Report of Foreign Bank and Financial Accounts FINCEN Form 114

2012 FBAR is Due on June 30, 2013

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One of the most important tax compliance forms for businesses and individuals is the Report of Foreign Bank and Financial Accounts (the “FBAR”), FinCEN Form 114 Formerly TD F 90-22.1. Pursuant to the Bank Secrecy Act, 31 U.S.C. §5311 et seq., the Department of Treasury (the “DOT”) has established certain recordkeeping and filing requirements for United States persons with financial interests in or signature authority (and other comparable authority) over financial accounts maintained with financial institutions in foreign countries. If the aggregate balances of such foreign accounts exceed $10,000 at any time during the relevant year, the FBAR must be filed with the DOT.

The FBAR must be filed by June 30 of each relevant year, including this year (2013). Thus, the 2012 FBAR must be received by the DOT by June 30, 2013. This rule is contrary to your regular tax returns where the mailing date determines whether the filing is timely. There are no extensions available – the FBAR must be received by June 30 or it will be considered delinquent.

If the FBAR becomes delinquent, it may be subject to severe penalties.

Contact Sherayzen Law Office for FBAR Assistance

If you have any questions or concerns regarding whether you need to file the FBAR or how to prepare the form, please contact Sherayzen Law Office directly. If you have not previous filed the FBARs and you were required to do so, you may be subject to severe penalties and you may need to do some form of a voluntary disclosure. In such case, you need to contact our experienced international tax attorneys to schedule a consultation as soon as possible. Attorney Eugene Sherayzen will assess your situation, determine your potential FBAR liability, explain the available options, prepare all of the required tax forms and the necessary legal documentation, guide you through this complex process of voluntary disclosure, and vigorously represent your interests during your negotiations with the IRS.

FBAR Attorney

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If you are looking for an attorney to help you with your FBAR issues, contact Sherayzen Law Office.

Sherayzen Law Office is an international tax and business law firm that specializes in FBAR compliance among other international tax issues. Our office is located in Minneapolis, but we have clients throughout the United States and overseas.

Helping U.S. taxpayers who have FBAR issues is one of our most important specializations. FinCEN Form 114 formerly Form TD F 90-22.1, the Report of Foreign Bank and Financial Accounts (commonly known as the “FBAR”), is not the most complex form in the Internal Revenue Code, but it is definitely one of the most severe forms when it comes to penalties. A lot of U.S. taxpayers either do not know about this form, do not realize how important it is, or they already realized that they should have filed the FBAR earlier and do not know how to get out of the vicious cycle of non-compliance.

Our international tax firm is highly experienced in these delinquent FBAR matters, including the voluntary disclosure process. We will analyze your case thoroughly, determine your FBAR liability and identify your voluntary disclosure options. Once you make your choice with respect to your voluntary disclosure option, we will create and implement a customized case strategy, including preparation of all of the necessary tax forms and legal briefs.

Clients of Sherayzen Law Office enjoy the personal attention of Mr. Eugene Sherayzen, the firm’s owner, who will be working with you throughout the process in order to make sure that your case proceeds efficiently. He is easily accessible by phone and email throughout the case.

We believe that each case is unique, especially in such complex matters as FBAR voluntary disclosure. Our international tax law firm will be looking for the unique features in your particular fact pattern to determine the most expeditious and favorable manner to proceed with your case.

One the biggest problems facing U.S. taxpayers in finding the right FBAR representation at this point is the tendency among some accounting firms and even law firms to disregard the special circumstances of a case and automatically channel their clients into the 2012 OVDP (Offshore Voluntary Disclosure Program) at the highest penalty rates with the idea that they will figure out later what the strategy of the case will be and whether the taxpayer needs to opt-out of the program.

We believe that this is an incorrect approach which completely disregards the individual circumstances of each taxpayer and may subject them to an unnecessarily high penalties and additional legal and accounting fees. Each case should be thoroughly analyzed at the beginning of the process before the taxpayers enters the 2012 OVDP, not in the middle or even at the end of the voluntary disclosure.

