Report of Foreign Bank and Financial Accounts (FBAR) (Portfolio 6085)

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