FBAR Filing Deadline Approaching – June 30th, 2016
The filing season has passed and many taxpayers are relieved to have their filings completed and submitted. A collective sigh of relief has been had as there little to be concerned about until next year. This is true for most taxpayers, but for those who have had $10,000 or more in a foreign financial account there is one last thing to do. The Report of Foreign Bank and Financial Accounts (FBAR), FinCEN 114, must be filed on or before June 30th, 2016, for tax year 2015. As time quickly runs out it’s essential to determine if there is an obligation and prepare the filing for submission. To help clients, prospects and others understand the requirements; JLK Rosenberger has provided a summary of key points below.
There are many rules that guide which individuals and companies are required to submit a FBAR filing. Broadly speaking any U.S. person (citizen, resident alien or U.S. registered company) that owns interest in or has authority over a foreign financial account that exceeds $10,000 is required to file. Qualifying accounts include bank accounts, securities accounts, and insurance policies with a cash value or a brokerage account held in a foreign country. Note that accounts held in foreign branches of U.S. banks do not require a filing to be submitted.
Failure to file a FBAR report can result in large penalties including both civil and criminal penalties. Currently there are different types of penalties assessed depending on the circumstances around the failure. The IRS is most harsh on those taxpayers that it deems were willful in the failure to file. For these individuals the maximum penalty is either $10,000 or 50% of the account balance at the time of violation (whichever is greater). Note that these penalties are assessed each year the filing was missed, so the sting can be quite potent if several years of filings were missed.
Non willful violations can result in a lower penalty. Currently there is a $10,000 per violation penalty which can include violations for not making the filing or omitting accounts from an existing filing. Remember that penalties can be imposed for several year so the net of fines can easily reach tens of thousands of dollars.
It’s important to remember that this is the last year that FBAR filings are due on June 30th. Last year Congress moved the filing deadline to April 15th to ensure consistency with other individual tax filings. So that means in 2017, the filing for tax year 2016 will be due earlier. Similar to individual income tax returns an extension may be filed for up to six months, with a filing deadline of October 15th.
The other change is that first time filers for tax year 2016 are provided with additional relief. If the filing deadline is missed and no extension is requested, the IRS will provide relief by waiving penalties and interest in most cases. This allows individuals not familiar with the filing requirements or process the opportunity to come into compliance without being subject to large penalties. However, it’s worth noting again that this is for first time filers only.
Interested in learning whether you have a filing requirement for 2015 or prior years? If you have not made a necessary filing in the past then it’s important to speak with a qualified professional before communicating with the IRS. You may eligible for one of the penalty relief programs available. If you have questions about FBAR requirements, filing process, or need help preparing the filing, JLK Rosenberger wants to help! For additional information please contact us at 949-860-9902, or click here to contact us. We look forward to speaking with you soon.