Contact Sherayzen Law Office for Help with FBARs

If you have any undisclosed foreign financial accounts, contact Sherayzen Law Office as soon as possible for an individual, comprehensive, creative and ethical approach to your voluntary disclosure process.

FBAR Lawyers Minneapolis

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Sherayzen Law Office is a premier international law firm that specializes in FBAR compliance among other international tax issues. The firm is headquartered in Minneapolis, but it serves clients throughout the United States and overseas.

FinCEN Form 114 formerly Form TD F 90-22.1, the Report of Foreign Bank and Financial Accounts (commonly known as the “FBAR”), is not the most complex form in the Internal Revenue Code, but it is definitely one of the most severe forms when it comes to penalties. A lot of U.S. taxpayers either do not know about this form, do not realize how important it is, or they already realized that they should have filed the FBAR earlier and do not know how to get out of the vicious cycle of non-compliance.

Helping these taxpayers is our specialty. Our international tax firm is highly specialized and experienced in the FBAR matters, including FBAR voluntary disclosure. We will analyze your case thoroughly, determine what your FBAR liability is (because this is not a straightforward matter and there are a lot of factors that influence your potential FBAR penalties) and identify your voluntary disclosure options.

Once you have made your choice with respect to your voluntary disclosure, we will proceed with implementing your customized case strategy. Attorney Eugene Sherayzen will personally be working with you throughout the case; we will prepare all of the required documentation (including any tax forms and the necessary legal briefs), submit all documentation to the IRS and rigorously represent your interests before the IRS throughout the voluntary disclosure process.

Contact Sherayzen Law Office for Help with FBARs

If you have any undisclosed foreign financial accounts, contact Sherayzen Law Office as soon as possible. The earlier you contact us, the sooner we can schedule a consultation to review your case. It is highly important that you contact Sherayzen Law Office before the IRS begins its investigation of your undisclosed accounts, because such investigations may preclude the availability of some of the voluntary disclosure options.

FBAR Criminal Penalties

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Potentially, a person who willfully fails to file an FBAR or files a false FBAR may be subject to:

  • A prison term of up to 10 years
  • Criminal penalties of up to $500,000
  • or both

When it comes to penalties, FinCEN Form 114 formerly Form TD F 90-22.1, Report on Foreign Bank and Financial Accounts (commonly known as FBAR), is one of the most severe forms ever issued by the U.S. Department of the Treasury.

In addition to a rich arsenal of civil penalties, the FBAR is also armed with criminal penalties that U.S. taxpayers may face in cases of willful non-compliance with the FBAR regulations.  The two most common cases for criminal prosecution are willful failure to file an FBAR and willful filing a false FBAR, especially when combined with potential tax evasion.

The authority for the severe criminal penalties can be found in 31 U.S.C. § 5322.  This means that, potentially, a person who willfully fails to file an FBAR or files a false FBAR may be subject to a prison term of up to 10 years, criminal penalties of up to $500,000 or both potentially, a person who willfully fails to file an FBAR or files a false FBAR may be subject to a prison term of up to 10 years, criminal penalties of up to $500,000 or both.

With the mountain of information that the IRS recently accumulated as a result of the 2009 OVDP, 2011 OVDI and, now, 2012 OVDP voluntary disclosure programs, one should expect a dramatic rise in FBAR enforcement. This, of course, means that we are likely to witness the equivalent rise in FBAR audits and criminal prosecutions.

Contact Sherayzen Law Office for FBAR Help

If you have undisclosed foreign accounts and you are subject to the FBAR requirements, contact Sherayzen Law Office immediately.  Our experienced international tax firm will thoroughly review your case, analyze the available options in a responsible and creative way, create a case plan, draft and complete the necessary legal and tax documents and forms, and rigorously represent your case before the IRS.

Don’t Face The IRS Alone! call now! 952-500-8159

IRS Audit of Offshore Accounts and Other Foreign Assets: Potential Penalties

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Failure to do timely voluntary disclosure may expose non-compliant U.S. taxpayers with foreign bank and financial accounts to tremendous amount of audit penalties. In this article, I will describe these penalties which may apply to non-compliant U.S. taxpayers during an IRS audit (remember, the application of these penalties in your particular case will depend on your particular circumstances; this article merely provides an overview of potential penalties that generally exist).

