FBAR, FATCA & Offshore Compliance
A U.S. person with foreign accounts worth more than $10,000 at any point in the year must report them. Many never knew. The penalties for not knowing are still significant, and the penalties for knowing are severe.
We bring foreign accounts and assets into compliance, choose the right correction path and defend clients when the IRS has already asked questions.
Two reporting systems, different thresholds, and the same accounts.
The FBAR is filed with the Treasury’s Financial Crimes Enforcement Network and covers foreign financial accounts over $10,000 in aggregate. Form 8938 is filed with the tax return and covers a wider range of foreign assets above higher thresholds.
Foreign banks report U.S. account holders to the IRS under FATCA. The IRS often knows about an account before the taxpayer discloses it.
The correction path depends on whether the failure was non-willful. That judgment is made once and shapes everything that follows.
The reporting thresholds.
From IRS guidance on the FBAR, Form 8938 and the streamlined procedures.
Joint filers have higher Form 8938 thresholds. The FBAR is due April 15 with an automatic extension to October 15. Taxpayers abroad who meet a non-residency test may use the foreign procedures with no miscellaneous penalty. Sources: IRS, Report of Foreign Bank and Financial Accounts; IRS, Comparison of Form 8938 and FBAR Requirements; IRS, Streamlined Domestic Offshore Procedures.
What we do in offshore compliance.
Exposure review
Accounts, assets, years and the facts that bear on willfulness, under privilege.
Streamlined filing procedures
Domestic and foreign submissions with the certification of non-willfulness, drafted to withstand review.
Voluntary disclosure
The IRS voluntary disclosure practice for cases where willfulness cannot be ruled out.
Delinquent filings
Late FBARs and information returns where no tax is due and the facts support it.
Penalty defense and examinations
Reasonable cause submissions, responses to penalty notices and representation in audits.
Annual compliance
FBAR, Form 8938 and related filings kept current, with the foreign institutions’ statements in hand.
How an offshore compliance matter runs.
Facts first, under privilege, before anything is filed.
Facts
Accounts, statements, prior returns and how the accounts came to exist, reviewed under privilege.
Path
Streamlined, voluntary disclosure, delinquent filing or reasonable cause, chosen on the facts.
Prepare
Amended returns, FBARs, information returns and the certification or narrative.
Submit and defend
Submission filed, follow-up questions answered, penalties contested where appropriate.
Lawyers who plan the structure and defend it.
Structure before the move, the investment or the sale.
Residency timing, entity choice, trusts and elections are decided together, with the home-country result in view. We coordinate with your accountants and counsel abroad so the plan works in both places.
Compliance and controversy in the same hands.
Foreign asset reporting, penalty exposure, streamlined and voluntary disclosures and IRS examinations. The firm also litigates and arbitrates, so a plan is written knowing how it will be tested.
The options narrow once the IRS makes contact.
Streamlined procedures are not available after an examination begins.
- Gather statements for every foreign account for the last six years
- Speak to a lawyer before an accountant; the privilege is different
- Preserve the history of how the account was opened and funded
- Act before a bank letter or IRS notice arrives
- Close or empty the account before deciding on a path
- File quiet amended returns without a procedure
- Sign a non-willfulness certification that overstates the facts
- Assume a small account is beneath notice
From the firm’s writing.
FBAR and FATCA Risks for U.S. Expats
What citizens abroad must file and what happens when they do not.
Read the articleIRS Streamlined Disclosure Attorney: Non-Willfulness
How the streamlined certification is written and tested.
Read the articleIRS Voluntary Disclosure for Foreign Assets and Crypto
When the voluntary disclosure practice is the right path.
Read the articleFrequently asked.
The Report of Foreign Bank and Financial Accounts, FinCEN Form 114, filed electronically by a U.S. person whose foreign financial accounts exceeded $10,000 in aggregate at any time in the year. It is separate from the tax return and due April 15, with an automatic extension to October 15.
Form 8938 is filed with the tax return under FATCA and covers specified foreign financial assets, including some that are not accounts, above higher thresholds that depend on filing status and residence. Many people must file both.
IRS procedures for taxpayers whose failure to report was non-willful. The domestic version requires three years of amended returns, six years of FBARs, a certification of non-willfulness and a 5 percent miscellaneous penalty. The foreign version, for those who meet a non-residency test, has no miscellaneous penalty.
The IRS voluntary disclosure practice exists for cases where willfulness cannot be ruled out. It involves a preclearance request, a fuller disclosure and higher penalties, in exchange for a path that avoids criminal referral. The choice between paths is made carefully and under privilege.
Streamlined procedures are closed once an examination begins, but other options remain: reasonable cause, penalty mitigation and representation in the audit. Call before responding.
Other areas of the practice.
Inbound and outbound services, from pre-immigration planning to offshore compliance. Back to the overview.
Foreign accounts that were never reported?
A confidential, privileged consultation. We will tell you which path fits the facts and what it will cost.