# FBAR Mess



## Lotsofquestions (Mar 22, 2017)

I've got a situation and I could use some advice.
An American expat friend has been diagnosed with early-stage dementia. I'm helping get her affairs in order. To help pay for her care, we need to wire her US bank account funds (about $100k in total) over here, possibly in installments.
Reviewing her files and trying to get information from her, I've become aware that she has probably never filed an FBAR for her overseas bank account, but she should have, probably going back at least to 2015. Possibly even further back.
Going forward, I definitely intend to help get an FBAR filed for her for 2022 and beyond. But what about the past??
Would it be a good idea now to file a late FBAR for 2021? (I'm assuming the answer is yes, but the FinCEN stance seems so punitive that I worry about causing my friend trouble with the Treasury.) And what about previous years? For how many years back should she file a late FBAR?
Finally, is this a serious enough of a mess that we ought to hire someone?


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## Lotsofquestions (Mar 22, 2017)

[Continued]

I just found this:

"_The IRS will not impose a penalty for the failure to file the delinquent FBARs if you properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs..."_

Unfortunately, she has not reported, but for a good reason...

Although there was some bank interest, it was negligible... below US$10 in total per year. And my friend's only other income has been very modest Social Security, which is below the reporting threshold. She'd owe no US income 
tax.

She has not filed a US tax return for the past 7 years because she was told it was unnecessary to file.


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## Moulard (Feb 3, 2017)

Lotsofquestions said:


> Going forward, I definitely intend to help get an FBAR filed for her for 2022 and beyond. But what about the past??


The delinquent FBAR process is simply to file them late adding a reason why they are late in a little box. You can do that so long as the IRS is not already tapping at the door.

From a compliance perspective you only need to submit a max of 6 years. You would need access to bank statements etc be able to do so. Although it is possible to report accounts as having an unknown max value. If you do file them, that will be the last you hear of it unless she has millions stashed away in (I presume Japanese) financial accounts.

It is worth noting that simply wiring funds from the US to (I assume Japan) will not set off reporting alarm bells. 

FINCEN does not care about ordinary accounts with ordinary balances... remember they are primarily an anti-money laundering agency..

To which end if doing large transfers it is worth providing advanced notice to both parties to avoid getting caught up in holds that can occur by banks trying to meet their own domestic Financial Tracking rules.

IRS only starts digging around if they are already actively interested in her tax returns... they simply do not have the manpower to do more than that.. 



Lotsofquestions said:


> She has not filed a US tax return for the past 7 years because she was told it was unnecessary to file.


Depending on her streams of income it is entirely possible that this advice was correct. 

Assuming she is single, head of household or a qualifying widow then if half her social security income plus all other streams of income is less than $25K USD then she is unlikely to have had to file.
Note I am by no means an expert on matters relating to US SS payments and taxation... not in my sphere of interest as I have made no contributions into the scheme so if others chime listen to them above me.

Going back to the FBAR question... The IRS will not impose a penalty for the failure to file the delinquent FBARs if income was properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs. So if she did not have to file, then there will be no penalty

So if the advice was correct then there would be none of the penalties applied in any event... so If I was in your shoes and had power of financial attorney or other guardianship status I would probably simply file FBARS moving forward and if, I had access past financial statements I might report up to 6 years but I would not lose sleep if I did not.
.


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## Harry Moles (11 mo ago)

Moulard said:


> would not lose sleep


This


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## Bevdeforges (Nov 16, 2007)

Moulard said:


> The IRS will not impose a penalty for the failure to file the delinquent FBARs if income was properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs. So if she did not have to file, then there will be no penalty


And especially this. If she did not have a reporting requirement (insufficient income) for those years then she is entirely "compliant" with her reporting obligations and life goes on.


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## Lotsofquestions (Mar 22, 2017)

> If I was in your shoes and had power of financial attorney or other guardianship status I would probably simply file FBARS moving forward and if, I had access past financial statements I might report up to 6 years but I would not lose sleep if I did not.


I don't have power of attorney, and even if I did, I doubt I could piece together her past 6 years without a huge amount of research, probably at considerable expense. Even if I did all that, it seems extremely unlikely that she'd owe any income tax.

My friend just moved to a care facility and seems to have kept practically no financial documents, not even for last year. Also, she doesn't have online access to any accounts, not even to her Social Security. And she's not even receiving a year-end statement from them, either! As I said, the situation is a mess.

I do know that the current balance in her Japanese bank account converts to more than US$10,000, so at the end of 2022 we will deal with this year and move forward with the FBAR. That seems like the best approach given the messed-up situation.

Thank you.


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## Moulard (Feb 3, 2017)

Indeed. I agree that simply filing FBAR moving forward on her behalf is a reasonable step forward, although many would suggest ignoring it

Assuming she is still competent to do so, then get her to sign FinCEN Form 114a (for your and her records only) and then you can file an FBAR on her behalf...

Assuming you have access to statements or accounts either directly or through her, then the FBAR is very simple.. I personally use the same form each year updating only the relevant financial year, and reported balances, but as I said earlier every account has a "Maximum account value unknown" option.. which I know many people use as the "Its none of your business" selection.

And the reality is, even if Japanese tax office was to report account information to the IRS through the IGA mutual data exchange channels, it is well known that the data provided by foreign tax authorities is almost impossible to be reconcilled against the data provided by the taxpayer


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## Lotsofquestions (Mar 22, 2017)

> Assuming she is still competent to do so, then get her to sign FinCEN Form 114a


On good days she seems fully aware. Together, we recently filed a change of address with US Social Security and the Japanese Pension Office, as well as with her US and Japanese banks. Therefore, I should be able to get the necessary account information from her for the FBAR at year end.

Thank you for telling me about FinCEN Form 114a.


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