You may be able to avoid paying FBAR penalties if you qualify for a delinquent FBAR submission or the Streamlined Compliance Procedures.  These voluntary disclosure methods eliminate or reduce your tax penalties while getting you into reporting compliance.

Delinquent FBAR Submissions

A delinquent FBAR submission is the simplest way to correct your failure to file FBARs.  However, this option is only available if you meet the following conditions:

• You properly reported and paid tax on income related to your foreign accounts on your tax return.
• Your failure to file FBARs was not willful.
• You aren’t under examination or criminal investigation by the IRS, and you haven’t previously been contacted about your delinquent FBARs.

If you meet these conditions, you can submit your delinquent FBARs without paying any penalties.  However, you should make sure you understand the eligibility requirements because delinquent FBAR submissions may be subject to an IRS tax audit.

Streamlined Compliance Procedures

The Streamlined Procedures have more relaxed eligibility requirements.  The most important condition is that you must certify that your failure to file FBARs was not willful.  Don’t make this certification unless you have thoroughly discussed the issue with an FBAR attorney.

You won’t need to pay any FBAR penalties if you qualify for the Streamlined Procedures. Instead, you’ll need to submit a miscellaneous offshore penalty equal to 5% of your highest aggregate account balance.  You’ll also need to pay any back taxes due and interest.

Other Offshore Disclosure Options

If you don’t qualify for either of these options you may need to use the new Offshore Disclosure Program to disclose your foreign accounts.  This generally requires the payment of some FBAR penalties.  However, you may be able to negotiate a penalty assessment that is less than the maximum amount allowed by law.  You also get to avoid criminal tax penalties, which can include several fines and jail time.

Contact an Attorney

To get help with voluntary disclosure of offshore accounts, call Ayar Law at 800-571-7175 to receive free, no-obligation tax advice.