reporting requirements can lead to severe civil penalties and/or criminal sanctions. If you have a foreign bank account, foreign financial assets or other foreign assets that need to be disclosed for the current year or that you failed to disclose in a prior year, you should speak with a tax attorney regarding your reporting requirements and your options for disclosure of the foreign assets.
Important Facts to Keep in Mind
- The deadline for filing the FBAR is the same as the deadline for filing a federal income tax return. For individuals, that due date is April 15, 2019 for the federal income tax return and the FBAR. You can, however, get an automatic extension to October 15, 2019.
- The FBAR Form 114 must be filed electronically with the Financial Crimes Enforcement Network (FinCEN). Do not file the FBAR with your return.
- The foreign bank or financial account may need to be disclosed on a Schedule B attached to your federal income tax return. Schedule B, Part III, asks about the existence of foreign accounts and the country in which the account is located.
- The foreign bank or financial account may also need to be reported on Form 8938 attached to your federal income tax return. Form 8938 is a separate form filed with your tax return. It does not replace or relieve you of your responsibility to file FBAR, Form 114 with FinCEN.
- The Offshore Voluntary Disclosure Program (OVDP) has ended. However, if you have foreign bank or financial accounts that were not previously disclosed, there are options available for you to come into compliance with your reporting requirements. These avenues for disclosure are dependent on the particular facts of your case. The penalties under the various disclosures differ significantly, and the penalties for late reporting can be severe and can involve criminal sanctions. Accordingly, you should speak with a tax attorney about the options available to you.
If you have foreign bank or financial assets that need to be disclosed, you need an experienced tax attorney to represent you in your dealings with the IRS or the Department of Justice. An accountant or enrolled agent is not protected by the attorney/client privilege.