IRS Publishes 2021 Guidance: How to Report Foreign Bank and Financial AccountsNews
Posted in on July 30, 2021
The Internal Revenue Service (IRS) recently published an online resource titled, “How to Report Foreign Bank and Financial Accounts”. Importantly, while this resource provides some useful guidance, taxpayers must be careful to make their own decisions independent of the IRS’ recommendations—as Maryland international tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains below:
FBAR and FATCA Compliance for U.S. Taxpayers with Foreign Accounts
The IRS’ new online resource provides a general overview of the Report of Foreign Bank and Financial Accounts (FBAR) and Foreign Account Tax Compliance Act (FATCA) reporting requirements for U.S. taxpayers. While it focuses primarily on FBAR compliance, it also references Form 8938—which taxpayers must file separately to comply with FATCA.
Although FBAR and FATCA obligations overlap in many cases, each reporting obligation is triggered by different circumstances. You can read our comparison of FBAR and FATCA to learn when each type of filing is required.
Here are some highlights from the IRS’s most recent FBAR and FATCA compliance guidance:
- U.S. taxpayers must file FBARs for accounts held on Indian lands and in U.S. territories in addition to those held in foreign countries. This includes, but is not limited to, Puerto Rico, Guam and Washington D.C.
- All joint owners of qualifying foreign financial accounts must file FBARs, with the exception of spouses who file IRS Form 114a.
- Children are responsible for filing their own FBARs unless they are incapable of doing so. In this circumstance, a parent or guardian is responsible for filing on the child’s behalf.
- When filing FBARs, U.S. taxpayers must, “reasonably figure and report the greatest value of currency or non-monetary assets in their accounts during the calendar year.”
- U.S. taxpayers who file FBARs must generally keep associated account records for five years from the relevant FBAR due date.
Remedying Past FBAR and FATCA Compliance Failures
In addition to maintaining FBAR and FATCA compliance, U.S. taxpayers need to be extremely careful when it comes to remedying past compliance failures. For example, while the IRS advises that taxpayers should file late FBARs “as soon as possible,” this can potentially be dangerous—and there are other potentially less-dangerous options available.
In many cases, the best option for remedying an FBAR or FATCA compliance failure will be to make what is known as a “voluntary disclosure”. The IRS currently maintains two distinct voluntary disclosure programs: (i) the Streamlined Filing Compliance Procedures for non-willful violations, and (ii) the Voluntary Disclosure Practice (VDP) for willful violations. Each program has different eligibility criteria and potential implications, and deciding which type of voluntary disclosure to make—or to make a late FBAR filing as recommended by the IRS—requires the insights and advice of an experienced international tax lawyer.
Speak with Maryland International Tax Lawyer Kevin E. Thorn
Do you have questions or concerns about FBAR or FATCA compliance? If so, we encourage you to contact us promptly. Call 240-235-5096, email email@example.com or get in touch with us online to request an appointment with Maryland international tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.Share This Post