Even the most compliant accounting clients often leave out information about offshore investments and accounts. Reporting these assets can be complicated and at times does not have a huge impact on one’s return. After all, what the IRS doesn’t know cannot hurt them, right? However, the US government is finding new ways to collect information on these holdings. Reporting foreign bank accounts is more important than ever in an increasingly connected world.
How the FBAR Affects You and Your Clients
Although reporting foreign bank accounts feels like a new concern, it has actually been law since 1970. In this year, the government began requiring people with foreign accounts totaling $10,000 or more in a single calendar year to file a form called an FBAR with FinCEN, the Financial Crimes Enforcement Network of the US Treasury Department. This form is now often called FinCEN Form 114.
The form is usually due on tax day, which was April 17 of this year. If your client files an extension for their taxes, however, their due date for reporting foreign holdings is also extended.
Deadline for Reporting Foreign Bank Accounts
Banks throughout the world are being required to report information about American holdings to the US government, with huge penalties for those who do not. Financial companies that do not comply may be banned from dealing with American markets, a punishment that few want to risk. More than 100 countries have agreed to this, including several that have generally been viewed as a safe haven.
However, clients who have failed to file an FBAR in prior years may be partially off the hook. The Offshore Voluntary Disclosure Program offers the possibility of amnesty for American citizens who have not been filing the necessary paperwork, even in certain cases where this was clearly willful. This program will end on September 28, 2018.
Your clients need to know that 2018 is their last chance to come clean with the Treasury Department and the IRS. File that FBAR this year and begin a new age of total honesty with the American government, or face huge consequences in the future.
