FBAR and Submission Requirements of OVDP – Part I
This is a two-part article that looks at FBAR and the different penalties for failing to file FBAR. It also
looks at the OVDP program started by the IRS amnesty and provides detailed information about
OVDP submission requirements.
FBAR is an acronym for the Foreign Bank Account Report, which is an annual report filed with the
United States Treasury for Americans to report the existence of foreign bank accounts and other
financial accounts held abroad. As per the law, any United States Person who has a financial interest
in or signature authority, or other authority over any financial account in a foreign country and if the
aggregate value of these accounts exceeds US$10,000 at any time during the calendar year must file a
Report of Foreign Bank and Financial Accounts (FBAR).
Missed FBAR filing can lead to huge civil penalty, an amount equal to the greater of $100,000 or 50
percent of the account balance for each violation each year, potentially accruing to the greater of
$800,000 or 400 percent of each account balance over a six year period apart from criminal penalty,
the fraud penalty and foreign information return penalties. In order to make taxpayers, who have
undisclosed foreign accounts and entities, comply with the tax laws, the IRS amnesty has started the
Offshore Voluntary Disclosure Program (OVDP) that allows tax evaders to make a voluntary
disclosure of undisclosed foreign accounts or entities. Here is a look at some of the submission
requirements of the OVDP program.
● All applicants must submit copies of previously filed original (and, if applicable, previously
filed amended) federal income tax returns for tax years covered by the voluntary disclosure.
● All applicants must submit complete and accurate amended federal income tax returns (for
individuals, Form 1040X, or original Form 1040 if delinquent) for all tax years covered by the
voluntary disclosure. It should be accompanied by applicable schedules detailing the amount
and type of previously unreported income from the account or entity (e.g., Schedule B for
interest and dividends, Schedule D for capital gains and losses, Schedule E for income from
partnerships, S corporations, estates or trusts, and, for years after 2010, Form 8938, Statement
of Specified Foreign Financial Assets). For taxpayers who began filing timely, original,
compliant returns that fully reported previously undisclosed offshore accounts or assets
before making the voluntary disclosure for certain years of the offshore disclosure period,
copies of the previously filed returns for the corresponding years.
● All applicants must submit a copy of their completed and signed Offshore Voluntary
Disclosures letter and attachment.
In the second and concluding part of this article, we will look at the rest of the submission
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