Signatories Have FBAR Requirements Too
When a U.S. bank account earns interest or income, the bank sends out a 1099 form alerting the Internal Revenue Service to the money that has been earned. The account holder also gets this 1099 form, which is included with an income tax filing. Of course, offshore banks do not send out these forms. If you have money offshore, you must take on the responsibility of reporting your offshore accounts (and any income those accounts earn) to the Internal Revenue Service (IRS).
U.S. citizens and permanent residents must report offshore accounts and worldwide income to the IRS regardless of where they live. Each year, an annual Report of Foreign Bank and Financial Accounts (FBAR) form must be submitted to the IRS. This is true even if you are a U.S. citizen living abroad and the foreign bank is your primary account. A failure to file FBARs can result in significant civil financial penalties and sometimes can result in criminal charges.
Many owners of foreign bank accounts are not aware of their FBAR obligations and may be out of compliance with tax rules, which can have serious consequences. Recently, Forbes reported on another group of individuals who could also be hit with fines and penalties for failure to file FBARs. This group is non-beneficiary signatories. If you are a signatory on any offshore account, you need to file FBARs. If you have not done so, you need to speak with a Washington DC IRS attorney about the legal options available to you.
Signatories Have FBAR Obligations
FBARs must be filed any time you are an owner or a signatory on financial accounts that have an aggregate value of $10,000 or more at any point over the course of the year. This means if any account or combination of accounts exceeds $10,000 even briefly, you have reporting obligations. This is true even if you never receive any money or proceeds from the offshore accounts.
Penalties for failure to file an annual FBAR are more serious than for most cases of tax evasion. If you are a non-willful violator, which means you did not intentionally try to deceive the IRS or hide your foreign accounts, you can be assessed civil fines of up to $10,000 per account per year. The consequences of this can be huge. For example, a signatory on a family member’s account for five years could theoretically owe $50,000 in penalties on an account he never received even $1 from if he did not report that account.
Willful violators face even harsher penalties. If you intentionally and knowingly failed to file your FBARs, then the civil fines can equal as much as 50 percent of the value of the foreign account. These penalties can quickly add up. One Florida man ended up paying 150 percent of the value of his offshore account to the IRS. Criminal penalties are even worse than these civil penalties, with a potential sentence of up to 10 years of incarceration.
If you are both a signatory and a beneficial account owner (meaning you get money from the account), you must file FBARs and declare income earned. If you have not done this in the past, then you need to talk to a Washington DC IRS lawyer about voluntary disclosure options and other amnesty programs that could limit your penalties. Call DC tax attorney Kevin Thorn today.