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FinCEN Form 114 Indian Financial Accounts Obligations | FBAR Attorney

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FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as  “FBAR”, is one of the most important requirements that Indian Americans face as part of their US tax compliance concerning their Indian Financial Accounts. This articles provides an overview of the  Indian American’s FBAR compliance requirements with the particular focus on the FinCEN Form 114 Indian Financial Accounts obligations.

FinCEN Form 114 Indian Financial Accounts: FBAR Background Information

FinCEN Form 114 is a critical requirement for any US person with financial accounts outside the United States. US citizens, residents, and even certain non-residents who have a financial interest or signature authority over foreign financial accounts must file an FBAR if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.

FBAR was introduced in the early 1970s as part of the Bank Secrecy Act.  Its original purpose was to combat money laundering, tax evasion, and other illicit activities involving undisclosed foreign financial assets. After the 9/11 terrorist attacks, however, Congress turned over the FBAR enforcement to the IRS, effectively turning FBAR into a tax form and one of the most formidable enforcement tools in the IRS arsenal.

What makes FinCEN Form 114 such a great US international tax enforcement weapon is the combination its broad scope of compliance, its low reporting threshold and, most importantly, its draconian noncompliance penalties.  FBAR penalties range from criminal penalties (i.e. a person can actually go to jail for FBAR noncompliance in certain limited circumstances) to horrendous civil willful penalties (imposed on a per account per year basis) to even non-willful penalties.  

While the Supreme court limited in 2023 the non-willful penalties to $10,000 (as adjusted for inflation) per form, FBAR has a statute of limitations of six years. This means that a non-willfulness penalty assessed after January 25, 2024 (until sometime at the end of the January of 2025) can still total $96,702 (inflation is accounted for in this number through the end of 2024).

FinCEN Form 114 Indian Financial Accounts: FBAR’s Broad Definition of “Account”

I mentioned above that the broad scope of FBAR compliance is one of the form’s characteristics that makes it so dangerous. The foundation for the far reach of the form stems from the FBAR’s broad definition of what constitutes a reportable “account” “Account” can be applied a huge variety of financial arrangements including but not limited to:

  • Bank accounts (such as savings and checking accounts)
  • Fixed-deposit accounts (each one individually is a separate account)
  • Mutual funds
  • Pension accounts (including the Indian PPF accounts)
  • Insurance policies with a cash-surrender value
  • Precious metal accounts
  • Retirement accounts

Basically, any type of a arrangement that involves a fiduciary relationship with a financial institution (which is itself a term of art with a broad definition) with respect to your assets immediately raises a possibility of additional FinCEN Form 114 compliance.  

It is crucial to note that the FBAR filing requirement applies not only to accounts where a US person is the sole owner but also to accounts where they have joint ownership or signature authority. Even accounts where a person only has signing authority, such as an employer’s account, are subject to the FinCEN Form 114 reporting requirement if the $10,000 threshold is met.

FinCEN Form 114 Indian Financial Accounts: Special Challenges in the Context of India

In the specific context of Indian Financial Accounts, such a broad definition of accounts for FinCEN Form 114 purposes leads to unique compliance challenges. Let’s discuss the three most common challenges. First of all, Indian FBAR filers tend to have a very large number of fixed-deposit and Indian mutual fund accounts as long-term savings financial vehicles. Many Indians think that they only have to report only main checking and savings bank accounts.  This is an important error. FBAR filers need to disclose each fixed-deposit and mutual fund account individually.

Second, Indian FinCEN Form 114 filers generally do not think of life insurance policies as something that they need to disclose.  Yet, the FBAR requires the disclosure of each life insurance policy individually.

Third, FBAR filers must disclose Public Provident Fund (“PPF”) accounts on their FBARs.  Many Indian Americans completely forget about these accounts.

I should also mention one more important point about these unique challenges – income tax compliance concerning all of these accounts that many Indian FBAR filers tend to overlook. India has a very different system of taxation from the United States and, usually, a failure to disclose accounts properly on FBAR is also a good indicator of potential US income tax noncompliance.

FinCEN Form 114 Indian Financial Accounts: Offshore Voluntary Disclosure

Now that we have identified the problem, let’s discuss how to best deal with FinCEN Form 114 noncompliance.  First of all, this is an issue that you should discuss with an international tax attorney who can advise on the best course of action based on the specific facts of your case.

One of the common advices that you will receive from your international tax attorney is to engage in an Offshore Voluntary Disclosure option. Offshore Voluntary Disclosure is a reflection of the fact that the IRS cannot possibly audit every single US income tax return. Hence, the IRS offers various offshore voluntary disclosure programs that allow noncompliant US taxpayers to come forward and report their unreported foreign financial accounts and other foreign assets in exchange for a more lenient treatment.

An offshore voluntary disclosure can be a highly-beneficial solution for prior noncompliance. At the same time, it is a highly-complex process that requires extensive knowledge of US tax laws.

Moreover, in the context of FinCEN Form 114 Indian Financial Accounts noncompliance, there are specific challenges that arise from the income tax treatment concerning Indian fixed-deposit accounts as well as Indian mutual fund investments (something that I alluded to above).

