With the recent closing of the 2014 filing season for the Report of Foreign Bank and Financial Accounts (FBARs) which occurred on June 30, 2014, the IRS released changes to the Offshore Voluntary Disclosure Program  (“OVDP”) to ease the burden and encourage more taxpayers to come into compliance under the streamline filing compliance procedures. The expanded streamline procedures are available to a broader base of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the U.S. 

The streamlined procedures waive the penalties for qualified individuals living abroad, and offer a reduced 5% penalty to eligible taxpayers residing in the U.S.  The IRS also modified the penalty framework for taxpayers participating in the OVDP program by increasing the 27.5% penalty to 50% for some taxpayers entering into the program after August 1, 2014.  

 As a reminder, the following is a summary of the foreign financial account requirements.

What is a foreign financial account?

  • An account located outside of the United States.
    • Includes a bank account, brokerage account, mutual fund, trust or other type of foreign financial account.
      • An account with a U.S. bank that is physically located outside of the U.S.; or
      • An account with a foreign bank located outside of the U.S.

Who is required to file Form 114 (formerly known as TD F 90 22.1)?

  • A United States person who has a financial interest in or signature authority over foreign financial accounts; and
  • If the combined value of the foreign financial accounts exceeds $10,000 at any point during the calendar year.

What penalties are associated with noncompliance?

  • Between $10,000  to $100,000 worth of potential civil penalties; or
  • 50% of the amount of the transaction or balance of foreign account at time of the offense.

The increased effort of the U.S. government to crack down on offshore tax evasion is proving successful. Since the launch of the first OVDP in 2009, more than 45,000 taxpayers have come into compliance voluntarily paying approximately $6.5 billion in taxes, interest and penalties. 

Over 100 Swiss banks are about to provide data to the IRS and FATCA disclosures on ground for the coming year, foreign banks are quickly flushing out their U.S. account owners.

Our B&V International Tax Services team is ready to assist with questions and reporting of your FBAR.