You probably already know about FBAR and that you must report foreign bank and financial accounts if the account balances exceed certain thresholds. Starting 2017, big changes to the FBAR deadline are in store.
2017 FBAR deadline aligns with the US income tax deadline
In previous years FBAR filings, also known as FinCen Form 114 Report of Foreign Bank and Financial Accounts, were due by June 30th. Starting this year, for the 2016 reporting period, the 2017 FBAR deadline has moved up by more than 2 months.
Now the FinCen Form 114 has the same due date as individual tax returns, which is April 18th 2017.
Even though the FBAR due date is now aligned with the US income tax date, you still file the form separately from your tax return. You must submit the FBAR electronically to Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) using the BSA e-filing system.
A 6-month FBAR extension is now available
The expedited timeline is not the only change for FBAR in 2017. For the first time, a 6-month extension is available for FBAR filing dates.
And to make it really easy, FinCen grants an automatic extension to October 15th for those who fail to file by April 18th. Hence, you don’t even need to file a request to obtain the extension.
Risks of not disclosing foreign assets
Don’t take reporting foreign bank and financial accounts and the new FBAR deadlines lightly. The reason is that failure to file the FinCen form 114 on time can result in severe penalties, even for inadvertent non-compliance.
The FBAR penalty for non-willful violations is $10,000 for each financial account not reported. For willful failure to comply with the FBAR filing requirements, the penalties are even harsher. For each violation the fine is $100,000 or 50% of the amount in the account. These fines can be imposed for each year of non-compliance.
Although the penalties are stiff, in practice we have rarely seen them imposed. The IRS has stated that if you included all income from your foreign financial accounts on your US tax returns and you are not under IRS investigation, then it will not impose a penalty for filing late.
However, this doesn’t mean that you can ignore FBAR filings. We are largely in uncharted territory here, with financial data sharing between foreign financial institutions and the IRS and Treasury Department increasing each year. As a result, we always strongly encourage timely filing each and every year in order to stay in compliance. We offer foreign asset reporting as one of our expat tax services. If you need help with FBAR, contact us for a free consultation.
Please take note of the FBAR filing requirements and new 2017 FBAR deadlines. If you were unaware and haven’t reported your financial accounts abroad in previous years, you should talk to a tax advisor right away. The IRS offers amnesty programs for voluntary disclosure, through which you can avoid the severe penalties.
Need help with your FBAR?
The expat tax experts at Online Taxman can make filing all necessary forms easy for you. If you need help with your FBAR, late filing or expat taxes in general, please contact us and schedule a free consultation.
Photo by Edward M