Form 114 – Report of Foreign Bank and Financial Accounts (FBAR)
Form 114, also known as the Report of Foreign Bank and Financial Accounts (FBAR), is a critical tax filing used by individuals and entities with foreign financial accounts that meet certain thresholds. The primary purpose of FBAR is to combat tax evasion and money laundering by requiring disclosure of offshore assets to the IRS.
Key Features and Components:
- FBAR must be filed annually if the aggregate value of foreign accounts exceeds $10,000 at any time during the calendar year.
- It is filed separately from the tax return, with the deadline falling on April 15th, with an automatic extension until October 15th.
- FBAR requires detailed information about foreign accounts, including their location, account numbers, and maximum values during the year.
Relevant Filing and Compliance Requirements:
Individuals, partnerships, corporations, and trusts with foreign accounts exceeding the threshold must file FBAR electronically through the Financial Crimes Enforcement Network (FinCEN). Failure to comply with FBAR requirements can lead to severe penalties, including civil fines and criminal prosecution.
Penalties for Non-Compliance:
Failure to file FBAR or providing inaccurate information can result in significant penalties. Civil penalties range from $10,000 per violation for non-willful violations to the greater of $100,000 or 50% of the account balance for willful violations. Criminal penalties can lead to fines and imprisonment.
Importance in Tax Resolution and Financial Compliance:
FBAR compliance is crucial for taxpayers with offshore accounts to avoid severe penalties and legal consequences. Proper reporting of foreign financial assets through FBAR ensures transparency and compliance with tax laws, promoting financial integrity and combating illicit financial activities.