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2017 FBAR Deadline | FinCEN Form 114 FBAR Lawyer & Attorney

FinCEN recently confirmed the 2017 FBAR deadline and the automatic extension option.

2017 FBAR Deadline: FBAR Background

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, is commonly known as FBAR.  US taxpayers should use this form to report their financial interest in or signatory authority over foreign financial accounts. Failure to timely file the FBAR may result in the imposition of draconian FBAR penalties.

2017 FBAR Deadline: Traditional FBAR Deadline

Prior to 2016 FBAR, the taxpayers had to file their FBARs for each relevant calendar year by June 30 of the following year. No filings extensions were allowed. The last FBAR that followed this deadline was 2015 FBAR (its due date was June 30, 2016).

2017 FBAR Deadline: Changes to FBAR Deadline Starting 2016 FBAR

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with 2016 FBAR.  Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.

Furthermore, during the transition period, the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. The taxpayers do not need to make any specific requests in order for extension to be granted.

In other words, starting 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. Moreover, the new FBAR filing deadline will follow to the letter the federal income tax due date guidance. The federal income tax due date guidance states that, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day.

2017 FBAR Deadline

Based on the new law, the 2017 FBAR deadline will be April 17, 2018 (same as 2017 income tax return due date). If a taxpayer does not file his 2017 FBAR by April 17, 2018, then the IRS will automatically grant an extension until October 15, 2018. Failure to file 2017 FBAR by October 15, 2018, may result in the imposition of FBAR civil and criminal penalties.

2018 FBAR Criminal Penalties | FBAR Lawyer & Attorney

2018 FBAR criminal penalties should be on the mind of any US taxpayer who willfully failed to file his FBARs or knowingly filed a false FBAR. In this essay, I would like to do an overview of the 2018 FBAR criminal penalties that these noncompliant US taxpayers may have to face.

2018 FBAR Criminal Penalties: Background Information

A lot of US taxpayers do not understand why the 2018 FBAR criminal penalties are so shockingly high. These taxpayers question why failing to file a form that has nothing do with income tax calculation should potentially result in a jail sentence.

The answer to this questions lies in the legislative history of FBAR. First of all, it is important to understand that FBAR is not a tax form. The Report of Foreign Bank and Financial Accounts (“FBAR”) was born in 1970 out of the Bank Secrecy Act (“BSA”), in particular 31 U.S.C. §5314. This means that the initial primary purpose of the form was to fight financial crimes, money laundering and terrorism. In other words, FBAR was not created as a tool against tax evasion.

Hence, the FBAR penalties were structured from the very beginning for the purpose of punishing criminals engaged in financial crimes and/or terrorism. This is why the FBAR penalties are so severe and easily surpass the penalties of any tax form.

It was only 30 years later, after the enaction of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), that the enforcement of FBAR was turned over to the IRS. The IRS almost immediately commenced using FBAR to fight the tax evasion schemes that utilized offshore accounts.

The Congress liked the IRS initiative and responded with the American Jobs Creation Act of 2004 (“2004 Jobs Act”). The 2004 Jobs Act further increased the FBAR penalties, including the creation of the non-willful penalty of up to $10,000 per violation.

2018 FBAR Criminal Penalties: Description

Now that we understand why the 2018 FBAR criminal penalties are so severe, let’s describe what they penalties actually look like. There are three different 2018 FBAR criminal penalties associated with different FBAR violations.

The first criminal penalty may be imposed under 26 U.S.C. 5322(a) and 31 C.F.R. § 103.59(b) for willful failure to file FBAR or retain records of a foreign account. The penalty is up to $250,000 or 5 years in prison or both.

When the willful failure to file FBAR is combined with a violation of other US laws or the failure to file FBAR is “part of a pattern of any illegal activity involving more than $100,000 in a 12-month period”, then the IRS has the option of imposing a criminal penalty under 26 U.S.C. 5322(b) and 31 C.F.R. § 103.59(c). In this case, the penalty jumps to incredible $500,000 or 10 years in prison or both.

Finally, if a person willingly and knowingly files a false, fictitious or fraudulent FBAR, he is subject to the penalty under 31 C.F.R. § 103.59(d). The penalty in this case may be $10,000 or 5 years or both.

