The Bank Secrecy Act (BSA) contained in Title 31 of the United States Code, requires that every year US persons must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and to keep certain records with regard to these accounts. The reporting is done by filing a Report of Foreign Bank and Financial Accounts (FBAR) on Financial Crimes Enforcement Network (FinCEN) Form 114. The FBAR filing date just passed earlier in April, but the FBAR filing due date is automatically extended for 6 months without a need to request any extension. Filers who missed the April deadline have an automatic extension until October 15, 2022, to file the FBAR.
As taxpayers prepared their returns and FBARs just recently, some noticed mistakes or omissions were made on earlier filed FBARs. Today’s blog post examines how to fix those FBAR errors. Please bear in mind this covers only the situation involving mistakes on a previously filed FBAR and does not involve errors or omissions such as unreported income or missing international tax information reports, such as Form 8938. The Internal Revenue Service (IRS) has other special procedures/compliance options that can be used to address these problems. Depending on the facts, fixing such errors can often be done without any imposition of penalties and we are happy to assist.
Correcting Previously Filed FBARs – How Far Back?
When someone has previously filed an FBAR but mistakenly provided incomplete or inaccurate information on the form, an amended FBAR can be filed. First, the person should determine how far back the filer should go to correct FBAR errors. The FBAR has a 6 year statute of limitations, so corrections need not be made if the statute of limitations has passed.
According to the IRS Internal Revenue Manual (IRM) at IRM 184.108.40.206.1, one counts the 6 years from the due date of the FBAR form. The due dates for the FBAR have changed. For calendar years 2015 and earlier, the due date is June 30 of the following calendar year. For calendar years 2016 and later, the due date is April 15 of the year following the year of the FBAR.
Here is an example: Taxpayer notices an omission on the FBAR filed for 2015 (due date June 30, 2016); the statute of limitations expires June 30, 2022.
Here is another example taken directly from the IRM: “In calendar year 2019, a foreign bank account owned by a U.S. person exceeds $10,000.00. The Report of Foreign Bank and Financial Accounts (FinCEN Form 114) was due April 15, 2020, but the account holder does not file one. The penalty assessment statute of limitations for failing to file an FBAR report expires April 15, 2026. NOTE: This does not include the 6-month automatic extension. At the time of this writing, no procedures have been established with regard to the automatic extension.”
While the statute of limitations information in the IRM sounds great, it is not binding authority and this means it is still possible that the government could use another date. Sadly, the FBAR area is fraught with many uncertainties. According to the BSA at 31 U.S.C. 5321(b), the statute of limitations is 6 years from the “transaction.” The problem is that there is no authoritative interpretation of what this means – when does the “transaction” occur? Moving past this conundrum, let’s examine the amendment process itself.
How to Amend an FBAR
Those who need to correct a previously filed FBAR must file a new FBAR with the corrected information and mark the new FBAR as “Amended.” Fill out the new FBAR completely, including fields that do not need any correction. One can e-file the amended FBAR using the BSA E-Filing System or contact FinCEN for an alternative filing method if one is unable to e-file.
If one e-files the amended FBAR, check the “Amended” box on FinCEN Form 114. The Prior Report BSA Identifier field will activate, and here, one enters the BSA ID number from the originally filed FBAR. If the original FBAR had been e-filed, the BSA ID number is found in the acknowledgement email sent by FinCEN. If the BSA ID number cannot be located or if the original FBAR was paper-filed, then enter all zeros in the Prior Report BSA Identifier field. FinCEN Form 114 includes a box for providing a brief explanation of the error.
Want to Learn More About FBAR?
As my readers know, FBAR matters keep growing in importance as the IRS continues to relentlessly crack down on noncompliance. Tax pro’s — Understanding FBAR matters can create a whole new line of business for you. Don’t lose potential clients because you do not fully understand FBAR. Next month, I will be presenting “Everything you need to know about FBAR” a live webinar with CPE credits. More information and registration here.
If you are unsure how to address FBAR noncompliance matters, let me know. I have years of experience guiding taxpayers in this area.
Posted April 28, 2022
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