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2020 FBAR Deadline in 2021 | FinCEN Form 114 International Tax Lawyer & Attorney

The 2020 FBAR deadline is one of the most important deadlines for US taxpayers this calendar year 2021. What makes FBAR so important are the draconian FBAR penalties which may be imposed on noncompliant taxpayers. Let’s discuss the 2020 FBAR deadline in more detail.

2020 FBAR Deadline: Background Information

The official name of FBAR is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. US Persons must file FBAR if they have a financial interest in or signatory or any other authority over foreign financial accounts if the highest aggregate value of these accounts is in excess of $10,000. FBARs must be timely e-filed separately from federal tax returns.

Failure to file an FBAR may result in the imposition of heavy FBAR penalties. The FBAR penalties vary from criminal penalties and willful penalties to non-willful penalties. You can find more details about FBAR penalties in this article.

2020 FBAR Deadline: Pre-2016 FBAR Deadline

For the years preceding 2016, US persons needed to file FBARs by June 30 of each year. For example, the 2013 FBAR was due on June 30, 2014. No filing extensions were allowed.

The last FBAR that followed the June 30 deadline was the 2015 FBAR; its due date was June 30, 2016. Due to the six-year FBAR statute of limitations, however, it is important to remember this history for the purpose of offshore voluntary disclosures and IRS FBAR audits. The 2015 FBAR’s statute of limitations will expire only on June 30, 2022.

2020 FBAR Deadline: Changes to FBAR Deadline Starting with the 2016 FBAR

For many years, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, many taxpayers simply missed the unusual FBAR filing deadline.

The US Congress took action in 2015 to alleviate this problem. As it usually happens, it did so when it passed a law that, on its surface, had nothing to do with FBARs. 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 (which continues to this date), the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. Taxpayers do not need to make any specific requests in order for an extension to be granted.

Thus, starting with the 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. This is the case even if federal law requires a different filing date. For example, 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; the FBAR deadline will follow suit and also shift to the next business day.

2020 FBAR Deadline

Based on the current law, the 2020 FBAR deadline will be April 15, 2021. However, it is automatically extended to October 15, 2021.

The 2020 FBAR must be e-filed through the US Financial Crimes Enforcement Network’s (FinCEN) BSA E-filing system.

Contact Sherayzen Law Office for Professional Help With Your FBAR Compliance

If you have undisclosed foreign accounts, contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a leader in US international tax compliance and offshore voluntary disclosures. We have successfully helped hundreds of US taxpayers around the globe with their FBAR compliance and FBAR voluntary disclosures; and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

New FBAR Filing Verification Submission Process | FBAR Lawyer & Attorney

On November 19, 2019, the IRS announced changes to the current FBAR filing verification submission process. The change is technical, but not without importance.

New FBAR Filing Verification Submission Process: FBAR Background Information

FBAR is a common name for FinCEN Form 114 (formerly known as TD F 90-22.1), Report of Foreign Bank and Financial Accounts. US Persons must use this form to report their ownership of or signatory authority or any other authority over foreign bank and financial accounts as long as these accounts’ aggregate balance exceeds the FBAR filing threshold. Despite its official name, the IRS has administered the form since 2001, not FinCEN.

FBAR is one of the most important US international information returns. FBAR noncompliance may lead to the imposition of severe civil and criminal penalties. Hence, it is of absolute importance for US persons to timely and properly file this form.

New FBAR Filing Verification Submission Process: Rules Prior to November 19 2019

Prior to November 19, 2019, US persons who wanted to verify whether their FBARs were filed could obtain the relevant information for up to five FBARs by simply calling 1-866-270-0733 (the IRS FBAR Hotline) and selecting option 1. IRM 4.26.16.4.13(4). In this case, the IRS representatives would provide the verbal verification for free. The filers could make this request sixty days after the date of filing. Id.

If, however, a filer wished to request information concerning more than five forms or he wanted to obtain paper copies of filed FBARs, then he would need to do so in writing. For written verifications, there was a $5.00 fee for verifying five or fewer forms and a $1.00 fee for each additional form. Id. The IRS charged $0.15 per copy of the entire FBAR. Id. Written requests should have been accompanied by payment in accordance with IRM 4.26.16.4.13(4)(b).

New FBAR Filing Verification Submission Process: New November 19 2019 Rules

On November 19, 2019, the IRS issued a memorandum which contained interim guidance concerning the process by which the IRS would accept the requests for FBAR filing verifications. The memorandum introduced the following revisions to the FBAR filing verification process.

