But should you? Or should you get an expert to file it for you?
The FBAR is the most insane form ever created.
Just because you have no tax due, don't mean the IRS can't assess a willful FBAR penalty against you. The FBAR is actually not a tax form. It is so complicated, the federal government put the IRS in charge of administering it because no other federal agency employees wanted to deal with it.
Oh, and FBAR penalties for even innocent mistakes are nothing short of insane.
Complexity: The FBAR is known by no less than four different names.
This may seem like a small issue, but it illustrates a larger problem. The IRS can't even settle on one standardized name for the FBAR. It is also known as:
FinCEN Form 114
Report of Foreign Bank Accounts
TD F 90.22-1
We are left with an uncomfortable question. If the IRS can't even have a consistent name for a form, how can anyone expect them to apply the law consistently or fairly?
Amending an FBAR infers a higher standard of knowledge -- this can be used against you.
When you file an FBAR the IRS assumes you have a heightened knowledge. They will punish you for any technical mistakes...as opposed to someone who never filed an FBAR.
In order to assess the willful FBAR penalty (up to 50% of the account value), the IRS must find a reason that you were "willful" in your actions.
Unfortunately, we've seen the IRS argue things like, "You knew enough to amend an FBAR, but you didn't know enough to read the instructions correctly?" Then, they go one step further and say, "Since you knew about the FBAR, you must know about the Internal Revenue Manual, the Bank Secrecy Act of 1970 (as amended) and the recent FBAR litigation on what is required in federal district court."
What happens if you don't amend and you needed to?
In the worst case scenario, willfully and knowingly filing a false FBAR means that the IRS can assess a civil penalty of $100,000 or 50% of the account value (whichever is greater) in addition to $10,000 or 5 years for criminal violations. However, it isn't exactly clear whether failure to amend is covered by this violation --- it's better to be safe and amend any mistakes on the FBAR.
You may need to enter an offshore disclosure program
Just because a foreign asset isn't taxed in the country is which it is held does not mean they are tax-free or reporting free for US tax purposes. If you have a missing FBAR AND unreported income, usually some sort of voluntary disclosure program is needed to mitigate the risk of being hit with the willfull FBAR penalties.
Again, amending an FBAR will infer you have a higher standard of knowledge and the IRS could use this against you if you are ever audited. That might not be a risk you are comfortable with.
When to amend FBARs
Filing your FBARs by the deadline is important to avoid some of the hefty penalties that may be administered by the IRS. If you've forgotten any of the following, you may have issues:
Missed accounts: Forgotten offshore accounts
Incorrect balances: Make sure you've calculated your FBAR balances correctly
Signatory authority: If you have signatory authority on an offshore account -- even if you have no financial interest -- you must declare this when you file FBARs.
Joint accounts: Joint accounts require filing even if another individual with ownership of the account has already submitted an FBAR. In addition, you need to make sure that you don't retain ownership of a joint account after selling it.
Life insurance/pension: Don't forget that foreign life insurance and/or pension plans are both reportable on the FBAR.
How to amend FBARs
If you do find yourself completely comfortable dealing with the risk of amending an FBAR yourself, you need to check the "Amended" box. In addition, you should use the original BSA identifier you were given when you filed your original FBAR.
Fun fact: the IRS's "employee manual" (put together in 2008) has the wrong instructions on how to amend FBARs.
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If you need any assistance with unfiled or misfiled FBARs, contact us. We can help. Call us at 888-727-8796 or email firstname.lastname@example.org. We can also help you understand if you should get into a disclosure program, and if so, which is right for your circumstances. Learn more about our services and fees here.