U.S persons having foreign financial accounts are required to report the existence of the account on a Form 90-22.1 (known as an FBAR) if the aggregate value of all such accounts equal or exceed $10,000. The IRS is currently encouraging taxpayers to come forward through its Voluntary Disclosure Program if they have not filed the FBAR forms and have failed to report any taxable income from those accounts.
But what if those foreign accounts have not generated any taxable income? What if any taxable income on those accounts was reported on a tax return?
The answer is that an FBAR form is still required. However, the taxpayer does not have to come forward through the Voluntary Disclosure Program.
Ordinarily the penalties for failing to file an FBAR can be quite severe. The IRS has agreed to waive these penalties in their entirety, however, if the taxpayer has paid all tax due in connection with the foreign accounts but have simply failed to file the FBAR. Moreover, these taxpayers do not need to go through the more elaborate Voluntary Disclosure Program. Instead, they can simply file the past due FBAR forms together with an explanation as to why they were not filed in the first place.
Be careful though, if a taxpayer has not reported all income from the accounts and simply files the FBAR forms without making a truthful, timely and complete disclosure, they can be subjected to the much more severe penalties.
For taxpayers who reported and paid tax on all their taxable income for prior years but did not file FBARs, the IRS says that they:
"should file the delinquent FBAR reports according to the instructions (send to Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621) and attach a statement explaining why the reports are filed late. Send copies of the delinquent FBARs, together with copies of tax returns for all relevant years, by September 23, 2009, to the Philadelphia Offshore Identification Unit at:
Internal Revenue Service
11501 Roosevelt Blvd.
South Bldg., Room 2002
Philadelphia, PA 19154
Attn: Charlie Judge, Offshore Unit, DP S-611
The IRS will not impose a penalty for the failure to file the FBARs. "
But what if those foreign accounts have not generated any taxable income? What if any taxable income on those accounts was reported on a tax return?
The answer is that an FBAR form is still required. However, the taxpayer does not have to come forward through the Voluntary Disclosure Program.
Ordinarily the penalties for failing to file an FBAR can be quite severe. The IRS has agreed to waive these penalties in their entirety, however, if the taxpayer has paid all tax due in connection with the foreign accounts but have simply failed to file the FBAR. Moreover, these taxpayers do not need to go through the more elaborate Voluntary Disclosure Program. Instead, they can simply file the past due FBAR forms together with an explanation as to why they were not filed in the first place.
Be careful though, if a taxpayer has not reported all income from the accounts and simply files the FBAR forms without making a truthful, timely and complete disclosure, they can be subjected to the much more severe penalties.
For taxpayers who reported and paid tax on all their taxable income for prior years but did not file FBARs, the IRS says that they:
"should file the delinquent FBAR reports according to the instructions (send to Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621) and attach a statement explaining why the reports are filed late. Send copies of the delinquent FBARs, together with copies of tax returns for all relevant years, by September 23, 2009, to the Philadelphia Offshore Identification Unit at:
Internal Revenue Service
11501 Roosevelt Blvd.
South Bldg., Room 2002
Philadelphia, PA 19154
Attn: Charlie Judge, Offshore Unit, DP S-611
The IRS will not impose a penalty for the failure to file the FBARs. "
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