If you are familiar with the term FBAR, you know about the reporting requirement for US persons that had a financial interest in or signature authority over at least one financial account located outside of the United States; and the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year being reported. The form to file this information (FinCEN 114), must be filed electronically by June 30th. Hopefully, it was filed along with your personal income tax return that reported your worldwide income. Just make sure you told your CPA about any of your online poker accounts. Just 3 days ago a court ruled a taxpayer’s online PokerStars and PartyPoker accounts needed to be reported on an FBAR in the case of United States v. Hom, US DC ND California, Case No. C 13-03721 WHA, 113 AFTR 2d ¶ 2014-893.
FBARs have their own due date because they are filed with the Financial Crimes Enforcement Network at the US Dept of Treasury, not the IRS. They also have a separate penalty structure. Failure to file an FBAR can be a criminal offense, carrying with it a prison term up to 10 years, and fines up to $500,000. While that sounds harsh, even the civil penalties can be substantial, $10,000 for a non-willful violation, or the greater of $100,000 or 50% of the account for each year you fail to file under a willful violation. For example, a willful failure to file for three years can mean you owe 150% of the account balance. Seems crazy, but this just happened to an 87 year old man!
While you may not have millions stashed away, don’t think that a small bank balance will fly under the radar. Foreign banks have had their hand forced by recent US legislation to turn over account information on US account holders.
If you have not filed in previous years, the Offshore Voluntary Disclosure Program, or OVDP, is one option, or, if your tax returns accurately reported any income from those accounts, you may be eligible to file the delinquent FBARs with a statement explaining why the FBARs are late(see FAQ 17 from the 2012 Offshore Voluntary Disclosure Initiative FAQs and Answers). There might also be a good chance you fall under one of the exceptions to the reporting requirement. As always with these issues, seek professional help if you are unsure.
John Mark Wendler is a Certified Public Accountant (CPA) practicing in San Diego, CA. Follow him on twitter @johnmarkwendler