In these situations, working with an experienced international tax attorney who understands the intricacies of US tax reporting of Indian financial accounts is crucial. An attorney can help you navigate the voluntary disclosure process and minimize your exposure to penalties.

Contact Sherayzen Law Office for Professional Help with Your FinCEN Form 114 Indian Financial Accounts Compliance

Sherayzen Law Office is a premier US international tax law firm that specializes in FBAR compliance and offshore voluntary disclosures. We have an extensive experience with US tax reporting concerning Indian bank and financial accounts, including in the context of various offshore voluntary disclosure options such as Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, Reasonable Cause disclosures, et cetera. By working with Sherayzen Law Office, you ensure that your compliance with US tax laws is handled thoroughly and professionally with the goal of protecting you from potential penalties.

Contact Sherayzen Law Office today to schedule your confidential consultation!

2018 FBAR Deadline in 2019 | FinCEN Form 114 International Tax Lawyer & Attorney

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The 2018 FBAR deadline is one of the most important deadlines for US taxpayers in the calendar year 2019. Since FBAR is not filed with the federal income tax return, many taxpayers may miss this deadline. This is why Sherayzen Law Office is publishing this notice to US taxpayers.

2018 FBAR Deadline: Background Information

FBAR is an acronym for 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 are filed separately from federal tax returns.

2018 FBAR Deadline: Pre-2016 FBAR Deadline

For the years preceding 2016, the US government chose a very strange deadline for FBARs – June 30 of each year. For example, 2012 FBAR was due on June 30, 2013. No filing extensions were allowed.

There was another surprising rule for FBAR deadlines. Prior to the mandatory e-filing of FBARs, taxpayers had to mail their FBARs to the specialized center in Detroit, Michigan. Unlike the rest of the tax forms, FBARs did not follow the “mailbox rule”. In other words, the filing of an FBAR was recognized by the IRS not upon the mailing of this form, but upon its receipt. For example, if FBAR was mailed on June 30, but received on July 1, it was not timely filed.

Federal tax returns, on the other hand, do follow the mailbox rule. This means that the IRS will consider the mailing date, not the date of receipt, as the date of the filing of a tax return. I should point out that, in practice, the IRS often confuses the rule and incorrectly issues failure-to-file penalties based on the date of receipt. This is why it is important to have a proof of mailing for your federal tax return.

The last FBAR that followed the June 30 deadline was 2015 FBAR; its due date was June 30, 2016. Nevertheless, due to the six-year FBAR statute of limitations, it is important to remember this history for the purpose of offshore voluntary disclosures and IRS FBAR audits. It will continue to be relevant as late as June 30, 2022.

2018 FBAR Deadline: Changes to FBAR Deadline Starting 2016 FBAR

Of course, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, taxpayers found it very difficult to timely comply with its requirements due to its very strange filing rules.

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.

2018 FBAR Deadline

Based on the current law, the 2018 FBAR deadline will be April 15, 2019. In other words, your 2018 FBAR has to be e-filed by and including that date. Automatic extension to October 15, 2019, is available.

Minneapolis FBAR Attorney | FATCA OVDP Tax Lawyer

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If you are looking for a Minneapolis FBAR Attorney, a recommended suggestion would be to retain the services of Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Mr. Sherayzen is a Minneapolis FBAR Attorney and founder of Sherayzen Law Office.

Minneapolis FBAR Attorney: Sherayzen Law Office FBAR Specialization

Sherayzen Law Office specializes in international tax compliance, including voluntary disclosure of delinquent (i.e. late) FBARs. As a Minneapolis FBAR Attorney, Mr. Sherayzen has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws.

The work of a Minneapolis FBAR Attorney is not limited only to FBARs. Rather, a Minneapolis FBAR Attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of international tax law. For example, oftentimes, the calculation of FBAR penalties may depend upon certain legal and accounting interpretations which would allow one to determine whether one has an income-compliant account. These interpretations themselves may be highly technical in nature and may come from different determinations from other areas of the case.

Moreover, as part of an offshore voluntary disclosure, a Minneapolis FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and innumerable number of other tasks.

Sherayzen Law Office Legal Team Provides Efficient and Cost-Effective Services

In order to make sure that his work as a Minneapolis FBAR Attorney is expeditious and cost-effective, Mr. Sherayzen built a team of tax professionals that he employs within his firm. Each member of the team is trained personally by Mr. Sherayzen and is assigned specific tasks. For example, an international tax accountant helps Mr. Sherayzen prepare the clients’ tax returns while his staff is trained in creating FBARs based on the information already verified by Mr. Sherayzen.

This team of motivated, intelligent and experienced tax professionals allows Sherayzen Law Office to provide an exceptional array of customized offshore voluntary disclosure and international tax compliance services which fully integrate the legal and accounting aspects of international tax compliance and offshore voluntary disclosures in an efficient and cost-effective manner.

Therefore, if you are looking for a Minneapolis FBAR Attorney, please contact Mr. Sherayzen as soon as possible to secure Your Confidential Consultation!