How To Limit FBAR Complications For Expats Filing FinCEN 114

How To Limit FBAR Complications For Expats Filing FinCEN 114

Key FBAR Non-Compliance Issues that Trigger IRS Problems

With the 2025 FBAR due date creeping up, U.S. Taxpayers with FBAR filing requirements should be aware of some of the more common Foreign Bank and Financial Account reporting triggers. The FBAR (FinCEN Form 114) has become one of the most important international information reporting forms for taxpayers who maintain ownership or signature authority/non-financial interest in foreign accounts, assets, and investments. That is because even though the FBAR is not even an IRS form, the Internal Revenue Service is tasked with enforcement — and they have made FBAR (FinCEN Form 114) compliance a key enforcement priority. It is important for Taxpayers filing the annual FBAR to be aware of some of the common triggers that can lead to non-compliance issues such as audits, examinations, and penalties (read: headaches). Let’s look at five key FBAR non-compliance issues that can trigger fines, penalties, and audits.

*Golding & Golding previously published the What Triggers an FBAR Audit article back in 2021 and has since updated and expanded the list.

Filers Who Suddenly Stop Reporting the FBAR

Each year, taxpayers who must file the annual FBAR do so by filing an electronic FinCEN Form 114 directly on the FinCEN website. After filing the form online, taxpayers will receive an identifier number (receipt) confirming that the U.S. government has received the submitted FBAR form. For taxpayers who have been filing the form in prior years and then suddenly stop filing the FBAR, this may trigger an issue within the U.S. government’s filing system. *If filers simply no longer have an FBAR requirement, this is no problem.

Filing the FBAR Form Late

For the past several years the FBAR has been due on 4/15 but is an automatic extension through October 15. Technically, there is no mechanism available to request filing a late FBAR form past the 10/15 due date. And since these forms are filed electronically, when the form is filed late it may trigger a late filing penalty notice of examination.

Unreported Higher Value Foreign Accounts

Taxpayers may have several accounts across many countries. Some of these accounts may be dormant or low-value accounts — and missing a few of these types of accounts on the FBARs is typically no big deal. However, if the taxpayer has large-value accounts that are missing from the FBAR, this could lead to compliance issues and possibly trigger an audit or penalties. This is because the IRS may take the position that the taxpayer intentionally left off the high-value accounts while reporting the low-value accounts.

Inaccurate Foreign Account Values

In addition, taxpayers must try their best to report accurate values for their accounts. Noting, that depending on the country and the type of account the taxpayer owns, up-to-date/accurate information is not always available. For example, if the taxpayer has a passbook account in a country where they no longer reside and it has been 20 years since they went in to get the book updated, then the taxpayer may not have current up-to-date information. Before reporting the account, the taxpayer should do their best to try to obtain accurate information (subject to limitations in performing a reasonable/diligent search). That is because if the foreign financial institution reports for FATCA and the account value reported by the foreign financial institution does not closely match the value reported by the filer — this could trigger problems.

Quiet Disclosure

Finally, taxpayers should be very careful to not submit a quiet disclosure. A quiet disclosure is when the taxpayer either begins filing the FBAR in the current year or mass files several years of previously unreported FBAR — without submitting through one of the approved IRS amnesty programs. The IRS has made it known that if they discover taxpayers have sought to circumvent the FBAR amnesty programs by secretly filing FBARs, they could be subject to significant fines and penalties.

Late-Filing Disclosure Options

If a Taxpayer is out of compliance, there are various international offshore tax amnesty programs that they can apply to safely get into compliance. Depending on the specific facts and circumstances of the Taxpayers’ noncompliance, they can determine which program will work best for them. 

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and/or other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.