Should You File an Incomplete FBAR Form, Pros and Cons

FBAR Amendment

File FBAR with Missing Foreign Account Data?

For U.S. persons who have foreign bank and other financial accounts, they may have an annual filing requirement to disclose their foreign money, including:

• • • Bank Accounts

    • Securities Accounts

    • Investment Accounts

    • Mutual Funds and ETFs

    • Pension Plans

    • Life Insurance Policies

    • Foreign Entities

    • Foreign Trusts

While there are many different types of IRS international information tax and reporting forms that the taxpayer may have to file, the FBAR is the most common since it has a relatively lower threshold for having to file the form (as compared to FATCA Form 8938 for example) and it has to be filed for taxpayers who meet the threshold filing requirement, even if they’re not otherwise required to file a tax return in that year.

In other words, if a taxpayer is a US person and has foreign bank accounts sufficient to have to file the FBAR, then we still file the form even if they are not required to file a tax return in that year. But what should taxpayers do if they are missing some of the foreign account information, they need to file the form accurately.

FBARs Do Not Have to be Perfect

One thing to keep in mind is that not all foreign financial institutions provide foreign bank and financial account data like U.S. financial institutions. Therefore, it may be difficult if not impossible for taxpayers to obtain all the account information that they need to perfect their FBAR filing. Nonetheless, even if a taxpayer is missing some information, they are still required to file the form. Just because the taxpayer may have incomplete information or may be missing some account balances does not mean that they are exempt from having to file. Therefore, the taxpayer should still file the FBAR the best they can with the information they can obtain and slash or with their best estimates.

Filing FBAR vs Non-Filing

While it may be uncomfortable for a taxpayer to file a form that is not entirely perfect, it is important to understand that from the IRS’s perspective giving it your best shot and trying to file timely and accurately is better than not filing it at all. That is because if you do not file, then the IRS has no record that you attempted to report the information the best you could. Instead, if you are audited or under examination later it will just look like you knew there was an F bar filing requirement but did not do so. And you must hope that the IRS believes your position that it is because you did not have all the information available to you.

Amending the FBAR

Gone are the days when the Internal Revenue Service could issue penalties based on the failure to report an account as opposed to a power failure to report the former. In accordance with Bittner, the Internal Revenue Service is limited in how it can issue penalties and so if the form is filed and you put your best foot forward, it would be difficult for the IRS to penalize you if some of the information was not entirely complete, as long as you can show that you did your due diligence to try to obtain the information. Conversely, if you do not file the form because you do not have every single piece of information necessary, then the IRS would still be able to penalize you potentially for the failure to file the Form.

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. 

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.