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

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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!

2020 FBAR Criminal Penalties | FBAR International Tax Lawyers

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2020 FBAR criminal penalties is a potential threat to any US taxpayer who willfully failed to file his FBARs or knowingly filed a false FBAR. In this essay, I would like to review the 2020 FBAR criminal penalties that these noncompliant US taxpayers may have to face.

2020 FBAR Criminal Penalties: Background Information

A lot of US taxpayers do not understand why the 2020 FBAR criminal penalties are so shockingly severe. 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 initially created to combat tax evasion.

Rather, FBAR criminal 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 allegedly to fight terrorism. Instead, 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 existing penalties and created an new non-willful penalty of up to $10,000 per violation.

2020 FBAR Criminal Penalties: Description

Now that we understand why the 2020 FBAR criminal penalties are so severe, let’s describe what these penalties actually may be. There are three different 2020 FBAR criminal penalties associated with different FBAR violations.

First, a 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.

Second, 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 may be penalized 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, contact Sherayzen Law Office 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 resolve their past FBAR noncompliance while reducing and, in some cases, even eliminating their FBAR penalties.

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

FinCEN Form 114 Estate Filers | FBAR Tax Lawyer & Attorney

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Many taxpayers and even tax professionals are completely unaware of the fact that FBAR needs to be filed not just by individuals, businesses and trusts, but also by estates. In this article, I will discuss FinCEN Form 114 Estate filers (i.e. estates that need to file FinCEN Form 114).

FinCEN Form 114 Estate filers: FBAR Background Information

FinCEN Form 114, commonly known as FBAR, was created in the 1970s as a result of the Bank Secrecy Act of 1970. The original purpose of the form was to fight financial crimes and terrorism; FinCEN was in charge of FBAR rulemaking and FBAR enforcement. After September 11, 2001, the US Congress turned over the function of FBAR enforcement to the IRS.

While the initial justification for the IRS involvement was fighting terrorism, it soon became clear that the IRS would use its new FBAR powers for international tax enforcement. This is exactly what happened; FinCEN Form 114 turned into the most formidable and scary weapon of the IRS to force US taxpayers to turn over their foreign bank account information.

FinCEN Form 114 Estate filers: FBAR Filing Requirements

If a US person has a financial interest in or signatory authority over foreign financial accounts and the aggregate value of these foreign financial accounts exceeds $10,000 at any time during the calendar year, then he has to file FBAR for that year. FBAR requires its filers determine the highest value of each of his accounts in “native” currency (i.e. the currency in which the account is denominated) first and then report this highest balance in US dollars. The Department of the Treasury publishes every year special FBAR currency conversion rates.

Prior to 2016 FBAR, the FBAR deadline was June 30 of each year. Starting 2016 FBAR, the FBAR deadline is aligned with the tax return deadline; as of the tax year 2019, the FBAR deadline is automatically extended to October 15. This may change in the future years.

FinCEN Form 114 Estate filers: Estates Must File FBARs

It is not just individuals, businesses and trusts who are required to file FinCEN Form 114. Estates must also file FBARs for any foreign accounts in the estate. It should be remembered that indirect ownership of foreign accounts (for example, through corporate shares in the estate) may also result in the requirement to file FBARs. Failure to file FinCEN Form 114 timely may result in the imposition of FBAR penalties on the estate.

FinCEN Form 114 Estate filers: Executor Liability for Decedent’s FBAR Noncompliance

If you are an executor of an estate and you discovered that the decedent should have filed FinCEN Forms 114 for prior years but never did so, then you need to explore your offshore voluntary disclosure options as soon as possible. There is a powerful incentive for the executors to resolve the decedent’s FBAR noncompliance – failure do so may result in the imposition of FBAR penalties on the executor of the estate.

Contact Sherayzen Law Office for Professional Help With FinCEN Form 114 Estate Filings and Offshore Voluntary Disclosure

If you are an executor or a personal representative of an estate and there is a reason to believe that the decedent failed to file FBARs in the past, then contact Sherayzen Law Office for professional help as soon as possible.

