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Dear Tax Talk,
My Japanese wife and I just found out about foreign bank account reporting requirements. We never heard or were informed about FBAR filing before. I am a lower-income cabinet maker and file tax returns myself. The interest from her Japanese bank, which is minimal, is always included on my return.
The funds in the account are well over the lower limit. We have been told we can just file for all the missed years and there may be no penalty for not knowing. Is that a reasonable expectation?
If you have reported the Japanese bank interest income on your tax returns, are not under investigation by the IRS and have not already been contacted by the IRS regarding delinquent Reports of Foreign Bank and Financial Accounts, or FBARs, then yes, all that is required of you is to file the required FBAR returns and the IRS will not charge you any penalties.
Through the Offshore Voluntary Disclosure Program, the IRS has been working diligently with taxpayers who have not been reporting foreign assets as required. Foreign accounts and trusts are reported on Part III of Schedule B, Interest and Ordinary Dividends. Effective July 1, 2014, based on the Foreign Account Tax Compliance Act, or FATCA, thousands of foreign banks will be reporting accounts held by U.S. persons to the IRS.
The FBAR is now reported on FinCEN Form 114 (previously Form TD F 90-22.1). The forms must be filed electronically at bsaefiling.fincen.treas.gov. At the beginning of the electronic form, you will be required to include a statement explaining why you are filing the FBAR late.
Be sure to print and save copies of your forms for each year. Additionally, you will receive emails confirming that the forms have been electronically submitted, and then you should also receive separate emails confirming the forms have been accepted. Be sure to save those emails — they are confirmation that you have filed the returns.
Thanks for the great question and all the best to you in resolving this matter quickly.
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