FBAR – Foreign Bank Account report.

Penalty for violation

• Non-willful violation – $10,000 per violation
• Willful violation- greater of $100,000 or 50% of the balance in the account at the time of the violation
  
  

*Adjusted for inflation – see the latest rates for the applicable year.

Streamlined filing compliance procedures: The U.S. taxpayers who failed to report foreign financial assets and pay all tax due in regard of those assets and this did not result from a willful conduct on their part.

SFOP/SDOP – Streamlined procedures for both non-U.S. residents (Streamlined foreign offshore procedures) and U.S. residents (“streamlined domestic offshore procedures”) are as below:

Taxpayers must certify that conduct was not willful.

This applies also for FBARs (FinCEN form 114).

Non-willful conduct is conduct that is due to negligence, carelessness, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

Attention: If IRS has initiated a civil examination of taxpayers’ return for any taxable year, regardless of the examination relating to undisclosed foreign financial assets, the tax payer will not be eligible for this scheme of procedures.

A valid Taxpayer identification number – TIN (SSN/ITIN in case of individual) is required to participate in the streamlined procedures.

General treatment:

• Tax returns submitted under the streamlined procedures will be processed like any other return (considered as any other regular return).
• The receipts of the return will not be acknowledged by the IRS.
• These returns will not be subject to IRS audit automatically.
• They mage be subject to verification procedures, to check the accuracy and completeness of submissions against the information received from banks, financial advisors etc.
  
  

Two possible scenarios – when you failed to report was non-willful.

1. You missed filing FBAR’s, but you reported your foreign income in your tax returns filed originally.

1. You missed filing FBAR’s and missed reporting your foreign incomes in your tax returns filed originally. Called as SDOP.

Under Scenario – 1: Missed filing FBAR’s, but you reported your foreign incomes in your tax returns filed originally.

• File your FBAR return for each of the years – Delinquent FBAR submission.
• Suggest filing online through FinCEN. 
• Collect your information for each of the 6 years (Bank name, highest yearly balance etc.).
• No further action is required with IRS.
• So, there are no penalties under this scenario.
  
  

If required, talk to your tax preparer to file for you.

Under Scenario – 2: Missed filing FBAR’s and missed reporting your foreign incomes in your tax returns filed originally.

SDOP – Streamlined Domestic Offshore Procedures.

• You may amend the most recent 3 years when income was missing.
• IRS does not ask you to go beyond 3 years. Amnesty program.
• File your FBAR return for each of the years – Delinquent FBAR submission.
• Suggest filing online through FinCEN. 
• Collect your information for each of the 6 years (Bank name, highest yearly balance etc.). FBAR’s missed filing can be done for up to 6 years. Amnesty program
• Submit Form 14654 (non-willfulness self-certification).
• Pay 5% penalty on the highest aggregate balance. This replaces the $ 10,000 per year penalty generally due to non-willful misconduct.

It’s advised to talk to your tax preparer to file for you.