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Do you need to report an offshore account?

If you had one or several accounts outside the U.S. that had more than a combined amount of $10,000 at any time over the year, you probably need to file. The Report of Foreign Banks and Financial Accounts (FBAR), FinCEN Form 114 needs to be electronically filed with the Treasury Department's Financial Crimes Enforcement Network (FinCEN).

When does the report need to be filed? The due date is June 30, 2016. No extensions are allowed to file the FBAR. Next year the due date will change to coordinate with the more well known tax filing deadline of April 15.

Awareness of these reporting requirements continues to increase as evidenced by an IRS report that more than one million taxpayers filed these disclosures in 2015.

Failure to file an FBAR

Penalties for not complying with the requirement are serious. A willful violation could lead to a penalty of up to 50 percent of the amount in the account or $100,000, whichever is greater. These penalties can be assessed for each violation, so failing to file in 2013 and 2014 could result in a substantial penalty. In some cases, criminal charges are also possible.

Nonwillful violations generally start with at least a $10,000 penalty and can go up to 50 percent of the balance in an account. Similar to willful violations these add up for each year that a FBAR is not filed.

Offshore Voluntary Disclosure

The IRS has offered several Offshore Voluntary Disclosure Programs. The current program allows a taxpayer to mitigate potential liability by coming forward voluntarily. A streamlined program is also available to certain taxpayers.

The IRS has made offshore accounts a focus area. With the serious potential penalties, it is crucial to seek assistance from an experienced tax attorney before deciding which program might be right.

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