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FinCEN 114 for spouses & children. Delinquent filers and Penalties

Feb 25, 2023 | FBAR, IRS - Internal Revenue Service | 0 comments

Who Must File the FBAR?

A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.

A financial account includes, but is not limited to securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions)

What if I file an FBAR with my spouse? 

The spouse of an individual who files an FBAR is not required to file a separate FBAR if the following conditions are met: (1) all the financial accounts that the non-filing spouse is required to report are jointly owned with the filing spouse; 2) the filing spouse reports the jointly owned accounts on a timely filed FBAR; and (3) the filers have completed and signed Form 114a, “Record of Authorization to Electronically File FBAR’s” (maintained with the filers’ records). Otherwise, both spouses are required to file separate FBARs, and each spouse must report the entire value of the jointly owned accounts.

Responsibility for Child’s FBAR

Generally, a child is responsible for filing his or her own FBAR report. If a child cannot file his or her own FBAR for any reason, such as age, the child’s parent, guardian, or other legally responsible person must file it for the child. Signing the child’s FBAR. If the child cannot sign his or her FBAR, a parent or guardian must sign the child’s FBAR. In item 45 Filer Title enter “Parent/Guardian filing for child.”

United States Military Banking Facility.

A financial account maintained with a financial institution located on a United States military installation is not required to be reported, even if that military installation is outside of the United States

Reporting a Financial Interest in 25 or More Foreign Financial Accounts

If the filer has a financial interest in over 25 or more foreign financial accounts check the yes box and enter the total number of accounts in 14a. Leave blank Part II (Continuation of Separate Accounts) or Part III (Joint Accounts) of this report but maintain records of the information.

If the filer has signature authority only (no financial interest), over 25 or more foreign financial accounts check the yes box, and enter the total number of accounts in 14b. Complete only items 34-43 of Part IV for each person on whose behalf the filer has signature authority. Detailed information about each account, including all information called for on this report, must be recorded and retained for five years from June 30 of the year following the calendar year reported. Any person who reports 25 or more foreign financial accounts in item 14a or item 14b, must provide all the information omitted from Parts II, III, IV or V, as appropriate, if the information is requested by FinCEN or the IRS.

Filing delinquent FBARs

Filing an FBAR late or not at all is a violation and may subject you to penalties. If the IRS hasn’t contacted you about a late FBAR and you’re not under civil or criminal investigation by the IRS, you should file late FBARs, as soon as possible, to keep potential penalties to a minimum.

Explain your reason for filing late in the appropriate box. If you’re using a compliance option, check with your tax preparer if you need to attach any statement for the specific compliance option.

Penalties

You may be subject to civil monetary penalties and/or criminal penalties for FBAR reporting and/or recordkeeping violations. Assertion of penalties depends on facts and circumstances.

Civil FBAR penalties

Civil FBAR penalty maximums in Title 31 of the United States Code are adjusted annually for inflation. The penalty for a willful failure to file the FBAR form is equal to the greater of $100,000 or 50% of your undisclosed foreign accounts’ value. The IRS has indicated that it may impose this penalty cumulatively for up to six years, and in the recent Zwerner Case, secured a jury verdict imposing the 50% penalty for three years cumulative (the US Department of Justice ultimately settled in June 2014 for two years’ 50% willfulness penalties, the rough equivalent of the entire account value).

$10,000 per account, per violation for non-willful (negligent) failure to failure where the taxpayer can show no reasonable cause for the failure to file. This penalty can and often will be imposed cumulatively.

Finally, in narrow circumstances that an FBAR tax attorney is best equipped to analyze and review, a taxpayer may obtain a no-penalty result if he/she shows there was reasonable cause for the failure to file.

Criminal FBAR penalties

Criminal FBAR Penalties are described in Publication 5569, Report of Foreign Bank & Financial Accounts (FBAR) Reference Guide.

If the IRS determines that your failure to file the FBAR form was willful, and the failure to report your foreign financial account also resulted in your not reporting a significant amount of taxable earnings to the US, you are at particular risk for prosecution both under the laws establishing FBAR violations (Title 31 of the US Code) and the laws establishing tax violations (Title 26 of the US Code). Willful failure to file means that a person knew, or reasonably should have known, that they were required to file an FBAR and chose not to.

In some cases, willful failure to file could even result in a prison sentence. The same penalties apply for knowingly filing a false or fraudulent FBAR.

Do not hesitate to contact us for more detail information, either by phone: +34 915193492 or by booking a free consultation through US Tax Consultants.

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