In an effort to increase tax revenue and try to mitigate off-shore tax evasion, the IRS has ramped up the reporting requirements for foreign bank accounts and other financial assets held by both businesses and individuals. However, this endeavor creates yet another layer of tax compliance.
If taxpayers are not vigilant about their reporting obligations for the various international informational returns, they may face unfortunate consequences. The civil penalties for not filing either the Report of Foreign Bank and Financial Accounts (FinCEN Report 114, frequently referred to as the FBAR form) or the Foreign Financial Asset Reporting Form (Form 8938) are significant and harsh. In extreme cases, taxpayers may also risk criminal charges.
Know what you’re accountable for
First, it is important to review your international bank accounts and other financial assets to understand exactly what you have, and are responsible for. Second, make sure you understand the reporting requirements with respect to those assets. There are various dollar amount thresholds for filing the different 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 also have an FBAR reporting requirement, even though you do not have direct control or ownership of the asset.
Filing due dates
Beginning with the 2016 tax year (to be filed in 2017) the due date has changed. The new due date will be April 15, or October 15 if an extension is requested.
How we can help
The international tax team at Clark Schaefer Hackett can help businesses and individuals understand the filing requirements and prepare the necessary disclosure forms. If you discover that 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 remedy the situation.
Contact us to learn more about reporting foreign bank accounts and other financial asset accounts, and to discuss your specific case. We have dedicated professionals in place to help you stay compliant.