When it comes to filing taxes, there are certain regulations and penalties you need to be aware of. Failing to comply with certain laws can mean hefty fines, or worse – jail time. In this article, we discuss the IRS FBAR penalty and what you need to know in order to avoid any potential penalties issued by the IRS. Read more to find out how a tax relief professional can help you understand the rules and regulations when it comes to filing taxes!
Introduction to the IRS FBAR Penalty
The FBAR penalty is imposed on taxpayers who fail to file a Report of Foreign Bank and Financial Accounts (FBAR). The FBAR is required by the IRS for taxpayers who have foreign financial accounts totalling more than $10,000 at any point during the year.
The penalty for failure to file an FBAR can be severe. Taxpayers who fail to file an FBAR may be subject to a civil penalty of up to $10,000 per year. In addition, taxpayers who wilfully fail to file an FBAR may be subject to a civil penalty of up to $100,000 or 50% of the account balance, whichever is greater. Taxpayers who knowingly and wilfully fail to file an FBAR may also be subject to criminal penalties including imprisonment of up to five years and a fine of up to $250,000.
What is an FBAR and Who Must File It?
The FBAR is the Foreign Bank Account Report, which is a form that must be filed by U.S. citizens and resident aliens who have financial interests in or signature authority over foreign financial accounts.
U.S. citizens and resident aliens who have foreign financial accounts that meet the criteria below must file an FBAR if the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year:
A U.S. citizen or resident alien who has a financial interest in or signature authority over foreign financial accounts, including but not limited to a bank account, securities account, or other type of financial account; and The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year.
Reasons for Filing an FBAR
The FBAR, or Foreign Bank Account Report, is required by the US Department of the Treasury for any US person with a financial interest in or signature authority over foreign financial accounts whose aggregate value exceeds $10,000 at any time during the year. There are a few different reasons why someone might need to file an FBAR. One common reason is if you have income from sources outside of the United States. This might include interest on foreign bank accounts, dividends from foreign stocks, or rent from foreign real estate holdings. Another reason you might need to file an FBAR is if you have a financial interest in or signature authority over a foreign account that is used for business purposes.