Effective as of the date of this memorandum, the IRS no longer accepts verbal verification requests; all requests must be submitted in writing. Hence, the existing fee structure in IRM 4.26.16.4.13(4)(b) now applies to all verification requests.

The IRS has stated that this procedural change is necessary to provide documentary evidence of all verification inquiries and IRS response to them. This new interim guidance will be incorporated into IRM 4.26.16 within the next two years from the date of issuance of the memorandum.

New FBAR Filing Verification Submission Process: Making a Proper Written Request

The written request for FBAR filing verification should include the filer’s name, Taxpayer Identification Number, and filing period(s). Tax practitioners requesting verifications for their clients must also make these requests in writing, and provide a copy of the Form 2848, Power of Attorney and Declaration of Representative, authorizing them to receive the FBAR information. The same fee structure as described above (i.e. a $5.00 fee for verifying five or fewer forms, a $1.00 fee for each additional form, and copies for an additional fee of $0.15) will continue to apply. Checks or money orders should be made payable to the “United States Treasury”.

Written requests and payments for FBAR filing verifications and copies of filed FBARs should be mailed to:

IRS Detroit Federal Building
Compliance Review Team
Attn.: Verification
P.O. Box 32063
Detroit, MI 48232-0063

In response to written requests, the IRS will send a letter stating whether the record shows that an FBAR was filed and if so, the date filed. If a copy of a paper-filed FBAR was requested, a copy will be included with IRS letter.

Contact Sherayzen Law Office for Professional Help with FBAR Compliance

The new FBAR filing verification process will be especially relevant in the context of offshore voluntary disclosures. Oftentimes, taxpayers do not have copies of their prior FBARs; and it is necessary to obtain these copies in order to properly calculate the penalty exposure as well as use them as evidence of non-willfulness (or find out if the IRS may use them as evidence of willfulness).

If you are required to file FBARs and you have not done so, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers with their FBAR compliance issues, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

Child’s FBAR Requirements | FBAR Tax Lawyer & Attorney

I often receive questions concerning a child’s FBAR requirements. Many taxpayers automatically assume that, if their children are below the age of majority, these children do not have to file FBARs. Unfortunately, this is not the case – a child’s FBAR requirements are every bit as extensive of those of his parents.

Child’s FBAR Requirements: FBAR Background Information

A US Person must file FinCEN Form 114, the Report of Foreign Bank and Financial Account, commonly known as “FBAR”, if he has a financial interest in or a signatory authority or any other authority over a foreign financial account and the highest value of this account (in the aggregate with any other foreign accounts of this US person) is in excess of $10,000. FBAR is filed separately from the tax return.

Failure to file FBAR can lead to very high penalties. In fact, FBAR has the most severe penalty system in comparison to any other forms related to foreign accounts; it includes even criminal penalties. Even when a person was not willful in his non-filing of FBAR, he may still be subject to FBAR non-willful civil penalties of up to $10,000 (as adjusted for inflation) per account per year.

Child’s FBAR Requirements: Age Does Not Matter

The gruesome consequences of a failure to file FBAR make the determination of who is required to file FBARs one of the most important tasks of an international tax lawyer. This is why understanding a child’s FBAR requirements is so important. Let’s clarify this issue right now.

The rule is that a US Person is subject to the FBAR filing requirement regardless of his age. In other words, even an infant must file an FBAR.

Hence, it is important for an international tax lawyer (and his clients) to always check whether minor children have any foreign accounts. A typical fact pattern in this context involves situations where grandparents set up foreign savings accounts for their US grandchildren.

It is especially important to keep this in mind during an offshore voluntary disclosure. Oftentimes, a voluntary disclosure is focused on parents; children’s accounts are often neglected.

Child’s FBAR Requirements: FBAR Filing

Generally, a child is responsible for filing his own FBAR. Again, this responsibility arises irrespective of the age of the child.

The IRS understands, however, that a child would normally be unable to file his own FBARs. In such cases, the responsibility for filing FBARs is placed on the legally responsible person (such as parents, guardians, et cetera). The legally responsible person will be allowed to sign and file FBARs on behalf of the child.

Contact Sherayzen Law Office With Respect to Your Child’s FBAR Requirements

If your child has foreign accounts, contact Sherayzen Law Office for professional FBAR help. We have helped hundreds of US taxpayers around the world with their FBAR obligations, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

IRS Issues FBAR Fact Sheet | FBAR FATCA Tax Lawyer & Attorney

On April 4, 2019, the IRS issued the FBAR Fact Sheet in order to acquaint US taxpayers with this highly important reporting requirement for foreign accounts held by US persons. Let’s analyze the new fact sheet in more detail.

