Do you have income overseas you forgot to report? Did Grandpa leave you his foreign bank account when he passed away? If you have foreign bank accounts holding more than $10,000 in the aggregate anytime during the year, you are required to file an FBAR (Report of Foreign Bank Accounts) by June 30th of the following year (the 2013 FBAR must be received by the IRS by June 30, 2014). There is no extension to file the FBAR.
It doesn’t matter whether the foreign accounts generate income or not; just owning them, or having signature authority, requires you to file. Failure to file can result in serious consequences. The sanctions for not completing the FBAR include numerous severe civil penalties and potential prosecution followed by a term in federal prison.
The 2012 Offshore Voluntary Disclosure Program (OVDP) continues well into 2014, with no definite final deadline in sight. It’s important to realize that the Voluntary Disclosure Program essentially sets up a race between you and the IRS. Diplomatically, as a result of the Foreign Account Tax Compliance Act (FATCA) country after country has recently declared that they intend to disclose US citizen account owners to the IRS. Do not “relax” if the country in which your Offshore Account is located has not yet turned over documentation to the IRS. Diplomatic and economic pressure is being exerted by the U.S. globally. The metaphorical “noose” will only tighten.
While the voluntary disclosure program is currently running indefinitely, the rules can change at any time. The FBAR penalty is 27.5% of the largest balance during the period covered by the voluntary disclosure. Sounds like a steep price to pay? The penalties are far greater if you don’t “get with the program” and then get caught. In addition, disclosing now allows you to transfer the money to your American accounts as well as to implement gifting and other estate planning strategies. Finally, for a “Get Out of Jail Free Card” it’s a pretty good deal. Now you will be able to sleep at night!