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Don’t miss FBAR filing deadline

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in Small Business Tax Deduction Strategies

The IRS recently announced that more than 1 million taxpayers filed Form 114, Report of Foreign Bank and Financial Accounts—commonly known as the FBAR—in 2015. (IRS News Release IR-2016-42, 3/15/16)

Alert: The deadline for filing FBARs for 2015 is June 30, 2016. Failure to file a FBAR, when required, can result in substantial penalties.

FBARs must be filed electronically with the Treasury Department’s Financial Crimes Enforcement Network (FinCen).

“Taxpayers here and abroad need to take their offshore tax and filing obligations seriously,” said IRS Commissioner John Koskinen in the new announcement. “Improving offshore compliance has been a top priority of the IRS for several years, and we are seeing very positive results.”

The requirement to file a FBAR kicks in if you have an interest in, or signature or other authority over, foreign financial accounts with an aggregate value exceeding $10,000 at any time during the prior year. In 2015, FinCen received a record high 1,163,229 FBARs, up more than 8% from the prior year. In fact, FinCen reports that FBAR filings have grown on average by 17% per year during the past five years.

Increased filings of IRS Form 8938, Statement of Specified Foreign Financial Assets, is another sign of growing awareness of foreign reporting requirements. Taxpayers filed more than 300,000 Forms 8938 with their 2014 tax returns, roughly the same number as the prior year and up from about 200,000 for 2011, the first year of the form. Generally, this form is required if the aggregate value of foreign accounts exceeds $50,000 ($100,000 for joint filers).

The penalties for failing to file an FBAR are steep. If the violation is willful, the taxpayer can be assessed a fine equal to the greater of $100,000 or 50% of the balance in the account for each violation. Higher penalties may be assessed for acts of fraud or providing false information. Worst of all, you could even be sentenced to a prison term of up to five years (10 years for an obstruction of justice).

The best place to obtain more information about filings for foreign bank accounts is www.irs.gov.

Tip: Due to a recent tax law change, the deadline for next year’s FBAR filing has been moved to April 15 to coincide with the individual federal tax return due date.

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