FBAR Examinations
Contents
- 1 FBAR Examinations
- 2 Common FBAR Examinations for Offshore Noncompliance
- 3 Bank FATCA Reporting
- 4 Missing or Incorrect Form 8938
- 5 J-5
- 6 IRS Audit
- 7 FBAR Audit
- 8 Current Year vs Prior Year Non-Compliance
- 9 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 10 Need Help Finding an Experienced Offshore Tax Attorney?
- 11 Golding & Golding: About Our International Tax Law Firm
FBAR Examinations
The IRS has significantly increased enforcement of FBAR Foreign Accounts Compliance, including assessing FBAR Penalties. Many years ago, before the introduction of FATCA (Foreign Account Tax Compliance Act), and the renewed interest in Foreign Bank and Financial Account Reporting, hiding money overseas was easy. While offshore banking is not per se illegal, the Internal Revenue Service has developed new and improved methods for examining foreign accounts. And, since FBAR penalties are heavily enforced, it is important to be aware of how the IRS investigates you, what you need to do to be compliant — and what to do if you are out of compliance.
We will summarize the basics of FBAR examinations.
Common FBAR Examinations for Offshore Noncompliance
The IRS has many tools at its disposal. Here is an introduction to five methods the IRS uses to investigate FBAR Violations.
Bank FATCA Reporting
The U.S. Government has entered into FATCA (Foreign Account Tax Compliance Act) Agreements with more than 110 countries. As a result, more than 300,000 FFI (Foreign Financial Institutions) are actively reporting U.S. Persons who own foreign accounts to the IRS. The IRS can use this information to cross-reference taxpayer filings and determine if the person is offshore compliant — this is a common way Taxpayers find themselves in an FBAR Examination.
Missing or Incorrect Form 8938
When a Taxpayer files a tax return, they may have a Form 8938 requirement. Form 8938 is used by U.S. Persons (Individuals and Entities) who have assets or accounts abroad. If the form is not filed timely or accurately, it can lead to further scrutiny — which can lead to an FBAR Examination.
J-5
J-5 is a group of countries (including the U.S.) that are working together to crack down on offshore tax fraud. Based on the information the IRS obtains from other countries on matters involving offshore, it can lead to an FBAR Audit, along with other international tax examinations.
IRS Audit
When a Taxpayer is under audit for non-compliance with any type of domestic or offshore matter, the IRS will issue an IDR. An IDR is an information document request. Even if the audit is not focused on international tax-related issues, the IDR will generally ask about unreported income and accounts. This can lead to an expanded audit on issues involving FBAR and other offshore matters.
FBAR Audit
Sometimes, the IRS will know you have not reported the accounts properly on the FBAR, and then examine you by way of an FBAR Audit. This is common when a 3rd party may have reported joint or signature authority accounts that included your name — but you did not report the FBAR as well — and this leads to a more complicated FBAR examination.
Current Year vs Prior Year Non-Compliance
Once a taxpayer has missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
Important Links:
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.