FBAR Civil Penalties

The civil penalty for willfully failing to file the Form 114 (formerly TD F 90-22.1) (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”) can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation. Please, visit our Voluntary Disclosure and FBAR Center for more detailed information.

Form 8938 Penalties

Closely related to the FBAR is Form 8938. This is a new form that is required to be filed beginning with the 2011 tax year by certain taxpayers (see this article for more information). While Form 8938 is the IRS equivalent of the FBAR required to be filed by the U.S. Department of the Treasury, it has it own penalty structure.

Failure to file Form 8938 as required by I.R.C. §6038D is $10,000 per each information return. An additional $10,000 penalty is added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

Form 3520 Penalties

These penalties are relevant only to the taxpayers who are required to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, pursuant to IRC §§ 6048 and 6039F. The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.

Form 3520-A Penalties

These penalties are relevant only to the taxpayers who must report ownership interests in foreign trusts, by United States persons with various interests in and powers over those trusts under IRC § 6048(b). A penalty for failing to file each Form 3520-A, Information Return of Foreign Trust With a U.S. Owner, is the greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.

Form 5471 Penalties

Certain categories of U.S. persons who are officers, directors or shareholders in certain foreign corporations (including International Business Corporations) are required to report information under IRC §§ 6035, 6038 and 6046 (see this article for more information).

A penalty for failing to file each Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

Form 5472 Penalties

Taxpayers may be required to report transactions between a 25 percent foreign-owned domestic corporation or a foreign corporation engaged in a trade or business in the United States and a related party as required by IRC §§ 6038A and 6038C.

A penalty for failing to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is $10,000 per form. An additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency.

Form 926 Penalties

Taxpayers are required to report transfers of property to foreign corporations and other information under IRC § 6038B. A penalty for failing to file Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.

Form 8865 Penalties

United States persons with certain interests in foreign partnerships are required to report interests in and transactions of the foreign partnerships, transfers of property to the foreign partnerships, and acquisitions, dispositions and changes in foreign partnership interests under IRC §§ 6038, 6038B, and 6046A.

A penalty for failing to file Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, is $10,000 per each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return. Furthermore, there is a penalty of ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

Civil Fraud Penalties

Pursuant to IRC §§ 6651(f) or 6663, where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75 percent of the unpaid tax.

Failure to File Penalty: IRC § 6651(a)(1)

Generally, taxpayers are required to file income tax returns. If a taxpayer fails to do so, a penalty of 5 percent of the balance due, plus an additional 5 percent for each month or fraction thereof during which the failure continues may be imposed. The penalty shall not exceed 25 percent.

Failure to Pay Tax Due Penalty: IRC § 6651(a)(2)

If a taxpayer fails to pay the amount of tax shown on the return, he may be liable for a penalty of 0.5 percent of the amount of tax shown on the return, plus an additional 0.5 percent for each additional month or fraction thereof that the amount remains unpaid. The penalty is capped at 25 percent.

Accuracy-Related Penalty: IRC § 6662

An accuracy-related penalty on underpayments may be imposed by the IRS. Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty.

Other Civil Penalties

Other penalties may be applicable depending on a situation.

Potential Criminal Penalties

In addition to civil penalties, the non-compliant taxpayers also face various potential criminal penalties.

FBAR Criminal Penalties

FBAR penalties are not limited to civil penalties, but also expose non-compliant taxpayers to criminal penalties. Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.

Criminal Penalties Related to Tax Returns

Possible criminal charges related to tax returns include tax evasion (26 U.S.C. § 7201), filing a false return (26 U.S.C. § 7206(1)) and failure to file an income tax return (26 U.S.C. § 7203).

A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000.

Contact Sherayzen Law Office for Help With IRS Audits Involving Offshore Assets

If you have undisclosed foreign assets and foreign income and you are subject to IRS audit, contact Sherayzen Law Office immediately. An experienced international tax attorney will thoroughly review your case, create a case plan, complete the required forms, and offer rigorous ethical IRS representation.