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FBAR REPORTING REQUIREMENTS

September 22, 2019

By Joshua Ashman, CPA & Nathan Mintz, Esq.

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FAILING TO MEET FBAR REPORTING REQUIREMENTS SPELLS SERIOUS TROUBLE FOR FORMER CPA

Given the renewed focus of the IRS on international tax compliance issues, it should come as no surprise that FBAR indictments and court cases are becoming increasingly prevalent.

The more recent cases have given particular attention to the issue of whether the taxpayer’s failure to meet the FBAR reporting requirements was willful or non-willful. This key distinction significantly affects the extent to which the IRS will penalize the taxpayer.

In a recent federal indictment of a former CPA, the egregiousness of the taxpayer’s actions again raised the issue of the extent to which a taxpayer’s actions should be classified by the IRS as willful in nature. Before we get to the case, let’s quickly review the FBAR reporting requirements.

THE FBAR REPORTING REQUIREMENTS

The Bank Secrecy Act (BSA) requires that a U.S. person file a Report of Foreign Bank and Financial Accounts (FBAR) if the maximum values of the foreign financial accounts of such person exceed $10,000 in the aggregate at any time during the calendar year.

The FBAR form (officially known as “FinCEN Form 114”) must be filed electronically using the BSA E-Filing System maintained by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The FBAR due date is April 15th, currently with an automatic extension of 6 months.

The IRS defines FBAR reportable accounts to include a foreign:

  • bank account
  • securities account
  • account with a person that is in the business of accepting deposits as a financial agency
  • account that is an insurance or annuity policy with a cash value
  • account with a person that acts as a broker or dealer for futures or options transactions in any commodity on or subject to the rules of a commodity exchange or association
  • account with a mutual fund or similar pooled fund

The FBAR reporting requirements apply if the individual holds the foreign account directly (or indirectly through certain entities) or has signature authority over the account.

INDICTMENT OF FORMER CPA

Several weeks ago, a federal grand jury returned an indictment charging Mr. Brian Booker, a former CPA, with failing to meet the FBAR reporting requirements and filing false documents with the IRS.

Booker, a former resident of Florida, owned and operated a cocoa trading company from Venezuela, Panama, and Florida. The indictment alleges that Booker failed to disclose a number of accounts located in Switzerland, Singapore, and Panama on FBARs, and that he filed false tax returns that failed to report the accounts.

Interestingly, Booker is also charged with filing a false submission to the IRS Streamlined Procedures amnesty program. Specifically, the indictment alleges that Booker’s actions were willful and he therefore should not have applied for the program. The jury may have taken into account Booker’s experience as a CPA in determining that his actions could be viewed as willful.

Due to the alleged willful nature of his actions, Booker faces some serious penalties, including a maximum sentence of five years in prison for each count relating to his failure to file an FBAR. He also faces a maximum sentence of three years in prison for each of the counts related to filing false tax documents.

FAILURE TO MEET THE FBAR REPORTING REQUIREMENTS IS A SERIOUS MATTER

Failing to meet the FBAR filing requirements can have serious consequences, so it’s important for late filers to explore all options available to them. There are IRS amnesty programs designed to help delinquent taxpayers, including a program designed specifically for late FBAR filers.

The team at Expat Tax Professionals has years of experience helping FBAR delinquent taxpayers come into compliance with their reporting obligations. We can help you determine which program is best for your particular case, so that you can put past delinquencies behind you.

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