Funnyman John Oliver had this to say about the IRS: “Dealing with the them is obligatory. It often functions badly. And it combines two of the things we hate most in life: someone taking our money and math.”
The IRS is hated by many in our country for many reasons, but chief among them is the power they hold and the punishment they wield without hesitation.
When the subject comes to FBARs (Foreign Bank Accounting Reports), the IRS has an enhanced capacity to mete out some really tough punishment.
To recap, the tax system of the US is worldwide. No matter where in the world you earn your money, its taxable. The FBAR is a tax filing document for US citizens with one or more international bank accounts that has reached an average balance of over $10,000 during the year. The accounts can be held directly or indirectly in the form of:
- Bank account;
- Brokerage accounts;
- Direct ownership of foreign mutual fund;
- Foreign-issued cash-value life insurance; or
- A trust.
New Muscle to Flex
Financial disclosure requirements are nothing new. But in late 2015, thanks to the Foreign Account Tax Compliance Act (FATCA), the US has made agreements with more than 100 countries requiring their financial institutions (commercial banks, investment banks, insurance companies, brokerages, etc.) to provide the IRS with info regarding any accounts held by US taxpayers.
Getting the feeling somebody’s watching you? We know what you mean. You can choose to fight disclosure if you want, but the odds are not in your favor.
If you willfully fail to disclose your oversea assets, you could be on the hook for 50% of your total balance or $100,000 – whichever is greater – for every year you failed to file an FBAR.
If you have multiple accounts, the fine could be from 50% to 100% of your highest balance.
You could also be sent to prison for five years. Nobody wants that. The food is sub-par, your clothing is chosen for you and the camaraderie is not what you’d think.
If your failure to file an FBAR is deemed non-willful (not many people even know about the FBAR) then the IRS may go a bit easier but can still impose a penalty of $10,000 for every year you fail to file an FBAR.
Do the Smart Thing: Hire a Tax Expert
The IRS does have a bit of discretion when it comes to dropping the hammer, especially in cases where the failure to file is deemed non-willful. Again, the IRS doesn’t go to great lengths to tell people that the FBAR even exists, so failure to know about it is not unheard of.
Regardless, you’re still going to have to pay your back taxes plus interest. Whether you pay the full amount or are able to position yourself to lessen the pain depends upon you making the wise decision to add a tax expert to your team.
Get in touch with us today, and let us start working for you.
Send an email to Eric Stuhler at email@example.com.