We have helped hundreds of US taxpayers, including estates, to successfully resolve their FinCEN Form 114 noncompliance. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Joint Account FBAR Reporting | FBAR Tax Lawyer & Attorney

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As an FBAR tax attorney, I constantly deal with the issues of joint account FBAR reporting. In most cases, the joint account FBAR reporting goes relatively smooth, but problems may surface from time to time. In this essay, I would like to address the general issues concerning joint account FBAR reporting.

Joint Account FBAR Reporting: FBAR Background

FBAR is the acronym for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114. A US person has to file an FBAR if he has a financial interest in or signatory authority or any other authority over foreign bank and financial accounts the aggregate value of which exceeds $10,000 at any point during the relevant calendar year.

It is important to emphasize that, with respect to joint accounts, each joint owner takes the entire value of the account in calculating whether he or she exceeded the $10,000 filing threshold.

A US person should file an FBAR separately from the tax return. Since 2016 FBAR, the Congress aligned the FBAR filing deadline with that of an income tax return (i.e. April 18). For example, the 2022 FBAR is due on April 18, 2023 (with an automatic extension until October 16, 2023 if needed).

Joint Account FBAR Reporting: Joint Owners

If two or more persons jointly maintain or own a partial interest in a foreign bank or financial account, then each of these persons has a financial interest in that account. Hence, as long as they are US persons, each of these US persons has to report the account on his or her FBAR.

Moreover, each of the filers must also indicate the principal joint owner of the joint account, even if this owner is not a US person. I wish to repeat this important point: the joint owner must be disclosed on FBAR even if he is not a US person. Besides the name of the joint owner, the filer must report the joint owner’s address and tax identification number (US or foreign).

Joint Account FBAR Reporting: Report the Entire Value of the Account

Even though the same joint account may be reported at least twice, FinCEN requires the FBAR filer to disclose the entire value of each jointly-owned foreign account on his FBAR.

Joint Account FBAR Reporting: Exception for Spouses

In certain circumstances, spouses may file a joint FBAR. This means that the spouse of an FBAR filer may not be required to file a separate FBAR, but she can join her husband in filing one FBAR for both of them.

In order to qualify for this exception, the spouses must meet the following three conditions. First and most important, all of the financial accounts that the non-filing spouse has to report are jointly owned with the filing spouse. The filing spouse may have additional accounts, but the non-filing spouse should not have any other foreign bank and financial accounts. Beware, however, that if one spouse is an owner of a foreign account, but the other spouse only has a signatory authority over the same account, then separate FBARs must be filed by each spouse.

Second, the filing spouse reports the jointly owned accounts on a timely filed FBAR and a PIN is used to sign item 44.

Third, both spouses must complete and sign Form 114a, a Record of Authorization to Electronically File FBARs (maintained with the filers’ records).

Contact Sherayzen Law Office for Professional Help With Joint Account FBAR Reporting

If you have foreign bank and financial accounts, contact Sherayzen Law Office for professional help with US international tax compliance and FBAR reporting. We have helped hundreds of US taxpayers with their FBAR filings, including joint FBAR filings, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Italian Bank Accounts | International Tax Lawyer & Attorney New York New Jersey

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US tax requirements concerning Italian bank accounts can be quite burdensome and complex. The chief three US reporting requirements applicable to Italian bank accounts are: worldwide income reporting, FBAR and FATCA Form 8938. Let’s discuss each of these requirements in more depth.

Italian Bank Accounts: US Tax Residents and US Persons

Before we delve into the discussion of these requirements, we need to identify who is required to comply with these requirements. This task is complicated by the fact that each of aforementioned three requirements has its own definition of a required filer.

