Foreign filing requirements, and in particular, the FBAR, is one of the most important tax filings to have filed on time and correctly in the U.S.
The filing penalties for the FBAR start at a nominal fee of $10,000 for late filings, and it is a lot different when $10,000 accrues interest vs what a smaller income or local delinquent filing might add up to. There is a rigorous abatement process that in our experience has allowed us to relieve many individuals of these steep penalties. However, that process costs money and time to work through too with a risk of still having to pay the tax liability. This being said, the best way to avoid penalties is to file these returns on time and correctly the first time. Here are some details to help you determine if and when you need to file the FBAR.
When does the FBAR need to be filed?
The FBAR has historically had a filing deadline of June 30th, including this year 2016 (for the 2015 financial year). However, this filing deadline is changing, which means it is extremely important to make sure you and your tax advisor are ready to file this sooner next year to avoid any filing penalties, or compliance headaches at the least.
The new deadline for the filing as of next year in 2017 will be April 15th (for filing 2016 return), which also happens to be the personal federal income tax filing deadline in the U.S. (form 1040's).
Can I file an extension for the FBAR?
For your 2015 FBAR that was due June 30th, unfortunately no, you cannot file an extension. Next year a 6 month extension can be filed on or before April 15th, once again much similar to the U.S. personal income tax extension filing schedule.
If you are late on filing your FBAR you do have options, and hopefully it can be addressed before you receive your first scary penalty notice. Often times, if it is a first time offense and you make the proper effort to become compliant, the IRS will waive the penalty. You will be best off talking to your tax advisor to help you consider what options are available to you and to help you through the process.
Why would I need to file an FBAR?
It doesn't matter if you are earning revenue yet or not, and you don't necessarily have to be a U.S. citizen or resident to meet the filing requirement.
It is based off two major factors:
- Are you a U.S. citizen, resident, OR do you/will you spend a significant amount of time in the U.S?
- Do you you have signature authority over any foreign financial account(s) that exceed $10,000 at any period during the calendar year?
If the answer to both of these 2 questions is maybe, then it is probably a good idea to talk with your U.S. tax advisor about whether or not you have an FBAR filing requirement.
Other Important Considerations
If you have to file an FBAR you more than likely have other U.S tax filing requirements including any of the following:
- Form 5472 for 5471
- Company and/or personal income tax filing requirements
- Payroll, property, sales, and/or other state or local tax filing requirements
All of which will depend on certain circumstances, with different filing deadlines, ID numbers, and ways to manage and understand your tax burden.
At HPC we provide tax advice on foreign filing requirements all the time. We can file all your U.S. foreign filing forms and other U.S. tax filings, and make sure you never have to worry about being in compliance. We also have a complete solution to help you get formed, registered, setup with a back office, Xero, and a team of accounting, VCFO, and tax experts.
Please schedule some time with us if you have questions about the FBAR or need help getting started or staying compliant in the U.S.