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What to do about delinquent FBARs

 

Excuse me. I must confess. I have read your diary. And I can't go on pretending that I don't know what I know. And I know it is a complete breach of any sort of ethical and personal confidentiality standards, but I feel I must share what I learned about you with our other readers.  Well, I won't share the stuff about your grandfather's liquor cabinet. That we will keep between you and me. But rather, I feel I must mention what you wrote about your delinquent FBARs. Yeah that. And the only reason I am going to share it, is because so many of our other visitors, well, maybe they wrote something similar in their diaries.

 

So now to the important quote:

 

Dear Diary… My delinquent FBAR is actually now a delinquent FinCEN Form 114 and my magic wand will not make this entire mess go away. I am just going to pretend I am not bothered. That should work, right?


For problems and messes, we all could use a little help.

 

I know you'd like to forget about delinquent FBARs

It’s easy to focus on what is in front us. The past is in the past, we think, and it seems so irrelevant. A typical story I hear from clients is, “I learned about FBARs and I want to report my foreign accounts,” but implied at the end there is, “that I currently have.”

 

A client may have some accounts right now, and they see these accounts as being the accounts that are the problem. So the client thinks that she must file delinquent FBARs for the past six years for the accounts she has right now and does not consider accounts she used to have. This is a misunderstanding of FBAR obligations and the disclosure programs because your old accounts need reporting too.

 

Pursuant to the disclosure programs rules, you must file delinquent FBARs properly. You must file these FBARs as if you had filed on time. This means that any account, even an account you closed recently, that was open during a particular year must be included on that year’s FBAR.

 

For example, suppose you had two checking accounts in India that you had for twenty years, but closed one in September 2012. It’s been closed for two years, and now you’re entering into the Streamlined Program. You would be wrong if you only filed FBARs for the account you still have. That account you closed in 2012 that you’ve all but forgotten about? That still needs to go onto FBARs for all the years it was open during your disclosure period. So if your Streamlined FBAR period is 2008 through 2013, that closed account still needs FBARs for 2008 through 2012. The account you kept open needs FBARs from 2008 through 2013 (and beyond).

 

When preparing your case for submission, taxpayers must remember to look back to what used to be open. Be diligent. Finding documentation may be difficult, but all accounts open during your disclosure period need to be reported, and you will rest easy knowing your submission was done correctly.