Nevertheless, we can readily identify the categories of required filers shared by all three requirements. These categories correspond most closely, but not exactly to the concept of US tax residents. “US tax residency” is a broad term which includes US citizens, US permanent residents, residents who satisfy the Substantial Presence Test and individuals who declare themselves as US tax residents.

This definition of a US tax resident is fully applicable to the worldwide income reporting requirement and very closely corresponds to the concept of the Specified Person of Form 8938. FBAR’s concept of “US Persons”, however, does differ more significantly from the definition of a “US tax resident”, but only in more unusual circumstances. The most common differences arise with respect to the treaty “tie-breaker” provisions to escape US tax residency and persons who declare themselves tax residents of the United States.

Additionally, I wish to caution the readers that even the definition of US tax residents which I just stated has a number of important exceptions, such as visa exemptions (for example, an F-1 visa five-year exemption for foreign students) from the Substantial Presence Test.

In other words, the issue of who the required filer is, requires careful analysis of the facts and circumstances of an individual. This is definitely the job of your international tax attorney; it is just too dangerous to attempt to do it yourself.

Italian Bank Accounts: Worldwide Income Reporting

All US tax residents must report their worldwide income on their US tax returns. In other words, US tax residents must disclose both US-source and foreign-source income to the IRS. In the context of the Italian bank accounts, foreign-source income means all bank interest income, dividends, royalties, capital gains and any other income generated by these accounts.

Italian Bank Accounts: FBAR Reporting

The official name of the Report of Foreign Bank and Financial Accounts (“FBAR”) is FinCEN Form 114. FBAR requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over Italian bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000.

I wish to emphasize again that, while the term “US persons” is very close to “US tax residents”, it is not the same. The term “US tax residents” is slightly broader than “US persons”. I encourage you to search our website – sherayzenlaw.com – for articles concerning the definition of a US Person.

One aspect of the FBAR requirement, however, deserves a special mention here – the definition of an “account”. The FBAR definition of an account is substantially broader than how this word is generally understood in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.

Finally, no discussion of FBAR can be considered complete without mentioned the much-dreaded FBAR penalty system. It is complex and severe to an astonishing degree. The most feared penalties are criminal FBAR penalties with up to 10 years in jail (of course, these penalties come into effect only in the most egregious situations). The next layer of penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Finally, FBAR imposes penalties even on non-willful taxpayers.

All of the civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. One of the most important factors is the size of the Italian bank accounts subject to FBAR penalties. Additionally, since 2015, the IRS has added another layer of limitations on the FBAR penalty imposition. These self-imposed limitations of course help, but one must keep in mind that they are voluntary IRS actions and may be disregarded under certain circumstances (in fact, there are already a few instances where this has occurred).

Italian Bank Accounts: FATCA Form 8938

FATCA Form 8938 has been in existence since 2011. Unlike FBAR, it is filed with a federal tax return and considered to be an integral part of the return. This means that a failure to file File 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.

Form 8938 requires “Specified Persons” to disclose on their US tax returns all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency. For example, if he is single and resides in the United States, he needs to file Form 8938 as long as the aggregate value of his SFFA is more than $50,000 at the end of the year or more than $75,000 at any point during the year.

The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to do duplicate reporting on FBAR and Form 8938.

Specified Persons consist of two categories: Specified Individuals and Specified Domestic Entities. You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.

Finally, Form 8938 has its own penalty system which has far-reaching consequences for income tax liability (including disallowance of foreign tax credit and imposition of higher accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.

Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Italian Bank Accounts

Worldwide income reporting, FBAR and Form 8938 do not constitute a complete list of US reporting requirements that may apply to Italian bank accounts. There may be many more.

This is why, if you have Italian bank accounts, should contact Sherayzen Law Office. We have a highly knowledgeable international tax compliance team headed by an experienced international tax attorney, Mr. Eugene Sherayzen. We have helped hundreds of US taxpayers with their US international tax issues, including reporting Italian bank accounts, and We can help You!

Contact Us Today to Schedule Your Confidential Consultation!