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If you or your business has $10,000 in foreign accounts, it's important that you pay attention to this year's FBAR reporting regulations.
The deadline for filing this year's FBAR (Report of Foreign Bank and Financial Accounts) is June 30.
However, if you improperly failed to file an FBAR in the last few years, or did not report foreign accounts on your past tax returns, you may also need to take advantage of the 2011 Offshore Voluntary Disclosure Initiative (OVDI).
Though FBAR forms have been around for decades, many business owners with foreign accounts still remain unaware of FBAR reporting requirements.
However, in addition to declaring foreign accounts on your tax returns, if you have more than $10,000 in accounts outside the U.S., you must file an FBAR form, which provides the IRS with more in-depth information on your holdings.
For those who were unaware of this requirement or did not report overseas holdings on past returns, the IRS has set an August 31 deadline to participate in its OVDI program.
The OVDI allows taxpayers to get up to date on foreign disclosures without risking criminal sanctions. However, participants do pay additional penalties.
Should you file an FBAR for the first time? Or participate in the OVDI?
Filing an FBAR for the first time might cause the IRS to flag you for further investigation, which means that, if you are not up to date on your FBAR reporting and/or tax returns, there is some risk to alerting the IRS of your holdings.
If this is the case, you need to speak to a tax attorney about the implications of FBAR reporting, as well as the OVDI. Reporting your foreign accounts may expose you to penalties, but not doing so may lead to criminal prosecution in the future.