Contact Sherayzen Law Office for Help With Past FBAR Violations

If you were required to file an FBAR but you have not done it, you need to contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options. Our international tax law firm specializes in FBAR compliance and we have helped hundreds of US taxpayers around the world to bring their US tax affairs into full compliance with US tax laws while reducing and, in some cases, eliminating their FBAR penalties.

We can help You! Contact Us Today to Schedule Your Confidential Consultation!

US Taxpayers’ Nightmare Continues: FBAR Penalty Inflation Adjustment

As if the FBAR penalties were not frightening enough, the Congress has mandated the IRS to adjust the FBAR penalties to account for inflation. As a result, the already complicated and severe system of FBAR penalties became even more complex and ruthless. In this article, I would like provide a general overview of the FBAR penalty inflation adjustment and what it means for noncompliant US taxpayers.

FBAR Penalty Inflation Adjustment: The “Old” FBAR Penalty System

The FBAR penalty system was already complex prior to the 2015 FBAR penalty inflation adjustment. It consisted of three different levels of penalties with various levels of mitigation. The highest level of penalties consisted of criminal penalties. The most dreadful penalty was imposed for the willful failure to file FBAR or retain records of a foreign account while also violating certain other laws – up to $500,000 or 10 years in prison or both.

The next level consisted of civil penalties imposed for the willful failure to file an FBAR – up to $100,000 or 50% of the highest balance of an account, whichever is greater, per violation. It is important to emphasize that the IRS has unilaterally interpreted the word “violation” to mean that a penalty should be imposed on each account per year, potentially going back six years (the FBAR statute of limitations is six years).

The third level of penalties were imposed for the non-willful failure to file an FBAR. The penalties were up to $10,000 per violation per year. It is also important to point out that the subsequent laws and IRS guidance imposed certain limitations on the application of the non-willful FBAR penalties.

Finally, there were also penalties imposed solely on businesses for negligent failure to file an FBAR. These penalties were up to $500 per violation; if, however, there was a pattern of negligence, the negligence penalties could increase ten times up to $50,000 per violation.

FBAR Penalty Inflation Adjustment: Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015

Apparently, the Congress did not believe that these FBAR penalties were sufficiently horrific. Hence, it enacted a law awkwardly named Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“2015 Inflation Adjustment Act”) to “improve the effectiveness of civil monetary penalties and to maintain their deterrent effect.”

The 2015 Inflation Adjustment Act required federal agencies to do two things: (1) adjust the amounts of civil monetary penalties with an initial “catch-up” adjustment; and (2) make subsequent annual adjustments for inflation. It is important to note that only civil penalties, not criminal, were subject to the inflation adjustment.

While the annual adjustment requirement is fairly clear, the “catch-up” adjustment requires a bit more explanation. In essence, the catch-up adjustment requires a federal agency to adjust the penalty (as it was last originally established by an act of Congress) for inflation from the time of establishment through roughly the November of 2015. In other words, a penalty would be adjusted in one year for all of the inflation that accumulated between the time the statutory penalty was created and the time the 2015 Inflation Adjustment Act was enacted. The adjustment was limited to 2.5 times of the original penalty.

The end result of the penalty adjustment was a massive increase in federal penalties in 2016. For example, one OSHA penalty went up from $70,000 to $124,709.

New System under the FBAR Penalty Inflation Adjustment

Luckily, the FBAR penalties were last revisited by Congress in 2004 and the increase in FBAR penalties, while very large (about 25%), was not as dramatic as some of the other federal penalties. Nevertheless, the FBAR penalty inflation adjustment further complicated the multi-layered system of FBAR penalties.

The key complication came from the fact that the FBAR penalty became dependent on the timing of the IRS penalty assessment, bifurcating the already existing FBAR penalty system (that was broadly described above) into two distinct parts: pre-November 2, 2015 and post-November 2, 2015.

If an FBAR violation occurred on or before November 2, 2015, the old FBAR penalty system applies. This is also true even if the actual IRS assessment of the FBAR penalties for the violation occurred after this date. In other words, the last FBAR violation definitely eligible for the old statutory penalties is the one concerning 2014 FBAR which was due on June 30, 2015. Obviously, FBARs for prior years are also eligible for the same treatment.

