Well, it’s finally June, and now that Spring is in the air, our hearts and minds turn to thoughts of….Filing FBARS!
In case you forgot, an FBAR is the form you must file by June 30 if you have signature authority over a foreign bank account. It is part of the government’s effort to crack down on offshore bank accounts hiding income otherwise subject to tax.
Failure to do so can subject you to HUGE penalties, as a Mr Zwerner recently discovered. It seems Zwerner had failed to report an offshore account for many years, using it to hide income, also not reported. Because of the increased exposure to criminal prosecution and civil penalties, He had a change in heart, voluntarily disclosed the account, and paid his back taxes for all open years. He came clean BEFORE the government discovered him and hoped to avoid criminal prosecution in so doing.
He got his wish, and avoided criminal prosecution. But he didn’t count on the IRS auditing all his amended returns, and assessing penalties for each of 3 years in the amount of 50% of the highest balance in the account during each year. It went to trial and a jury ruled in favor of the IRS.
Zwerner owed penalties of $2.2 mil on an account whose highest balance was $1.7mil!
How could he have avoided this? Timely filing of his FBARs and claiming all his income on his tax returns is the simplest way to sleep well at night. And that works in all four seasons.