FBAR Fact Sheet: Organizational Structure of the Fact Sheet

The IRS FBAR Fact Sheet can be divided into seven parts: (1) introduction to FBAR and the need to report foreign accounts to the IRS; (2) identification of who needs to file FBARs; (3) explanation of how to file FBARs (including special cases such as joint accounts and the determination of highest balances); (4) discussion of Form 8938 and FBAR; (5) amended and late FBARs; (6) description of FBAR recordkeeping requirements; and (7) more IRS resources concerning FBAR. These parts are not clearly delineated in the Fact Sheet; rather, they are summaries of various information that this brochure contains.

FBAR Fact Sheet: Introduction to FBAR

The IRS FBAR Fact Sheet commences with the warning to US taxpayers that they are required to report their foreign bank and financial accounts even if they do not produce any interest income. April 15 is identified as the critical deadline for these taxpayers. Later, the IRS also states that there is an extension available for FBARs. Again, the IRS did not do a very good job in organizing the Fact Sheet.

FBAR Fact Sheet: Who Needs to File FBARs?

Then, the IRS Fact Sheet finally introduces FBAR and states that it was created by the 1970 Bank Secrecy Act; there is no discussion of the significance of this legal history. Then, the IRS focuses on the persons who may have to file FBARs and introduces the concept of “US Person”. It defines US person as a “citizen or resident of the United States or any domestic legal entity such as a partnership, corporation, limited liability company, estate or trust.”

There is a hidden trap in this IRS definition. “Resident of the United States” does not only include US permanent residents (as most non-lawyers would read it), but also US tax residents. I encourage the readers to read this article with respect to the definition of “resident” for FBAR purposes.

The IRS also defines “United States” for FBAR purposes. The readers can read this article published by Sherayzen Law Office for a more detailed analysis of this concept.

FBAR Fact Sheet: How to File FBARs

This part of the FBAR Fact Sheet focuses on the details concerning how to file FBAR electronically. The IRS cautions taxpayers that FBAR should not be filed with their federal tax returns.

Then, the IRS discusses in more detail certain special cases such as joint accounts and US retirement accounts. The IRS finishes this part of the FBAR fact sheet with the discussion on the determination of the highest value of a foreign account.

FBAR Fact Sheet: Form 8938 & FBAR

In this part of the Fact Sheet, the IRS introduces taxpayers to an existence of another requirement concerning foreign accounts, FATCA Form 8938. The IRS urges the readers to search the IRS website with respect to this form and how it compares to FBAR.

FBAR Fact Sheet: Amended and Late FBARs

The next part of the Fact Sheet focuses on amended and late FBARs. First, the IRS discusses how to amend an FBAR. Then, the IRS states that, as soon as a taxpayer learns that he did not file the required FBARs, he needs to e-file them. At that point, the IRS casually discusses that there is space available on the form to explain the reason for late filing. Finally, the IRS describes the severe FBAR criminal penalties, stating the following: “the IRS will not penalize those who properly report a foreign financial account on a late filed FBAR, and the IRS finds they have reasonable cause for late filing.”

Sherayzen Law Office believes that the IRS has not done a good job in this part of the Fact Sheet. It has completely failed to emphasize the importance of seeking a legal advice prior to filing a late FBAR. A taxpayer may get the wrong impression that he should file a late FBAR as soon as possible before exploring the options on how to do it in a way that protects him from excessive FBAR penalties.

Moreover, the IRS also failed to emphasize the importance of offshore voluntary disclosure with respect to late FBARs. Besides a casual mention of an “IRS compliance program”, there is nothing about the various available voluntary disclosure options for US taxpayers who are filing late FBARs. The IRS does not refer at all to the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.

FBAR Fact Sheet: Recordkeeping Requirements

In the next part of the Fact Sheet, the IRS discusses how many years the FBAR filers need to keep the supporting documentation and copies of FBARs. Curiously, the IRS states that the filers should keep the documents for five years from the due date of FBAR, but the FBAR Statute of Limitations is six years.

Sherayzen Law Office does not believe that the IRS advice is correct here. We urge FBAR filers to keep their FBAR records and copies of the filed FBARs for six to ten years.