If an FBAR violation occurred after November 2, 2015 and the FBAR penalty would be assessed after August 1, 2016, the new system of penalties (i.e. the one after the FBAR penalty inflation adjustment) applies. In other words, all FBAR violations starting 2015 FBAR (which was due on June 30, 2016) are subject to the ever-increasing FBAR civil penalties.

With respect to these post-November 2, 2015 violations, the exact amount of penalties will depend on the timing of the IRS penalty assessment, not when the FBAR violation actually occurred. For example, if the IRS penalty assessment was made after August 1, 2016 but prior to January 15, 2017, then maximum non-willful FBAR penalty per violation will be $12,459 and the maximum willful FBAR penalty per violation will be the greater of $124,588 or 50% of the highest balance of the account.

If, however, the penalty was assessed after January 15, 2017 but prior to January 15, 2018, the maximum non-willful FBAR penalty will increase to $12,663 per violation and the maximum civil willful FBAR penalty will be the greater of $126,626 or 50% of the highest balance of the account.

Contact Sherayzen Law Office for Help with Avoiding or Reducing Your FBAR Penalties

Whether you have undisclosed foreign accounts on which the FBAR penalties have not yet been imposed or the IRS has already imposed FBAR penalties for your prior FBAR noncompliance, you should contact Sherayzen Law Office as soon as possible to secure professional help. We have helped hundreds of US taxpayers to reduce and, under certain circumstances, completely eliminate FBAR penalties through properly made voluntary disclosures. We have also helped US taxpayers to fight the already imposed FBAR penalties through appeals to the IRS Office of Appeals as well as in a federal court.

We can help You! Contact Us Today to Schedule Your Confidential Consultation!

2016 FBAR Currency Conversion Rates | FBAR Lawyer and Attorney

Using proper currency conversion rates is a critical part of preparing 2016 FBAR and 2016 Form 8938. The instructions to both forms require (in case of Form 8938, this is the default choice) US taxpayers to use the 2016 FBAR Currency Conversion Rates published by the Treasury Department. The 2016 FBAR Currency Conversion Rates also serve other purposes beyond the preparation of the 2016 FBAR and Form 8938.

The 2016 FBAR Currency Conversion Rates are the December 31, 2016 rates officially published by the U.S. Department of Treasury (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”) and they are the proper conversion rates that must be used while preparing FBAR and Form 8938.

Due to this importance of 2016 FBAR Currency Conversion Rates to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below with the official 2016 FBAR Currency Conversion Rates (keep in mind, you still need to refer to the official website for any updates).

 

