Were You Supposed to File an FBAR with Your 2022 Income Tax Return?

Most U.S. taxpayers who have offshore bank accounts are required to file an annual Report of Foreign Bank and Financial Accounts (FBAR) with their federal income tax returns. Some are also required to File IRS Form 8938 (which is used to disclose “specified foreign financial assets”). If you were supposed to file an FBAR and/or IRS Form 8938 with your 2022 income tax return but didn’t, what should you do now? Virginia international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

What If You Failed to File an FBAR in 2022?

The good news is that if you failed to file an FBAR with your 2022 federal tax returns, it still isn’t too late. The Internal Revenue Service (IRS) has established an automatic extension that allows U.S. taxpayers to file as late as October 15 without penalty.

What if You Also Failed to File FBARs in Prior Tax Years?

The bigger concern is if you failed to file an FBAR in a prior tax year. If so, you are officially delinquent, and you could be liable for substantial penalties. At this point, the only way to avoid these penalties entirely is to convince the IRS that you have “reasonable cause” for your late filing (or filings). If you cannot establish reasonable cause, then your best option will most likely be to try to limit your penalty liability by submitting either a streamlined filing or a voluntary disclosure.

Submitting a streamlined filing is an option for U.S. taxpayers who can certify that their failure to file a timely FBAR was non-willful. While submitting a streamlined filing can minimize U.S. taxpayers’ liability for FBAR penalties, it can also be risky. As the IRS explains, FBARs “submitted under the streamlined procedures may be subject to IRS examination, additional civil penalties, and even criminal liability.” The IRS makes its own determination of willfulness when examining streamlined filings; and, if it decides that a taxpayer’s certification of non-willfulness is fraudulent, it can pursue criminal charges.

For those who cannot make the certification of non-willfulness required for a streamlined filing, it may be necessary to submit a voluntary disclosure. This carries its own risks, but it can also provide protection from criminal prosecution in appropriate cases.

What if You Failed to File IRS Form 8938?

Unlike the FBAR, U.S. taxpayers do not receive an automatic extension to file IRS Form 8938. As a result, taxpayers who failed to file IRS Form 8938 for the 2021 tax year by April 18, 2022 (and who failed to request an extension) must take proactive measures to come into compliance. Depending on the circumstances involved, this will most likely entail submitting either a streamlined filing or a voluntary disclosure as well.

Schedule a Call with Virginia International Tax Attorney Kevin E. Thorn, Managing Partner of Thorn Law Group

Are you behind on your obligations to the IRS? If so, Virginia international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, can help you make smart decisions. To arrange a confidential consultation as soon as possible, call 703-752-3752, email ket@thornlawgroup.com or tell us how we can reach you online now.