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Filing FBAR

FBAR violations


Do you have foreign assets or involved in transactions with a foreign entity? 

If yes, it’s your responsibility to know your tax obligations regarding international transactions and foreign entity taxation during your return filing process. 

Be it foreign authority issued stocks and bonds or property on foreign land; one can own several kinds of foreign assets. These assets are sources of income for US persons. However, as these assets are foreign entities, the taxation system is very different.

Under such cases, the taxpayer may quickly become non-compliant for the offshore tax liabilities. Taxpayers may be required to pay taxes based on the foreign entity and transaction rules provided by IRS. One of the requirements is Form 114, the FBAR form. 

FBAR- definition, and purpose

What is the FBAR form, what exactly this document is, and the reason for filing Form 114? 

FBAR or Foreign Bank and Financial Accounts Report is a document containing all the transaction details you have made in the current financial year related to foreign financial assets and accounts. Taxpayers file the FBAR electronically through the Financial Crimes Enforcement Network’s BSA E-Filing System. Taxpayers don’t file the FBAR with their federal tax return. If you need to paper-file your FBAR, you need to call FinCEN’s Regulatory Helpline to request an exemption from e-filing. (Reference: https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar#:~:text=You%20must%20file%20the%20FBAR,an%20exemption%20from%20e%2Dfiling)

What do FBAR violations mean?

FBAR violations come from an intentional attempt to high assets or a negligent act of not researching your foreign tax obligations. FBAR violations are penalized severely.

FBAR needs to be filed once the total foreign accounts valuation exceeds $10,000. 

How can one detect willful violations of FBAR?

The moment you submit the tax return, the entire document is going to be scrutinized thoroughly. During this process, the documents and data incidents are verified, giving away one’s malicious intent of evading the foreign tax liabilities. 

Following is the list of some of the documents IRS uses to check the genuineness of your FBAR form.

  • Bank statements, credit and debit statements related to the foreign account, and the transaction details
  • Whether or not an FBAR document has been submitted in the previous years by the similar taxpayer
  • Any form processed by the IRS asking the taxpayer to explain the lack of proper information in the return file
  • Any financial form showing the taxpayer’s awareness about the FBAR
  • Details on opening the foreign financial accounts 
  • International information submitted by foreign banks regarding the taxpayer

What penalties are imposed on the taxpayer for FBAR violations?

Penalties range and can be as high as $12,921 or even the greater of $129,210, or 50% of the amount per 31 U.S.C.5321(a)(5)(D)

Streamlined filing compliance procedures to mitigate penalties

Streamlined filing compliance procedures are primarily intended for taxpayers whose failure to report foreign financial assets and pay taxes regarding the assets was not willful. Eligibility for the procedures:

  • the taxpayer is not under a civil examination,
  • not under criminal investigation by the IRS,
  • has not made a voluntary disclosure under the voluntary disclosure procedures,
  • has filed all required tax returns,
  • file amended tax returns and required information returns for the most recent three tax years,
  • file delinquent FBARs for the most current 6 tax years,
  • pay the miscellaneous offshore penalty,
  • pay or have the arrangement to pay the tax due.
  • has reasonable cause for failing to file the FBAR returns,
  • is not under a civil or criminal investigation by the IRS,
  • has not already been contacted by the IRS about the delinquent FBAR information returns. 


FBAR filing shouldn’t be taken lightly because strict laws protect the Federal government from losses due to incompliance. Getting all the information from your tax preparer about the FBAR filing is crucial so that you can avoid both willful and non-willful violations of the FBAR rules..

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