FBAR Fact Sheet: IRS Resources

The IRS concludes its FBAR Fact Sheet with the discussion of additional available resources to US taxpayers, including FBAR hotline and Publication 4261.

Sherayzen Law Office’s View of the FBAR Fact Sheet

We believe that the FBAR Fact Sheet can serve only as a general introduction to FBAR, but it is not sufficient to provide US taxpayers with sufficient guidance on how to properly deal with late FBARs. On the contrary, a US taxpayer may actually put himself in a worse legal position if he only relies on the Fact Sheet to file his late FBARs.

If you should have filed FBARs but you have not done so, contact Sherayzen Law Office for professional help. As the IRS states in its FBAR Fact Sheet, the FBAR penalties are extremely severe. Hence, it is important to approach any FBAR violations with an extreme caution and retain Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world to deal with late FBARs, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

FBAR Maximum Account Value Determination | FBAR Tax Lawyer & Attorney

Determination of the FBAR maximum account value is a problem with which every FBAR filer has to deal. In this article, I would like to provide the main guidelines for the determination of the FBAR maximum account value.

FBAR Maximum Account Value Determination: Background Information

The Report of Foreign Bank and Financial Accounts or FBAR requires each filer to disclose his financial interest in or signatory authority or any other authority over foreign bank and financial accounts to the IRS. As part of this disclosure, the filer must calculate and report the maximum account value for each of his foreign accounts on his FBAR.

FBAR Maximum Account Value Determination: Definition of Highest Value

FinCEN defines the maximum value of an account for FBAR purposes as “a reasonable approximation of the greatest value of currency or nonmonetary assets in the account during the calendar year.” In other words, the IRS does not expect you to always get the highest possible value. A reasonable approximation of this value will do if the exact highest value is not possible to determine.

FBAR Maximum Account Value Determination: Usual Problems

There are two main problems that each FBAR filer faces whenever he tries to identify the maximum account value for FBAR purposes. The first and most obvious problem is the determination of the highest account value. How does one determine the highest value for a bank account? What about a securities account where stocks fluctuate all the time? What about a precious metals account which has investments in different precious metals?

Second, FBAR requires that all amounts be stated in US dollars. Hence, an issue arises with respect to proper currency conversion – i.e. what is the proper currency exchange rate? Should the spot rates be used? Or December 31 exchange rates?

Let’s discuss each of these problems in more depth.

FBAR Maximum Account Value Determination: Methodology

Determination of maximum account value depends to a certain degree on the type of an account for which the filer is trying to determine this value. There is no question that, with respect to checking and savings bank accounts, the IRS wants you to use the full-year statements to determine the day on which the highest value was achieved for each of these accounts. This is a simple and effective method.

Determining the maximum value of a securities account is much harder, because securities fluctuate on a daily basis. For this reason, the IRS allows you to rely on periodic account statements to make this determination, especially end-of-year statements. This method is allowed only as long as the statements fairly approximate the maximum value during the calendar year.

Even this method, however, is often insufficient when one deals with mixed-currency accounts, mixed-investment accounts, mixed-metal accounts, et cetera. These situations should be handled on a case-by-case basis by your international tax attorney.

Let’s illustrate the complexity of the issues involved here by a relatively simple example. Generally, an end-of-year statement for an investment account is a good approximation of the maximum value of the account. If, however, there was a withdrawal of funds from the account following a major sale of investments, then the end-of-year statement cannot be relied upon. Instead, one should try a different method to approximate the highest value. One possibility is to use a reliable and known financial website for valuing the remaining assets on the date of the sale plus the proceeds from the sale of investments. The method, however, may fail if the highest value of investments was at the beginning of the year, not the date of sale.

FBAR Maximum Account Value Determination: Currency Conversion

Unlike the identification of the highest account value with its various complications, the currency conversation part of the FBAR maximum account value determination is fairly straightforward. All filers must use the end-of-year FBAR rates published by the Treasury Department. These rates are officially called “Treasury Financial Management Service rates”, but they are commonly called “FBAR rates” by US international tax lawyers. The FBAR rates are division rates, not the multiplication ones. This is standard in US international tax law.

Hence, for the currency conversion purposes, you need to identify the currency in which your account is nominated, find the appropriate FBAR conversion rate for the relevant year and divide your highest balance by the relevant FBAR rate. For your convenience, Sherayzen Law Office also publishes FBAR rates on its website.

Contact Sherayzen Law Office for Professional Help With Your FBAR Preparation

If you are required to file FBARs, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers to comply with their FBAR obligations, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!