What Should You Do If You Missed the October 15 FBAR Deadline?
For U.S. taxpayers with offshore bank accounts, the deadline to disclose these accounts to the federal government was October 15, 2022. All U.S. taxpayers with qualifying offshore accounts must file a Report of Foreign Bank and Financial Accounts (FBAR) annually, and while the filing deadline is technically April 15, all taxpayers receive an automatic six-month extension. So, now that October 15 has come and gone, what happens if you didn’t file an FBAR?
U.S. Taxpayers with Delinquent FBARs Must Evaluate Their Options
Failure to file an FBAR can have severe consequences. Established under the Bank Secrecy Act (BSA), the FBAR filing requirement exists to prevent both money laundering and tax fraud, so the federal government takes compliance very seriously. Depending on the circumstances involved, failure to timely disclose offshore bank accounts on an FBAR can lead to either civil or criminal prosecution—with potential penalties including both fines and prison time.
For taxpayers who fail to file by October 15, simply filing late generally is not the best option. This will trigger maximum penalties, and it may trigger scrutiny from the Internal Revenue Service (IRS) as well. Instead, in most cases, taxpayers who are behind on their annual filing obligations have two primary options:
Option 1: Submit a Streamlined Filing
If you inadvertently failed to file an FBAR by October 15, 2022, you may be eligible to take advantage of the IRS’ Streamlined Filing Compliance Procedures. This option is exclusively available to taxpayers who can certify that “their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.”
While utilizing the IRS' Streamlined Filing Compliance Procedures does not allow taxpayers to avoid failure-to-file penalties entirely, it protects against the risk of the IRS uncovering their FBAR delinquencies on its own initiative. If the IRS discovers an undisclosed FBAR filing failure (or receives a delinquent FBAR outside of the Streamlined Filing Compliance Procedures), this is far more likely to result in additional scrutiny and additional penalties.
Option 2: Make a Voluntary Disclosure
Taxpayers who cannot make the “non-willfulness” certification required under the IRS’ Streamlined Filing Compliance Procedures may be able to mitigate their risk by submitting a voluntary disclosure to IRS Criminal Investigations (IRS CI). As IRS CI explains, “[a] voluntary disclosure will not automatically guarantee immunity from prosecution; however, a voluntary disclosure may result in prosecution not being recommended.” As voluntary FBAR violations have the potential to trigger criminal penalties, taxpayers who have knowingly committed these violations will want to consult with a federal tax lawyer to determine if a voluntary disclosure is their best path forward.
Discuss Your Options with Federal Tax Lawyer Kevin E. Thorn
If you need to know more about your options for remedying a delinquent FBAR filing in 2022, we encourage you to contact us promptly. To schedule a confidential consultation with federal tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 202-349-4033, email firstname.lastname@example.org or request an appointment online today.