Country Currency Foreign Currency to $1.00
Afghanistan Afghani 66.5000
Albania Lek 128.2500
Algeria Dinar 110.0180
Angola Kwanza 170.0000
Antigua-Barbuda East Caribbean Dollar 2.7000
Argentina Peso 15.9030
Armenia Dram 480.0000
Australia Dollar 1.3850
Austria Euro 0.9490
Azerbaijan New Manat 1.8400
Bahamas Dollar 1.0000
Bahrain Dinar 0.3770
Bangladesh Taka 79.0000
Barbados Dollar 2.0200
Belarus New Ruble  1.9590
Belarus Ruble  19585.0000
Belgium Euro  0.9490
Belize Dollar 2.0000
Benin CFA Franc  625.1400
Bermuda Dollar 1.0000
Bolivia Boliviano  6.8700
Bosnia-Hercegovina Marka  1.8560
Botswana Pula  10.6720
Brazil Real  3.2530
Brunei Dollar  1.4450
Bulgaria Lev  1.8560
Burkina Faso CFA Franc  625.1400
Burma-Myanmar Kyat  1365.0000
Burundi Franc  1650.0000
Cambodia (Khmer) Riel 4103.0000
Cameroon CFA Franc  621.7300
Canada Dollar  1.3460
Cape Verde Escudo  104.7280
Cayman Islands Dollar 0.8200
Central African Republic CFA Franc  621.7300
Chad CFA Franc  621.7300
Chile Peso  668.8000
China Renminbi  6.9420
Colombia Peso 3001.5000
Comoros Franc  462.6500
Congo CFA Franc  621.7300
Congo, Dem. Rep Congolese Franc  1210.0000
Costa Rica Colon  546.0000
Cote D’Ivoire CFA Franc  625.1400
Croatia Kuna  7.0500
Cuba Peso 1.0000
Cyprus Euro  0.9490
Czech Republic Koruna  25.0450
Denmark Krone  7.0540
Djibouti Franc  177.0000
Dominican Republic Peso  46.5900
Ecuador Dolares 1.0000
Egypt Pound  18.0000
El Salvador Dolares 1.0000
Equatorial Guinea CFA Franc  621.7300
Eritrea Nakfa  15.0000
Estonia Euro  0.9490
Ethiopia Birr  22.4000
Euro Zone Euro  0.9490
Fiji Dollar  2.0730
Finland Euro  0.9490
France Euro  0.9490
Gabon CFA Franc  621.7300
Gambia Dalasi  44.0000
Georgia Lari  2.6600
Germany FRG Euro  0.9490
Ghana Cedi  4.2200
Greece Euro  0.9490
Grenada East Carribean Dollar 2.7000
Guatemala Quetzal  7.5220
Guinea Franc  9225.0000
Guinea Bissau CFA Franc  625.1400
Guyana Dollar  205.0000
Haiti Gourde  66.4600
Honduras Lempira  23.4000
Hong Kong Dollar  7.7560
Hungary Forint  293.7500
Iceland Krona  112.8700
India Rupee  67.8000
Indonesia Rupiah  13380.0000
Iran Rial  32376.0000
Iraq Dinar  1166.0000
Ireland Euro  0.9490
Israel Shekel  3.8410
Italy Euro  0.9490
Jamaica Dollar  128.0000
Japan Yen  117.0300
Jerusalem Shekel  3.8410
Jordan Dinar 0.7080
Kazakhstan Tenge  333.3000
Kenya Shilling  102.4500
Korea Won  1203.2100
Kuwait Dinar  0.3050
Kyrgyzstan Som  69.3000
Laos Kip  8170.0000
Latvia Euro  0.9490
Lebanon Pound 1500.0000
Lesotho South African Rand  13.7070
Liberia Dollar  91.0000
Libya Dinar  1.4380
Lithuania Euro  0.9490
Luxembourg Euro  0.9490
Macao Mop 8.0000
Macedonia FYROM Denar  58.1200
Madagascar Aria  3350.5400
Malawi Kwacha  747.0000
Malaysia Ringgit  4.4850
Mali CFA Franc  625.1400
Malta Euro  0.9490
Marshall Islands Dollar 1.0000
Martinique Euro  0.9490
Mauritania Ouguiya  355.0000
Mauritius Rupee  35.8700
Mexico New Peso  20.6520
Micronesia Dollar 1.0000
Moldova Leu  19.9000
Mongolia Tugrik  2489.5300
Montenegro Euro  0.9490
Morocco Dirham  10.1540
Mozambique Metical  70.8000
Namibia Dollar  13.7070
Nepal Rupee  108.7000
Netherlands Euro  0.9490
Netherlands Antilles Guilder 1.7800
New Zealand Dollar  1.4370
Nicaragua Cordoba  29.0500
Niger CFA Franc  625.1400
Nigeria Naira 304.2000
Norway Krone 8.6210
Oman Rial 0.3850
Pakistan Rupee  104.3500
Palau Dollar 1.0000
Panama Balboa 1.0000
Papua New Guinea Kina  3.1010
Paraguay Guarani  5755.0000
Peru Nuevo Sol  3.3570
Philippines Peso  49.5910
Poland Zloty  4.1850
Portugal Euro  0.9490
Qatar Riyal 3.6410
Romania Leu  4.3050
Russia Ruble  61.0220
Rwanda Franc  815.0000
Sao Tome & Principe Dobras 23556.0240
Saudi Arabia Riyal 3.7500
Senegal CFA Franc 625.1400
Serbia Dinar  117.1400
Seychelles Rupee  13.2190
Sierra Leone Leone  7451.0000
Singapore Dollar  1.4450
Slovak Republic Euro  0.9490
Slovenia Euro  0.9490
Solomon Islands Dollar  7.9370
South Africa Rand  13.7070
South Sudan Pound  80.0000
Spain Euro  0.9490
Sri Lanka Rupee  149.6000
St Lucia East Caribbean Dollar 2.7000
Sudan Pound  7.1000
Suriname Guilder  7.4850
Swaziland Lilangeni  13.7070
Sweden Krona  9.0630
Switzerland Franc  1.0190
Syria Pound  515.0000
Taiwan Dollar  32.4010
Tajikistan Somoni 7.8000
Tanzania Shilling  2178.0000
Thailand Baht  35.7700
Timor-Leste Dili 1.0000
Togo CFA Franc 625.1400
Tonga Pa’anga  2.1530
Trinidad & Tobago Dollar  6.6900
Tunisia Dinar  2.3010
Turkey Lira  3.5220
Turkmenistan Manat 3.4910
Uganda Shilling  3607.0000
Ukraine Hryvnia  27.0000
United Arab Emirates Dirham 3.6720
United Kingdom Pound Sterling  0.8120
Uruguay New Peso  29.0700
Uzbekistan Som  3286.0000
Vanuatu Vatu  111.8000
Venezuela New Bolivar  673.8300
Vietnam Dong  22770.0000
Western Samoa Tala  2.4960
Yemen Rial  250.5000
Zambia Kwacha (New)  9.9150
Zambia Kwacha  5455.0000
Zimbabwe Dollar 1.0000

