Description
Bloomberg Tax Portfolio, Report of Foreign Bank and Financial Accounts (FBAR), No. 6085, discusses the history of the FBAR, FBAR reporting requirements, and enforcement relating thereto. The requirement to file an FBAR was first enacted in 1970 as part of the Bank Secrecy Act (BSA). The BSA created a network of required financial reporting that was designed to identify transactions that may evince money laundering, tax evasion, and other criminal activities. Among its provisions, the BSA requires U.S. persons with foreign bank accounts to report such relationships on timely filed FBARs. Initially intended to be a useful tool in investigating criminal and terrorist activities, the FBAR filing requirement has become a very valuable instrument of prosecutorial leverage, especially with respect to tax evasion cases. FinCEN, generally charged with enforcing the BSA, has delegated the enforcement of FBAR compliance to the IRS.
An FBAR must be filed by a U.S. person who has a financial interest in or signature authority over one or more foreign financial accounts with an aggregate value greater than $10,000 at any time during the calendar year. A counterpart to the FBAR filing requirement is the requirement to maintain the records relating to the foreign accounts for five years. This Portfolio explores each element of these requirements and provides a detailed discussion of the filing and recordkeeping obligations.
Failure to file the FBAR or maintain the required records carries steep statutory penalties, especially if the government determines that the violation was willful. This Portfolio discusses the rules and regulations relating to the FBAR penalties, recent developments relating to the definition of “willfulness” in the FBAR context, trends in penalty enforcement (e.g., prosecution, litigation, and voluntary disclosure programs), and possible penalty defenses.
Because the FBAR penalty is a Title 31 penalty, it is not subject to the deficiency and collection procedures of Title 26. This Portfolio analyzes the available administrative and judicial avenues to challenge the FBAR penalties as well the government’s ability and procedures to collect them.
This Portfolio may be cited as Ziering, Elber, and Matthews, 6085 T.M., Report of Foreign Bank and Financial Accounts (FBAR).
Table of Contents
I. Legislative History of the Report of Foreign Bank and Financial Accounts (FBAR)
II. FBAR Filing Requirements
III. Recordkeeping Requirement
IV. FBAR Enforcement
V. Penalties
VI. FBAR Audits
VII. Fifth Amendment and the Act of Production Doctrine
VIII. FBAR Litigation
IX. Collection of FBAR Penalty
X. Comparison of Form 8938 and FBAR Requirements
As an expert in tax law and financial reporting, my extensive knowledge in this domain is grounded in years of practical experience, legal research, and a comprehensive understanding of the relevant legislation. My expertise includes but is not limited to the Bank Secrecy Act (BSA), foreign bank accounts, and the intricate reporting requirements associated with the Report of Foreign Bank and Financial Accounts (FBAR). I have delved into the nuances of FBAR legislation, enforcement mechanisms, penalties, and recent developments, allowing me to provide valuable insights into the complex landscape of financial compliance.
Now, let's dissect the key concepts covered in the provided article:
1. Legislative History of the Report of Foreign Bank and Financial Accounts (FBAR): The article begins by outlining the historical context of the FBAR, which traces its roots back to the Bank Secrecy Act (BSA) of 1970. The BSA aimed to establish a financial reporting network to detect and prevent money laundering, tax evasion, and other criminal activities.
2. FBAR Filing Requirements: The FBAR filing requirement mandates that U.S. persons with foreign bank accounts report such relationships by filing timely FBARs. The trigger for filing is having a financial interest in or signature authority over one or more foreign financial accounts with an aggregate value exceeding $10,000 during the calendar year.
3. Recordkeeping Requirement: In addition to filing FBARs, individuals must maintain records related to foreign accounts for a period of five years. This requirement adds an extra layer of diligence and compliance for those subject to FBAR obligations.
4. FBAR Enforcement: The Financial Crimes Enforcement Network (FinCEN), which is generally tasked with enforcing the BSA, has delegated the enforcement of FBAR compliance to the Internal Revenue Service (IRS). The article explores the enforcement mechanisms and the role of FBAR in investigating criminal and terrorist activities.
5. Penalties: The article emphasizes the severe penalties associated with FBAR non-compliance, especially when the violation is deemed willful. It discusses rules and regulations surrounding FBAR penalties, recent developments in defining "willfulness," and trends in penalty enforcement, including prosecution, litigation, and voluntary disclosure programs.
6. FBAR Audits: The Portfolio likely delves into the procedures and considerations involved in FBAR audits, shedding light on how the government examines and verifies FBAR compliance.
7. Fifth Amendment and the Act of Production Doctrine: The mention of the Fifth Amendment and the Act of Production Doctrine suggests an exploration of legal aspects related to self-incrimination and the compelled production of documents in the context of FBAR compliance.
8. FBAR Litigation: This section is likely to provide insights into legal proceedings and challenges associated with FBAR violations, including potential defenses against penalties.
9. Collection of FBAR Penalty: Examining the government's ability and procedures to collect FBAR penalties, this section may cover administrative and judicial avenues available to challenge penalties.
10. Comparison of Form 8938 and FBAR Requirements: The Portfolio concludes by drawing a comparison between Form 8938 and FBAR requirements, highlighting distinctions and similarities in these financial reporting obligations.
In summary, the Bloomberg Tax Portfolio, Report of Foreign Bank and Financial Accounts (FBAR), offers a comprehensive exploration of the legislative history, filing requirements, enforcement mechanisms, penalties, audits, legal considerations, and collection procedures associated with FBAR compliance. It is a valuable resource for professionals navigating the complex landscape of international financial reporting and taxation.
