|July 14, 2014|
Previously published on June 17, 2014
U.S. Taxpayers are required to disclose ownership of or signature authority over any offshore bank account that had a balance of $10,000 or more at any point during calendar year 2013. This requirement also applies to multiple offshore accounts which have a maximum aggregate balance of more than $10,000. The highest account balance of each offshore account and certain foreign assets must be reported before June 30, 2014 every year to the IRS and FinCEN on an “FBAR” form. Beginning this year, all FBAR forms must be e-filed.
The FBAR is an information return which does not create any additional tax liability. While offshore accounts are legal, the FBAR is a tool used by the IRS to locate individuals with unreported foreign income. In recent years, UBS and Wells Fargo (Caribbean) have been forced to provide bank records and names of U.S. clients to the IRS. The IRS can then cross check these records with taxpayers’ returns to determine if an FBAR has been filed. Failure to file an FBAR can result in severe civil (as much as 50% of the highest account balance per year) and criminal penalties. The IRS has made clear that it is attempting to secure records from banks in Asia, the Caribbean, and Europe.
Many taxpayers with offshore accounts are or were completely unaware of this requirement, which can even attach to foreign life insurance policies, a company’s foreign bank account, or an employee of a company with signature over a foreign bank account. The requirement to file applies to individuals, businesses, estates, trusts, and other entities.
If you have ownership of or signature authority over a foreign bank account or an interest in any foreign assets, including life insurance, please contact William Buck or Carly Schimizzi as soon as possible. The June 30th filing deadline cannot be extended.