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What is the FBAR statute of limitations for penalty assessments? What other FBAR statutes should I be concerned about? If you have failed to file your FBAR, also known as FinCEN Form 114, you may ask yourself these questions. The article below was prepared by a Denver tax attorney at The McGuire Law Firm and will examine and discuss a few of the related FBAR statutes of limitations.

FBAR Statute of Limitations

The FBAR statute of limitations rules differ from other tax law enforcement rules. That is because the FBARS refers to US title 31 (Money and finance), not title 26 (the Internal Revenue Code).

The FBAR reporting relates to offshoring foreign assets, accounts, and investments. However, it does not relate to income reporting. The IRS takes an aggressive stance toward foreign accounts compliance. Still, the IRS is restricted in the time to assess or enforce the FBAR Statutes.

FBAR penalty assessment statute

31 USC 5321(b)(1) and 5321(b)(2) provide the FBAR penalty assessment statute expiration date and collection statute expiration date, which is part of the Bank Secrecy Act. The FBAR assessment statute expiration date is six (6) years from the due date of the FBAR, and this applies to whether the failure to file the FBAR was willful or non-willful. It is important to note that you can also be assessed a penalty for failing to maintain required records. The FBAR penalty statute of limitation for failing to maintain required records, whether willful or non-willful, is also six years, but this statute only begins to run from the date the Internal Revenue Service first requests the records.

The “Limits” of the FBAR Statute of Limitations

The Internal Revenue Service (IRS) has several tools to combat offshore tax evasion. One of those tools is the Foreign Bank Account Report (FBAR). Although the FBAR filing deadline is April 15th yearly, the IRS does not consistently enforce it strictly. Instead, the agency uses a variety of tactics to catch taxpayers who fail to file a report.

In some cases, the IRS will use the FBAR reporting requirement to help determine whether someone committed a federal offense. For example, the IRS may investigate a person failing to file an FBAR. If the investigation reveals grounds to prosecute the individual, the IRS could refer the case to the Justice Department.

Another way the IRS enforces the FBAR filing requirement is by auditing returns filed by individuals who did not comply with the law. Auditors might look into particular accounts to see if the taxpayer had money overseas. They could even examine whether the taxpayer used foreign financial institutions to hide assets.

When the IRS starts investigating the FBAR filing requirements, it typically looks at records dating back six years. However, the IRS often extends the statute of limitations beyond that date. When the IRS determines that someone failed to file an FBAR within the statutory period correctly, it sends a notice demanding payment. If the taxpayer fails to pay, the IRS files a lien against his property. The lien prevents the taxpayer from selling his assets without paying the IRS.

FBAR Statute Limitations Example 1

That being said, let’s apply these FBAR statute limitations as an example. Let’s assume Joe has foreign bank accounts in the calendar year 2014 that exceed $10,000 and that, for purposes of the FBAR filing, Joe is a US Person. Joe would thus have been required to file the FBAR (Report of Foreign Bank and Financial Accounts) on June 30, 2015. Joe was unaware of the FBAR filing requirement and did not file FinCEN Form 114. The FBAR penalty assessment statute of limitations for failing to file the FBAR would expire on June 30, 2021.

Failure To Maintain Required Records

Now let’s apply the FBAR statute of limitations for failing to maintain required records. We will assume the same facts above, but Joe also failed to maintain the required records. On April 1, 2016, an IRS or other examiner requested the relevant records to Joe’s foreign bank accounts. The FBAR assessment statute of limitations for failing to maintain required records expires on April 1, 2022.

Statute Of Limitations To File Suit

Now that we have determined Joe’s FBAR statute of limitations for assessing an FBAR penalty, does the government have a statute of limitations to file suit? Yes, there is a two (2) year statute for the government to file a civil action against Joe to recover an FBAR penalty. However, there is no statute of limitations for the period in which the government can receive payment from Joe by offsetting certain payments.

For More Information

John McGuire has prepared the above article to provide information about FBAR statute limitations. Still, please remember to always discuss your specific facts and circumstances directly with your tax attorney or other counsel. Please contact us anytime if you wish to speak with a Denver tax attorney or Denver Business Attorney at The McGuire Law Firm. Call us at 720-833-7705 today!

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