How to File FBAR Forms That Are Past Due
- How to File FBAR Late
- How to Use the Delinquent FBAR Submission Procedures
- How to File Late FBARs through the Streamlined Filing Compliance Program
- How Many Years Do You Need to File FBAR?
- FBAR Penalties: What Happens If You Don’t File?
- Common Mistakes with FBAR Forms
- Filing FBAR Late Doesn’t Have to Be Complicated
If you’ve missed the filing deadline for your FBAR, you’re probably a little worried. After all, there’s plenty of fear-mongering on the internet regarding the penalties you can face for past-due FBAR forms. The good news is that you have options if you have delinquent FBARs you need to file.
Here’s what you need to know!
- If you have delinquent FBAR forms, you can file late to come into compliance.
- As long as your failure to file was non-willful, you may be able to avoid the usual penalties.
- Act soon! The longer you wait, the harder it may be to avoid costly consequences.
How to File FBAR Late
If you have FBARs that are past due, you have a few options for coming into compliance. Let’s take a look.
1. Filing Delinquent FBAR Forms Online Yourself
If you don’t have substantial changes to make on your tax return involving unreported income, you may be eligible for the Delinquent FBAR Submission Procedures. Under these rules, you can get into compliance without the usual penalty. (More on this below!)
2. Contact FinCEN’s Regulatory Helpline
If you’re unable to file electronically for any reason, you can contact the FinCEN Helpline to determine alternatives to electronic filing. The number for this is 800-949-2732 or 703-905-3975 if calling from outside the United States.
3. Use the Streamlined Filing Compliance Procedures
For more complicated situations, you may need to use the Streamlined Filing Compliance Procedures to come into compliance. (More on this below!)
How to Use the Delinquent FBAR Submission Procedures
If you’re filing your FBAR late (and you aren’t under criminal investigation by the IRS), you can file your delinquent forms online yourself. You can do this through the Delinquent FBAR Submission Procedures.
Visit the BSA E-Filing System operated by the Financial Crimes Enforcement Network (FinCEN). There, you can file any missing FBARs for previous years. Just make sure you follow their instructions to the letter!
You will need to prepare a statement explaining why you are late in filing your FBARs. (The cover page of the FinCEN form will include a section for this.) The IRS won’t impose a penalty as long as you properly reported on your US tax returns and paid all taxes on any income from your foreign financial accounts reported on the late FBARs.
(Eligibility for this program is limited to taxpayers who don’t have unreported income and aren’t required to file additional delinquent forms besides the FBAR. If you don’t meet those standards, you may need to use the Streamlined Filing Compliance Procedures instead.)
Once you’ve filed an FBAR electronically, print out a copy of the submitted FBAR form for your records (or save a digital copy in a secure location). Retain the confirmation email or message you receive, as well. This could save you from any future headaches if the IRS claims your FBAR was never filed.
How to File Late FBARs through the Streamlined Filing Compliance Program
The Streamlined Filing Compliance Procedures is a tax amnesty program designed to help expats avoid the usual penalties for late filing. To use this program, you must have delinquent or amended tax returns as well as the FBAR. To use the Streamlined Compliance Procedures, all you have to do is:
- Self-certify that your failure to file was accidental, not willful
- File your last three delinquent or amended income tax returns and pay any taxes you owed on those returns
- Certify that you have been in the United States for 30 days or less for at least one of the years you are filing delinquent or amended returns
- File FBARs any years needed for the last six years
This will bring you into compliance with IRS regulations. Learn about how you can get caught up easily with our Streamlined Filing Package.
How Many Years Do You Need to File FBAR?
There is a six-year statute of limitations for civil FBAR violations. This means that the IRS has six years to confront a taxpayer regarding a delinquent FBAR. If you are behind in filing your FBARs, you will need to file any that are missing from the past six years. Any years before that are no longer relevant.
If you have delinquent FBARs for multiple years, submit them all at once. Filing just one and leaving the others unresolved for a time could raise red flags and open you up to serious penalties.
FBAR Penalties: What Happens If You Don’t File?
The penalty for not filing an FBAR will vary depending on whether the IRS believes your mistake is willful or non-willful. As long as you can prove that filing delinquent FBAR forms was non-willful and you have support for your claim, there’s less of a chance that you’ll be penalized.
Willful vs. Non-Willful
If the IRS rules your violation non-willful, it means they’ve determined you didn’t know about the requirement. In this case, they’ll find you negligent and may issue a penalty of up to $10,000 per year for every year you committed the violation.
If they believe your violation was willful, it means they believe you knew you were required to file an FBAR but chose not to do so.
The consequence for a willful violation can include either a penalty of $100,000 or 50% of your account value, depending on which amount is higher. The IRS can also assess the penalty for each unreported account for each year you failed to report. A willful violation of the FBAR can even lead to criminal incarceration.
How Willfulness Is Determined
Whether the IRS finds you willful will depend on certain evidence, including:
- Bank statements
- Correspondence with foreign financial institutions
- Previous tax returns
- Previous correspondence with the IRS
- Business History
- Interviews with the entity preparing your tax returns
The burden of proving willfulness falls on the IRS. They’ll review as much information as possible to determine whether your actions were intentional.
It’s important to note that the IRS may consider you willful if they determine you were willfully ignorant about the requirement to file an FBAR.
Common Mistakes with FBAR Forms
Because FBAR regulations can be complicated, it’s normal for people to misunderstand what’s required. It’s a lot to take in. Here are some common mistakes made when filing the FBAR:
- Misunderstanding the FBAR threshold: Taxpayers may mistakenly believe that because they don’t have $10,000 in any single financial account, they are not obligated to file an FBAR. However, the $10,000 threshold refers to the combined total of all foreign financial accounts, not a single account. Even if the $10,000 is spread out over multiple accounts, you must still report it on an FBAR.
- Failing to identify financial accounts: Under FBAR policies, “financial accounts” are more than just bank accounts. Life insurance policies, pensions, investment accounts, , and more are all reportable on the FBAR.
- Submitting paper forms: Since 2013, all FBARs must be filed electronically through the FinCEN website. Paper submissions are not accepted.
- Giving inaccurate information: Providing inaccurate or incomplete information on an FBAR can open you up to several headaches. Always make sure you have the proper documentation—and review it thoroughly—before submitting anything.
- Misinterpreting “financial interest”: Taxpayers must report foreign financial accounts they have a “financial interest” in. This includes accounts with an indirect interest, such as in a corporation you own a significant share of.
- Failing to convert currency correctly: When determining whether you meet the FBAR threshold, you may have to convert foreign currency to USD to value it. To do this, you will have to use the US Treasury’s Bureau of Fiscal Affairs official year-end exchange rate for the relevant tax year.
If you think you might have filing errors on your FBAR forms from previous years—or you haven’t filed them in the first place — rest assured that you can still correct or file FBAR forms with a simple, headache-free process.
Filing FBAR Late Doesn’t Have to Be Complicated
We hope this guide has helped you understand how to avoid the penalties for filing an FBAR late! Our expat-expert CPAs and IRS Enrolled Agents have ample experience helping US expats get caught up on delinquent taxes using the various programs and procedures available through the IRS.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.