You need to file the FBAR if you are a US citizen who is living overseas. This is a purely informational tax form stating your finances and wealth in different accounts. Failing to file the FBAR leads to heavy penalties imposed by the IRS.
However, an FBAR penalty waiver can be used when an individual has been imposed with FBAR penalties. There is a certain procedure for requesting FBAR penalty mitigation.
Factors for FBAR penalty waiver
Check out the IRS FBAR violation penalty mitigation factors that allow US citizens living abroad respite from paying the heavy penalties.
- The Bank Secrecy Act (BSA) gives the Treasury Secretary some freedom in deciding the severity of penalties for violation of the FBAR reporting and record-keeping requirements.
- There is a maximum penalty sum, but no minimum amount.
- The examiner may decide if a particular case facts and circumstances don’t call for a penalty.
- The examiner is required to issue the FBAR warning letter if there was a violation in filing the FBAR but no penalty is necessary.
How to meet the requirements for FBAR penalty waiver?
One has to meet 4 requirements for qualifying for FBAR penalty waiver:
- The person hasn’t had any prior FBAR penalty assessments or BSA convictions or criminal tax in the ten years before.
- None of the foreign accounts linked to the person’s money came from an illicit source or was used for any criminal activity.
- The individual cooperated during the test.
- Since the person failed to record income connected to any amount in a foreign account, the IRS could not find out a fraud punishment against the individual for an underpayment of earnings tax for the relevant year.
Failing to file an FBAR allows the IRS to think that you are fraudulent or hiding your wealth overseas. FBAR penalty mitigation waives your penalties with just a stern warning from the FBAR examiner.