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Foreign bank accounts and other financial assets: Reducing your risk of penalties

May 20, 2013

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With increased reporting requirements for foreign bank accounts and other financial assets held by both businesses and individuals, are you at risk for penalties or criminal charges?

Increased Reporting
In recent years, the IRS has ramped up the reporting requirements for foreign bank accounts and other financial assets held by both businesses and individuals.  This is all in an effort to increase tax revenue and try to mitigate off-shore tax evasion.  The IRS realizes this is a significant issue and they are finally doing something about it.  The bad news is that many times it creates yet another layer of tax compliance for businesses and individuals, who are already compliant.

If taxpayers are not vigilant over their reporting obligations for the various international informational returns, they may find themselves in a precarious position.  The civil penalties for not filing either the Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1 or FBAR) or the Foreign Financial Asset Reporting Form (Form 8938) are significant and harsh.  You also may also risk criminal charges in the most extreme cases.

Know What You Have
First, it is important to review your international bank accounts and other financial assets to understand exactly what you have, and then secondly, make sure you understand the reporting requirements with respect to those assets.  There are various dollar amount thresholds for filing the various forms, based on what type of foreign account you have, as well as your filing status.

In addition, if you are a corporate officer with signature authority over a foreign bank account, you may have an FBAR reporting requirement, even though you do not have direct control or ownership of the asset.

How We Can Help
The international tax team at Clark Schaefer Hackett can assist businesses and individuals with both understanding the filing requirements as well as the preparation of the necessary disclosure forms.  In addition, if you find yourself in a situation where you discover you should have been filing either the FBAR form or Form 8938 for prior years, our international tax experts can consult with you on how to proceed, given your specific facts.

Generally, it is best to come forward voluntarily versus waiting for the IRS to find you.  Our tax experts can advise you of the pros and cons of coming forward, as well as the IRS’s likely reaction to your case.
Contact our international team to learn more about the reporting of foreign bank accounts and other financial asset accounts, and to discuss your specific case.  We have the experience to help.

Filing Due Dates
The Report of Foreign Bank and Financial Accounts (FBAR) has a due date of June 30 each year.  This due date is unique as it is a received by due date which means the Department of the Treasury must receive your FBAR by June 30 each year.  Form 8938 (Statement of Specified Foreign Financial Assets) is required to be filed with your annual return and must be filed by the due date (including extensions) for that return.

Candy DeClark is a Shareholder at Clark Schaefer Hackett and Chairs the firm’s Professional Services Provider Industry Group. She can be reached at 937.227.0070 or [email protected]

Brittany Lawrence is a Tax Manager at Clark Schaefer Hackett, and a member of the firm’s Professional Services Provider Industry Group.  She can be reached at 937.226.0070 or [email protected] 

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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