1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM – Former Yugoslav Republic of Macedonia.

Why the IRS Loves FBAR | International Tax Attorney Houston

The IRS loves FBAR. Undoubtedly, FATCA Form 8938 is a very serious rival, but even this form cannot match the FBAR‘s popularity among the IRS agents with respect to foreign accounts. What is behind this popularity? Or, stated in another way, why does the IRS love FBAR and prefers them to any other international tax enforcement mechanism for undisclosed foreign accounts?

First Reason Why the IRS Loves FBAR

The first reason why the IRS loves FBAR is because FBAR used to be the main and almost only form that dealt directly with the foreign accounts. Until 2011, when Form 8938 appeared for the first time, there was simply no form created pursuant to the Internal Revenue Code that would match the FBAR’s reach with respect to foreign bank and financial accounts.

Second Reason Why the IRS Loves FBAR

The second reason why the IRS loves FBAR is the ease with which a taxpayer can commit an FBAR violation. First, since FBAR comes from Title 31 and it is not part of the Internal Revenue Code, it is a fairly obscure requirement. Obviously, it is much better known now after the IRS voluntary disclosure programs. Still, there are many taxpayers and even accountants who simply do not know of FBAR’s existence.

Second, FBAR has a very low reporting threshold. As long as the highest aggregate balance on the foreign accounts was $10,000 or more at any point during a year, all of the accounts must be reported on FBAR. In essence, any more or less active use of an account is likely to trigger the FBAR requirement.

Third Reason Why the IRS Loves FBAR

The third reason why the IRS loves FBAR is the wide net that the FBAR casts over taxpayers. Not only does the FBAR define the term “account” in a very broad manner (including in this term such odd “accounts” as life insurance policies, bullion gold investments and so on), but its penalty structure forces compliance among all levels of taxpayers irrespective of their earnings or their willfulness (or lack thereof) with respect to FBAR violations.

Fourth Reason Why the IRS Loves FBAR

Finally, the fourth reason why the IRS loves FBAR is its draconian penalty structure that may result in the imposition of penalties that far exceed the balance (to emphasize: not the earnings, but the balance) of the unreported accounts. FBAR imposes high penalties of up to $10,000 even with respect to non-willful violations. Criminal penalties, including jail time, may be possible for willful violations.

In other words, FBAR is the ultimate punishment that the IRS can hammer out on noncompliant US taxpayers. This is probably the most important reason for the popularity of FBAR among IRS agents and even US Department of Justice prosecutors.

Contact Sherayzen Law Office for Professional Help with Undisclosed Foreign Accounts and Foreign Assets

If you have not disclosed your foreign accounts on FBARs or you have other unreported foreign assets, contact Sherayzen Law Office for professional help as soon as possible. Our legal and accounting team is led by one of the best international tax lawyers in the country, Mr. Eugene Sherayzen. We have helped hundreds of US taxpayers around the world with their FBAR compliance and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!