You’re planning to file an FBAR (Reports of Foreign Bank and Financial Accounts). Will this action automatically get you audited by the IRS?
Short answer: no. However, not filing an FBAR may increase the risk of an audit. Here’s what you need to know.
What Actually Triggers IRS Action?
The possibility of an IRS audit becomes much more likely if:
- You neglect to report taxable income;
- You break the rules of having a foreign bank account.
To avoid problems, this solution is simple: properly file both your standard income taxes and your FBAR on time each year.
What if you failed to file your FBAR on time? Are you doomed? No. There are no penalties for late FBARS, but there are non-filing penalties. If the IRS discovers you knew about the FBAR requirement but didn’t file, the agency could investigate you for willful noncompliance.
Knowing Where You Stand
Assuming you unintentionally failed to file your FBAR, you may qualify for the Streamlined Procedures, which can waive penalties. If you have unreported overseas accounts or assets—and the IRS hasn’t pursued or audited you, and you are not under criminal investigation—file a delinquent FBAR as soon as possible.
Another way to prevent the chances of an audit is to enter the IRS-approved Offshore Voluntary Disclosure Program (OVDP), which offers people with unreported foreign assets or taxable income from offshore accounts to report their obligatory tax information, including the FBAR.
The best way to protect yourself from an IRS audit and avoid penalties is to file your FBAR on time. If you are concerned about your FBAR filing requirements—or if you need clarity about how to untangle your situation in an intelligent, deliberate way—contact the Highland Tax Group team at 720-398-6088. We can help you approach the problem strategically.