IRS Enforcement of FBAR Violations

The IRS enforcement of FBAR violations and investigations by the IRS are on the rise. The FBAR is FinCEN Form 114, and it is required to be filed by U.S. person taxpayers in order to report their  Foreign Bank and Financial Accounts. The failure to timely file the FBAR can lead to fines and offshore penalties — which can vary drastically. Moreover, in late 2023, the IRS confirmed that not only is FBAR enforcement a priority, but that the IRS has every intention of expanding FBAR enforcement in the coming years.

The FBAR Requirements

In recent years, the Internal Revenue Service has significantly increased enforcement of foreign accounting compliance matters, with a focus on FBAR and FATCA. FBAR enforcement has become so prevalent and important for taxpayers that our Board-Certified Tax Law Specialist team developed a standalone website dedicated exclusively to foreign accounts compliance matters. Let’s take a look at what the IRS recently published involving increased FBAR examinations.

Which Accounts are Subject to FBAR Violations?

While many different types of foreign accounts are required to be included on the FBAR, some common examples of financial accounts include:

• • • Stock accounts

    • Investment accounts

    • Mutual fund accounts

    • ETF Accounts

    • Foreign pension or retirement

    • Foreign life insurance

New 2024 FBAR Examinations are Coming

As provided by the IRS

• • • “High-income taxpayers from all segments continue to utilize Foreign Bank accounts to avoid disclosure and related taxes. A U.S. person with a financial interest over a foreign financial account is required to file a Report of Foreign Bank and Financial Accounts (FBAR) if the aggregate value of all foreign financial accounts is more than $10,000 at any time.

    • IRS analysis of multi-year filing patterns has identified hundreds of possible FBAR non-filers with account balances that average over $1.4 million. The IRS plans to audit the most egregious potential non-filer FBAR cases in Fiscal Year 2024.”

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.