Manafort Indicted for FBAR Issues

Paul Manafort has been in the news a lot lately, bringing new focus and awareness to those with foreign bank accounts, and the filing responsibilities that having those accounts entails.  Manafort was indicted for concealing his interests in several foreign bank accounts, as well as tax evasion and a host of other criminal charges. Not disclosing this information  can cause an alert to federal authorities.


Foreign Reporting Requirements

A US citizen or resident is required to disclose certain foreign bank and financial accounts which he or she has a financial interest in (or signature authority over) annually. This obligation can be triggered by direct or indirect interests; a US Person is treated as having a financial interest in a foreign account through indirect ownership of more than 50 percent of the voting power or equity of a foreign entity, like a corporation or partnership.

The US Person is required to annually disclose the interest on FinCEN 114, Report of Foreign Bank and Financial Accounts, which is commonly referred to as the FBAR. The disclosure requirement is triggered when the aggregate value of the foreign account exceeds $10,000. The form is filed with your federal income tax return.

The civil penalties for failing to timely disclose an interest in a foreign account can be severe, and in the case of willful violations, can reach up to 50 percent of the highest aggregate annual balance of the unreported foreign financial account each year.

The statute of limitations for FBAR violations is six years, and the willful penalty may be assessed for more than one year, creating extreme financial consequences for FBAR reporting failures. A US person must also disclose the existence of covered foreign accounts in Part III of Schedule B to his or her Form 1040 – US Individual Income Tax Return.

Importantly, by signing the return, a US Person attests—under penalties of perjury—that all information provided on the return is “true, correct and complete.” Thus, a non-disclosing US Person can be prosecuted for perjury and for filing a false or fraudulent tax return in addition to any financial penalties.

FBAR and Criminal Sanctions

A range of criminal sanctions may apply to US Persons who fail to disclose the existence of—and income from—offshore financial accounts on their annual tax return, FBARs and other IRS forms. For example, the statutory criminal sanctions for failing to file an FBAR include substantial fines and up to 10 years imprisonment, depending on the type of violation. Because a substantial number of US Persons failed to disclose their foreign financial accounts, the IRS implemented the Offshore Voluntary Disclosure Program, the Streamlined Offshore Procedures Program, the Delinquent International Information Return Program, and the Delinquent FBAR Submission Procedures to assist taxpayers in becoming compliant with the Bank Secrecy Act.

What to do if you Have Foreign Accounts

If you have foreign accounts, you need to make sure you are filing and complying with all federal regulations.  If you would like to discuss your personal tax situation, please contact our office to schedule a free, totally confidential consultation today.