New FBAR Examinations and FBAR Audits in 2024/2025

FBAR Examinations and Audits of Foreign Accounts (How to Avoid)

FBAR Examinations and Audits of Foreign Accounts

The FBAR is a FinCEN form that is used to report foreign bank and financial accounts (aka FinCEN Form 114) to the U.S. Government. In recent years, the Internal Revenue Service has made offshore tax compliance a key enforcement priority, with an emphasis on FBAR reporting. In 2024, the IRS stated that it was significantly increasing the number of U.S. Taxpayers who would become subject to FBAR audits and examinations. Even though the FBAR form is not technically an IRS form, FBAR non-compliance is enforced by the Internal Revenue Service. The failure to properly and accurately file timely FBARs may result in significant fines and penalties. The IRS knows that many Taxpayers have failed to file FBARs going back several years and have not voluntarily disclosed their foreign accounts, assets, and investments through the IRS offshore disclosure programs — which is why the IRS is increasing the number of FBAR audits in the coming years.

• • • With FBAR examinations and audits on the rise, what can Taxpayers due to limit the chance of an FBAR examination or foreign account audit?

*Golding & Golding previously published the What Triggers an FBAR Audit, Foreign Account Noncompliance article in 2021 and has since updated and expanded the article to include methods to limit the risk of audit.

Continue to File Timely FBARs

For Taxpayers who have been filing annual FBARs timely and accurately, the best way to avoid an audit or examination is to continue filing accurate and timely FBARs. The IRS is still understaffed, and they must direct their resources to matters they believe will result in financial gain for the Internal Revenue Service. There is little to no benefit for the IRS to target Taxpayers who have been complying with the FBAR requirements.

Submit to One of the IRS Offshore Disclosure Programs

Taxpayers who realize they are out of compliance should consider getting into compliance by submitting to one of the IRS offshore disclosure programs before they are under audit or examination. Taxpayers who submit to the offshore disclosure programs would typically be able to avoid an audit or an examination because, in the current landscape of offshore disclosure, the chance of an audit or examination with a non-willful submission is low (VDP ‘willfulness’ audits are generally less intrusive than non-VDP audits). Timing is also very important, because if the Taxpayer is under audit or examination then they become ineligible to submit to the offshore disclosure program.

Submit Late FBARs with a Reasonable Cause Statement

Depending on the specific facts and circumstances of the Taxpayer’s noncompliance, they may consider submitting a reasonable cause statement to the IRS instead of an offshore disclosure. There are pros and cons to this approach and Taxpayers should be sure to consult with Board Certified Tax Law Specialists who specialize exclusively in offshore disclosure and compliance to get an understanding of the benefits and risks of making a reasonable cause submission.

Avoid Making a Quiet Disclosure

One of the fastest and quickest ways for a Taxpayer to find themselves under audit or examination is by making a quiet disclosure. By making a quiet disclosure, the Taxpayer circumvents the proper routes for submitting prior year FBAR forms and instead submits the forms ‘silently’ hoping that the IRS is unaware that the Taxpayer submitted the forms. The IRS has made it very clear that if they catch Taxpayers submitting quiet disclosure they will pursue them for civil fines and penalties (and possibly worse) depending on the specific facts of the quiet disclosure. 

Late Filing Penalties May Be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and 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.