June 30th deadline for filing the Form 114 – Individuals Filing the Report of Foreign Bank and Financial Accounts has passed, but the IRS continues its fight to secure US tax revenue from foreign financial accounts.
IRS has taken several steps to ensure compliance and has streamlined the process of filing and disclosing the foreign bank accounts:
- All foreign financial institutions are required to report information regarding accounts of US citizens from July 1, 2014, as part of Foreign Account Tax Compliance Act (FATCA) which was passed in 2010. As a result, US taxpayers are getting FATCA letters from foreign banks, which means that the taxpayer is identified as a US taxpayer by the bank and his/her information will be disclosed to the IRS. This has led to an increased participation by the taxpayers in Offshore Voluntary Disclosure Program (OVDP) and Streamlined Filing Compliance Procedures.
- Initiation of offshore compliance programs like Offshore Voluntary Disclosure Program (OVDP) and Streamlined Filing Compliance Procedures has resulted in more than $8 billion in tax collections according to IRS press release in October 2015.
IRS in March of 2016, mentioned that in 2015, FinCen received a record high 1,163,229 FBARs, up more than eight percent from the prior year. In fact, FBAR filings have grown on average by 17 percent per year during the last five years, according to FinCen data.
- By imposing no penalty for delinquent FBAR’s the Treasury has paved the way for taxpayers to come forward and disclose their foreign bank accounts. There is no penalty imposed for taxpayers who have paid tax and reported the income from foreign financial accounts on their income tax returns if:
- they have not filed FBARS,
- they are not under a civil examination or a criminal investigation by the IRS, and
- they have not already been contacted by the IRS about the delinquent FBARs
The following procedures need to be followed to file delinquent FBAR’s https://www.irs.gov/individuals/international-taxpayers/delinquent-fbar-submission-procedures
IRS continues to make an effort for automatic reporting of foreign accounts by signing intergovernmental agreements (IGAs) between US and partner jurisdictions. With a push towards reciprocal automatic exchange between various jurisdictions IRS hopes it can easily detect the existence of offshore accounts and the income attributable to those accounts.
Due Date change FBAR reporting – Deadline for FBAR (FinCEN Report 114) for the 2016 year will be April 15, 2017, with a six-month extension until October 15th available upon request.