All U.S. Taxpayers are required to report foreign income on their tax returns. So why does the IRS require an additional FBAR form to be filed? If you were going to fail to disclose on one form, you would fail to disclose on the FBAR form, right? What possible purpose does the FBAR form serve, except to create another hurdle in an already hyper-regulated economy?
The answer lies with the title of the chapter of the various laws. You see, the Tax Code is located in Chapter 26 of the US Code. But the strange thing is that all FBAR-related law is located in Chapter 31: Bank Secrecy.
Congress passed the Bank Secrecy Act not only to reduce tax evasion, but other crimes as well — money laundering, terrorism financing, and narcotics and gun trafficking. The FBAR form is really for bank secrecy purposes, not tax compliance. The filed FBAR form lets the government know who has money, how much, and where….well, legal money, at least. One would assume that a person involved in money laundering, terrorist financing, narcotic and drug trafficking may not be especially concerned about missing FBAR form filing requirements.
Even Washington figured that it would be somewhat onerous to create an IRS equivalent to administer the Bank Secrecy Act. So for many (but not all) provisions, the Secretary of the Treasury (who is the head of the IRS) is in charge of collecting the FBAR information and then assessing penalties, and beginning criminal investigations, if needed.
We have people call our office every single day who are terrified that they just found out about this FBAR reporting requirement and think the IRS is going to penalize them heavily or put them in jail. This is not the case. If you have unfiled FBARs you are concerned about, contact us. We can help. Call us at 888-727-8796 or email info@irsmedic.com.
