You have three major option for filing Foreign Bank Account Reports (FBARs) for previous tax years. The best option for you will depend on the specific facts of your case, such as:
- Whether you failed to report foreign income during the tax years in question.
- Whether your failure to file was willful or non-willful.
- Your risk tolerance.
- How much the estimated amount of penalties will be when using the Streamlined Procedure or the new Offshore Disclosure Framework.
Consult a tax attorney before you use any type of offshore disclosure method to make sure you are correctly following IRS procedures.
Delinquent FBAR Submission
This method involves simply sending in the delinquent FBARs. You don’t pay any penalties and you don’t have to amend your tax returns.
You can only use this strategy if you are not under civil examination or criminal investigation by the IRS and have not been contacted about the delinquent FBARs. You won’t owe any penalties if you didn’t have foreign income or paid tax on your foreign income during the years you failed to file FBARs.
The Streamlined Filing Compliance Procedures involve more costs, but are open to taxpayers with a broader range of circumstances. You can use the Streamlined Procedures if you have unreported foreign income for the years in question.
However, you will need to certify that your noncompliance was not willful. You should get a tax attorney’s professional opinion on this matter before using the Streamlined Procedures.
You’ll need to amend tax returns and submit up to six years of delinquent FBARs. You’ll have to pay any back taxes and interest, along with a 5% miscellaneous offshore penalty for domestic taxpayers.
New Offshore Disclosure Procedures
The end of the old Offshore Voluntary Disclosure Program left a gap in the available IRS offshore disclosure programs. Taxpayers who couldn’t certify that their conduct was non-willful didn’t have any precise framework for correcting their noncompliance.
The IRS resolved that issue by enacting new offshore disclosure procedures. If your failure to file FBARs was willful, this is the only offshore disclosure method you’ll be able to use.
Willful FBAR penalties and other tax penalties can be assessed when you use this disclosure method. The cost can be steep, but you will be protected from criminal prosecution if you come to an agreement with the IRS.
Contact an Attorney
Contact a tax attorney to determine which offshore disclosure method is in your best interests.
Get help with IRS offshore disclosure by calling Ayar Law at 800.571.7175 to request your consultation with a tax attorney.