New Law Alters FBAR Filing Deadline
Recent changes to the law have altered the due date of FinCen Report 114, a form commonly referred to as the FBAR. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 was recently signed into law, which alters the due date for FBAR filings.
The FBAR has historically had a filing deadline of June 30 of the following year. Starting with tax year 2016, the June 30 deadline has been changed to April 15, to coincide with the Form 1040 deadline. This means your 2016 FBAR will be due on or before April 15, 2017. Similar to Form 1040, you will now be able to extend the time to file your FBAR by a maximum of six months. For taxpayers living abroad who have a Form 1040 due date of June 15, the Act’s reference to Treasury Regulation §1.6081 appears to indicate that the FBAR deadline will likewise be June 15.
Any taxpayer with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeds $10,000 at any time during the tax year generally must file an FBAR. The civil penalties which the IRS can impose for a taxpayer’s failure to file an FBAR vary significantly, based on the degree of culpability of the taxpayer and based on all of the facts and circumstances relating to the taxpayer’s noncompliance. If the IRS is convinced that the offshore account holder did not act willfully in his or her failure to file an FBAR, the penalty would be limited to $10,000 per violation. Importantly, the IRS takes the position that a separate violation occurs for each bank account that is not listed on the FBAR. This penalty can be waived if the account holder can convince the IRS that the failure to file an FBAR is due to reasonable cause. In addition the IRS does permit its agents to impose a penalty lower than $10,000 per account.
If the IRS feels that the failure to file the FBAR was willful, the penalty is the greater of $100,000, or 50% of the balance of the non-compliant account, at the time of the violation. This maximum penalty is a maximum for each year the FBAR is not filed. If the IRS feels that the taxpayer acted willfully in the failure to report offshore accounts, it could result in criminal charges. The criminal penalties can result in a fine of not more than $250,000, up to five years in prison, or both.
The FBAR is not the only due date that was changed by the Act. Starting with tax year 2016, partnership tax returns will be due on March 15 for calendar year partnerships, and the 15th day of the third month for fiscal-year partnerships. Also starting in tax year 2016, C corporations will be due on the 15th day of the fourth month following the close of the corporation’s year.
With a potential $10,000 per violation non-willful penalty, taxpayers and tax practitioners must make sure that they comply with the new filing deadline. If you have any questions or concerns regarding your own requirement to file an FBAR, please contact our firm.
Jonathan T. Amitrano
(714) 546-0445 x116