A New Approach to Reporting Overdue Foreign Financial Accounts

U.S. taxpayers who do not need to use the "Voluntary Disclosure Practice" or "Streamlined Filing Compliance Procedures" to submit delinquent or amended tax returns to report and pay back taxes, but who meet the following criteria, may use this procedure:

• You are not currently under a civil examination or criminal investigation by the IRS.
• The IRS has not yet contacted you regarding your delinquent FBARs.
• You have correctly reported all income (e.g., interest, dividends, etc.) from these foreign accounts on your past U.S. tax returns and have paid all associated taxes.

Procedure and Requirements

When filing late FBARs, you must state that you are following the "Delinquent FBAR Submission Procedures" and provide a "Reasonable Cause Statement" explaining why the filing was not completed on time.

Taxpayers can file directly according to these procedures. This is excellent news for taxpayers residing in the U.S. who failed to report foreign financial accounts; while the "Streamlined Domestic Open Procedure" typically imposes a 5% penalty, this delinquent submission procedure waives all penalties if the income from those assets was already reported and taxes were paid, leaving only the account information undisclosed.

Important Conditions for Eligibility

To use this "Delinquent FBAR Submission Procedures" and qualify for the penalty waiver, the following conditions must be met:

• 6-Year Look-back Period: Based on IRS practice and relevant statutes, you generally need to file delinquent FBARs (FinCEN Form 114) for the past 6 years.
• Reasoning: The civil statute of limitations for FBAR is generally 6 years from the filing deadline. Therefore, when a taxpayer seeks compliance, the IRS typically requires filing for all years still within this statute.
• Note: This is consistent with the requirements of the "Streamlined Filing Compliance Procedures," which also require filing for the past 6 years.

Official Resources and Legal Basis

For detailed instructions, please visit the official IRS website: Delinquent FBAR Submission Procedures (IRS.gov). On this page, the IRS specifies the target audience (those who filed income tax returns and paid relevant taxes but missed FBAR filings) and the necessary steps for compliance.