U.S. individuals who are required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) have an automatic extension this year until October 16th, 2017. The requirement to file the FBAR is imposed on U.S. citizens, residents, or entities that own a foreign bank account or have the signature authority over a foreign account. Prior to the 2016 tax year, FBARs were due on June 30th. However, as of the 2016 tax year, they are due on April 15th with an automatic 6-month extension of time, meaning the final due date for FBARs is October 15th (coinciding with the federal due dates for an individual’s tax return). FBARs must be filed electronically through the Treasury’s Financial Crimes Enforcement Network (FinCEN) BSA E-Filing System.
Those taxpayers with filing requirements who are victims of Hurricanes Harvey and Irma have until January 31, 2018 to file their 2016 FBAR. FinCEN is offering this expanded relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently, 18 counties in Texas are eligible and 16 counties in Florida have been designated. Additional information can be found here for Harvey victims and here for Irma victims.
If you have a filing requirement, it is not too late to file your 2016 FBAR. Penalties for nonfiling can be severe. For nonwillful civil violations, penalties can reach up to $10,000 per account per violation, while willful civil violations will carry penalties up to the greater of $100,000 or 50 percent of the account’s balance at the time of the offense. In the case of criminal violations, the monetary penalties are significantly higher, and additional consequences may include incarceration.
Generally speaking, the statute of limitations for the failure to file an FBAR is 6 years. As an example, if a taxpayer owning a single foreign bank account has failed to file an FBAR, at a minimum, the taxpayer could be subject to a $10,000 FBAR penalty per year for 6 years, totaling $60,000. This assumes, of course, that the account existed for at least 6 years.
If 2016 was your first year with an FBAR filing requirement, then you have until October 16th, 2017 to file your FBAR. The filing must be done online or with the assistance of a professional tax preparer. For those that have failed to file their FBAR for earlier years, the IRS does offer programs to help bring the taxpayer into compliance. Addressing the complexities associated with FBAR nonfiling is a specialized area. Please consult a tax advisor with experience in these matters if you believe that you may not be in full compliance with these rules.