Two filings that look alike
The FBAR is a report of foreign financial accounts filed electronically with FinCEN, the Treasury Department's financial crimes bureau, and not with your tax return. It applies to US persons with a financial interest in, or signature authority over, foreign accounts whose combined value crosses a threshold at any point in the year. The FATCA form is filed with the IRS as part of the income tax return, covers a broader range of foreign financial assets, and has higher thresholds that vary with filing status and where you live. Many people must file both, and filing one does not satisfy the other. FATCA also requires foreign banks to identify US account holders, which is why banks overseas ask for US tax information.
Penalties and how they are counted
Penalties for missed FBARs differ sharply depending on whether the failure was willful. For non-willful violations, the Supreme Court has held that the penalty applies per report rather than per account, which limited exposure for people with many accounts. Willful violations can bring much larger civil penalties and, in serious cases, criminal charges. Missing the FATCA form carries its own penalties and can keep the period for assessing tax open for the related return. Interest and other income from foreign accounts, which is often the real tax issue, has to be reported on the income tax return in addition to the informational filings.
Catching up on missed years
If you have not filed, how you come into compliance matters. The IRS has offered streamlined procedures for taxpayers whose failures were not willful, with a certification explaining the circumstances, and separate procedures for people who owe no additional tax and only missed the informational filings. Taxpayers whose conduct may have been willful usually consider the IRS Criminal Investigation voluntary disclosure practice instead. Simply filing current reports and saying nothing about past years, sometimes called a quiet disclosure, carries risk. We review account histories, how the accounts were opened and used, and what you knew at the time, because an honest answer to the willfulness question decides which path fits.
