[vpatel4u]

Hi,

I came in US in Sept 2012 on Green Card with my family. My mother doesn't work here so her taxes are files jointly with my father's (has a job) tax return filing since 2012. Me and my father had a savings account outside US that has less than $10,000 since 2012 till today. But my mom has a joint account with my younger brother (student) that has around $55,000. We didn't know much about tax rules here in US, recently I heard about FBAR and knowing about its penalties on failing to report it I was freaked out.

We had no information about it at all, but what to do now, its been 3 years not reported that account? Since, my mother's account needs to be disclosed, how much penalty will need to be paid? I also read that FBAR penalty is reduced to 5% from 27.5%, is it true?

Please help!

[MidAtlantic]

There is no reason to freak out. Many have found themselves in your position. If, as you say, you were unaware of FBAR you are unlikely to be penalized.

Go to the FBAR website and enter the three years that need to be completed (only two are late): BSA E-Filing System - Welcome to the BSA E-Filing System It even gives you the option, in a drop down menu, to explain that you are filing late because you "Did not know that I had to file".

You may need to review whether you/your mother has declared the interest on this account also.

[AtlantaTaxExpert]

I agree with Mid-Atlantic.

What you will do is a "quiet submission" to make up past due FBARs. I have done dozens over the past five years with NO adverse response from the IRS. For accounts below $500,000, the IRS rarely pays attention. They have limited resources and must save their time and efforts for the people who are hiding MILLIONS overseas to avoid taxation.

[vpatel4u]

Thanks Mid-Atlantic and AtlantaTaxExpert, hope what ever you are saying comes out favorable for us. These days where ever I am reading about FBAR and its late filing, penalties seems to be huge.
1. But once we file this, will IRS monitor those accounts through third party ? Will our foreign assets be affected ?

2. Since we are late filing for 2012 and 2013 and also never reported the interest from those accounts, will we be penalized ?

[AtlantaTaxExpert]

VPatel4U,

You DO need to amend your 2012 and 2013 tax returns to add the interest earned IF the interest was enough to increase your tax by $50. Otherwise, do not bother.

Will the IRS use this information to monitor foreign accounts? Maybe, but that is what the entire FATCA initiative is all about, so it is going to happen eventually whether your submit the FBARs or not.

This I know: the window to submit late FBARs under a "quiet submission" is closing. Eventually, the IRS will begin to take a harder stance on this, and those who have NOT become compliant WILL pay the price in penalties and fines.

[vpatel4u]

Yeah there were interest around $3000 aggregate. We don't want to hide anything and want to be on safer side, correct our mistakes that were committed due to lack of knowledge.

Something like $10,000 penalty per violation, 27.5% of highest amount each year, really scared me.

Thanks again, this is helpful.

[AtlantaTaxExpert]

The intent is to scare people into compliance.

Just remember that YOU are NOT the intended target of the FBAR, not when it was passed in the late 1960s and definitely not now.

Get into compliance and you should be okay.

[vpatel4u]

Hi,

What if someone don't have a job here in US or not enough wages earned for meet tax filing requirements, so he is not required to file his US tax return, still FBAR is required to file for that year ?

[MidAtlantic]

Yes, FBAR is quite separate from income tax filing requirements. If you have an aggregate of more than $10,000 in foreign accounts you must submit a FBAR.

[AtlantaTaxExpert]

But ONLY if you are considered a resident. The FBAR requirement does NOT apply for non-resident aliens.

[vpatel4u]

Thanks again MidAtlantic and AtlantaTaxExpert, appreceiated. I got one more question :

What kind of accounts are required to be shown for FBAR and reporting earned interest ? NRI accounts (NRE and NRO) only ? What about the accounts which are not one of these and are simple savings accounts in a foreign country ?

[AtlantaTaxExpert]

ANY type of bank account (NRO, NRI, NRE, whatever), stock/bond/mutual funds accounts, fixed deposit accounts, life insurance that has a cash value, and any PRIVATE pension plan (but NOT the Provident fund).

Also, if you have an account that you have signature authority on, THAT account must be included, even if the money does not belong directly to you. I understand there are certain family accounts in India that the father passes onto the eldest son as custodian. The name eludes me, but that account DOS have to be included on the FBAR.

[vpatel4u]

One thing I don't understand, why US govt is after our money which is not earned here. We never transferred that money from here to those accounts. Also, those assets are taxed by foreign govt.
Whatever we earned here we filed and paid taxes for it, then why for those assets which we never earned here ?

[AtlantaTaxExpert]

First, the FBAR is an INFORMATION report; NO tax is assessed.

Second, the interest earned in those foreign accounts IS subject to U.S. income taxes, but you can claim a Foreign Tax Credit (usually dollar-for-dollar) for the taxes paid to the foreign governments.

Third, NO ONE has EVER said that income taxes are fair. They are, however, the LAW, and you ignore the law (and the FBAR reporting requirement) at your own risk.

And the risk IS considerable if the IRS identifies you as being NON-compliant with the FBAR requirement.

[vpatel4u]

Hi,

I just figured out that my brother who is a student is the owner of one of the accounts that exceeds $10,000. He don't have a job since arriving to US and is showed as a dependent. Since, he is never required to file a tax return here and thus is unaware of FBAR and 1099-INT like forms; what about his case ? Will he also have to pay penalty for not filing ?

[AtlantaTaxExpert]

Is your brother a resident or non-resident alien? Also, HIS account was joint with your mother, so SHE will have to report the account on HER FBAR.

[vpatel4u]

Hello,

I figured out that interest on those accounts was also unreported, since we were unaware of foreign banks needs to be reported. Interest was around $2000 each year. What to do now ?
Also, I am confused that how highest aggregate value is calculated ?

Lets say a person has 2 accounts.

Account A :
Opening Balance : $200
Transfered $150 to Account B
Got interest on remaining $50.

Account B :
Opening Balance : $150 (From Account A)
Got interest on $150

What will be highest aggregate value for FBAR in this case ? $200 + $150 + interests ?
Person still has total asset value of $200 + interest from Account A + interest from Account B.

Please help, scared now :(

[AtlantaTaxExpert]

First, Do NOT be scared! Unless your foreign accounts have money in excess of $500,000, your FBAR reports will be reviewed and filed with no action taken on them. The IRS has bigger fish to fry.

As for reporting the accounts, report the HIGHEST balance on each account, even it means reporting the same money twice. The IRS knows there will be double reporting.

[vpatel4u]

Hi,

I have been gathering info regarding the disclosure and filing of delinquent fbar's and tax returns. There is a new Streamlined procedure 2014 whereby tax payer needs to pay only 5% penalty once of the highest value, but this doesn't comes with any guarantee of safety from prosecution. The old procedure ODVP requires to pay 27% penalty and 20% for interest and eliminates the risk of prosecution.
I am now confused which option would be best and safe in our case, considering total amount $70K + $6K(interest for 2 years).

Please advice !

Thanks

[AtlantaTaxExpert]

The BEST option is to submit the late FBARs electronically without coversheet or fanfare. Check off the REASON you are filing late is that you were NOT aware of the requirement.

Then amend your returns and report the interest, paying the taxes, penalties and interest if any taxes are due (which might NOT be the case after you claim the Foreign Tax Credit for the 10% TDS that Indian assesses on the interest that Indian banks pay.

All of your research about the new streamlined procedure and the old OVDP is for those who have been INTENTIONALLY hiding assets overseas and not people like you who were caught unawares about the filing requirement. You are NOT the intended target of the FBAR, so do not act like one.