Reminder! FBAR Must be Received Electronically by June 30th | New Penalties in Place
Introduced in September 2013 by the Financial Crimes Enforcement Network (“FinCEN”), Form 114, Report of Foreign Bank and Financial Accounts (FBAR), is required to be filed by Tuesday, June 30, 2015. Please note, this Form supersedes Form TD 90-22.1. If you are a U.S. person (i.e., a U.S. individual or U.S. entity) with a financial interest in or signature authority over one or more foreign financial accounts with an aggregate value that surpassed $10,000 at any time during the past calendar year, it is important that you are aware of the recent FBAR filing requirement changes.
E-Filing Requirement for Form 114
Per the FBAR changes, as a filer, you now are required to submit Form 114 electronically through a registered tax software program or the Bank Secrecy Act E-Filing System.
If you and a spouse file jointly, or have a third party that prepares your FBAR(s), you now are responsible for FinCEN Form 114a, Record of Authorization to Electronically File FBARs. Although Form 114a is not required to be filed with Form 114, you must keep Form 114a and/or give it to your third-party preparer, along with your FBAR records.
New IRS Guidance for FBAR Penalties
Announced last month, the IRS issued new guidance regarding the penalties for FBAR filers who fail to file a foreign bank account report, and placed limits on the maximum penalties that can be levied. According to the guidance, for each year IRS examiners determine a taxpayer committed a willful violation of the filing requirements, the total penalty may be capped at 50 percent of the highest aggregate balance of all unreported accounts. IRS examiners could recommend that the fine is higher or lower than 50 percent, but the total penalty cannot surpass 100 percent of the account balances.
If an IRS examiner determines that a taxpayer committed several non-willful violations of FBAR reporting, the IRS examiner may recommend a single penalty for every year, regardless of how many foreign bank accounts failed to be reported. Capped at $10,000, the fine for each year is determined by the aggregate balance of the unreported accounts. In addition, the total penalty for non-willful violations will not surpass 50 percent of the highest aggregate balances of all the unreported accounts.
If an IRS examiner determines that the FBAR violations were due to reasonable cause, and a taxpayer has later submitted correct and complete Forms 114 in a timely manner, then a non-willful penalty may not be imposed or recommended by the agent.
As you prepare to submit FinCEN Form 114 to report accounts for the calendar year 2014, please keep in mind the possible impact of the new penalties guidance. For more information on the IRS penalty changes, or for assistance with electronically filing FinCEN Form 114, please contact your Cherry Bekaert Tax professional.