By Gary G. Wallace, CPA, Managing Partner
In 2014, Credit Suisse pled guilty to criminal misconduct for tax evasion and agreed to settle by paying $2.6 billion in penalties to the various U.S. based governmental bodies. This headline highlights the U.S. Government crackdown on U.S taxpayers who have a financial interest in a foreign financial account. Coincidentally, this news is timely as the Report of Foreign Bank and Financial Accounts Compliance (“FBAR”) deadline of June 30th is looming (no extensions available).
In brief, the purpose of the FBAR is to track and record foreign financial accounts so that U.S. taxpayers are appropriately taxed all sources of income. The FBAR is a financial form required to be filed by all United States persons, residents, and entities (such as trusts and corporations) that have:
- Financial interest in or signature authority over at least one financial account located outside the United States AND;
- Those financial foreign accounts have an aggregate value that exceeds $10,000 at any time during the calendar year.
If a taxpayer meets the requirements stated above, it is important to comply with regulations by filing the Financial Crimes Enforcement Network (FinCEN) Form 114 online through the BSA E-filing System website. The taxpayer can also use the FinCEN Form 114a if a third party, such as Keiter, will electronically file the FBAR on the taxpayer’s behalf.
If a taxpayer fails to properly file an FBAR, they are subject to either a non-willful or willful civil penalty. A non-willful violation may be subject to a civil penalty up to $10,000 for each negligent violation. For willful violations, the civil penalty assessed is the greater of $100,000 or 50% of the balance in the account at the time of the violation. In addition to civil penalties, criminal penalties may be assessed as well. The penalties are assessed for each year and each separate violation. For example, if you have 10 accounts that have not been reported for 5 years, there could be 50 separate penalties assessed.
Questions? Please contact our International Tax Services partners:
804.565.6025
804.273.6258
About the Author
Gary G. Wallace, CPA, Managing Partner
Gary provides tax and business advisory services to business and individual clients. He has advised clients in various aspects of restructurings, including tax aspects of debt workouts and foreclosures, forgiveness of indebtedness, bankruptcy restructurings and liquidations, establishing liquidating trusts and partner-partnership transactions. Gary also has significant knowledge and experience in individual taxation, business taxation, and advising clients on all aspects of tax matters. He is the Managing Partner of the Firm.
More Insights from Gary G. WallaceThe information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
