subject: Fbar: Why Is It Such A Big Deal? [print this page] Filing a Foreign Bank Account Report or FBAR in the US comes with a string of rules and regulations. Every person concerned hopes that the process is simple but the details surrounding it imply challenges ahead.
The history of FBAR traces back to the year 1970 when the US Congress passed the Bank Secrecy Act or Foreign Financial Account Reporting Act. The BSA aims to solicit reports on foreign bank accounts from US citizens to prevent money laundering, tax evasion, and other crimes where money is involved. The IRS and US Treasury Department were appointed to handle this matter.
Calculating the success of the government in enforcing the laws governing FBAR since the day it was established would be a difficult task but what we know is that the fight is not yet over. Just this year, IRS issued a new set of rules and guidelines that comprise more severe penalties for violators.
Judging from the citizen's reactions, America is not quite impressed.
A Brief Look At FBAR
According to the Bank Secrecy Act, US citizens, residents, and business owners based in the US are required to disclose the details of their financial accounts held in another country. However, American citizens living outside of the US are also required to file an FBAR. It also states that the accounts -- savings, mutual funds or joint accounts, brokerage account, securities account, insurance, pension and retirement plans, credit cards, and other financial accounts with cash value -- must reach the $10,000 or more threshold amount for it to be considered reportable. This amount may come from a single or combined financial accounts.
Reporting these accounts through FBAR Form 90-22.1 must be done every year and submitted to the Treasury Department office before June 30.
Violation of the FBAR rules entitles a person to pay civil or criminal penalties (or both) which include a fine of not less than $500 for non-willful violators. For a violation to be categorized as "non-willful," the person should prove his/her unawareness of his/her eligibility and must file an FBAR as soon as he/she is made aware.
Willful violations, on the other hand, is the act of delaying form submission, delivering false information and documents, among others intentionally. Cases of such kind alerts the government that the person in questions might be involved in illegal trades and criminal sanctions may be imposed. Usually, willful violations are equivalent to $5,000-$250,000 (up to $500,000) fine plus jail time of five years. Additionally, the IRS may also confiscate half of the total balance in the person's offshore account.
To other people, it is unjust but some still consider the new arrangements as aggressive but effective. The IRS claims that, for non-willful violations, paying the fines is not always necessary. Sometimes, the letter of explanation may suffice provided that the person is proven faithful and innocent. With the rampant use of money to commit international crimes, FBAR may be just the right way to avoid threats on national and economic security.
The details enclosed in this article are not enough to understand what FBAR really is and why it exists. The best way to have an in depth understanding of it is to talk to a tax lawyer or an FBAR lawyer specifically. You may also consult a CPA, who can give you guidance on tax analysis but not FBAR in particular, unless you ask for it.
