Did You File an FBAR with Your 2022 Federal Income Tax Return?

If you have a foreign bank account (or multiple foreign bank accounts) with an aggregate value of $10,000 or more, you are required to disclose your foreign holdings to the U.S. government each year. You must do so by filing a Report of Foreign Bank and Financial Accounts (FBAR) with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

Your annual FBAR is due on Tax Day—which has now come and gone for 2022. So, what if you didn’t file an FBAR when you filed your federal income tax return? Boston international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

FBAR Filers Get an Automatic Extension to October 15

While FBARs are technically late after Tax Day, FBAR filers receive an automatic extension to October 15. As the Internal Revenue Service (IRS) notes, “You don’t need to request an extension to file the FBAR.”

While this is welcome news for many U.S. taxpayers who own offshore bank accounts, it is important to keep in mind that filing an FBAR might not be your only obligation related to your foreign assets. You may have had an obligation to file IRS Form 8938 as well.

Many Offshore Bank Account Owners Must File an FBAR and IRS Form 8938

U.S. taxpayers must file IRS Form 8938 with their federal income taxes if they own “specified foreign financial assets” exceeding certain thresholds. For unmarried taxpayers living in the U.S., owning specified foreign financial assets worth $50,000 or more on the last day of the tax year or worth $75,000 or more at any point during the tax year triggers the IRS Form 8938 filing requirement. For married taxpayers living in the U.S., these thresholds double.

An offshore bank account is a type of “specified foreign financial asset.” There are other types as well. The filing thresholds mentioned above apply in the aggregate, meaning that the obligation to file IRS Form 8938 applies if the value of any combination of a taxpayer’s specified foreign financial assets exceeds an applicable threshold. When this is the case, the taxpayer must report all specified foreign financial assets—even if individual assets would not trigger the filing requirement on their own.

Options for Remedying Delinquent FBAR and IRS Form 8938 Filings

Importantly, the automatic filing extension that applies to FBARs does not apply to IRS Form 8938. As a result, while taxpayers still have time to file their FBARs for the 2021 tax year, those who have not filed IRS Form 8938 (and who did not request an extension) are behind. With penalties starting in the five figures, taxpayers who are behind must work with experienced tax counsel to mitigate their exposure to the fullest extent possible. In many cases, this will involve making some form of voluntary disclosure to the IRS.

Discuss Your Options with Boston International Tax Attorney Kevin E. Thorn

If you need to know more about how to remedy a delinquent FBAR or IRS Form 8938 filing, we invite you to schedule a confidential initial consultation at Thorn Law Group. To request an appointment with Boston international tax attorney Kevin E. Thorn, Managing Partner, please call 617-692-2989, email ket@thornlawgroup.com or inquire online today.