Americans who reside abroad must submit a Foreign Bank Account Report (FBAR) which is a FinCEN Form or the Financial Crimes Enforcement Network.
What is an FBAR?
The FBAR is an annual report that needs to be submitted to the IRS which states that if a person has a financial interest in, or signing power over, a financial account in a foreign nation with an aggregate worth of more than $10,000 at any point during the calendar year. The purpose of filing the FBAR is to prevent US citizens from violating their tax obligations by not disclosing their wealth abroad.
The FBAR form must be submitted to the IRS at the same time as the taxpayer’s tax return. An FBAR may still need to be filed by a person even if they are not required to file a tax return failing with there can be an FBAR IRS penalty.
Filing an FBAR has nothing to do with taxes instead the main purpose is to reduce money laundering and other financial by the owners, co-partnership, or signed authority for foreign accounts. It is mandatory to submit account information to the US government annually on the FBAR.
FBAR penalties are imposed depending on whether the failure to file was purposeful or accidental.
Willful failure to file
The typical penalty for purposeful failure to file 50% or $100,000 of the account’s balance at the time of the violation either is higher, for every year that a mandatory FBAR was not filed. There could also be imprisonment.
It indicates that a person was unaware of filing an FBAR. For each year that a necessary FBAR was not filed, the typical FBAR penalty for non-willful failure to file is $10,000.
FBAR penalties could also affect the US citizens living overseas. Hence, be vigilant in filing the FBAR on time every year.