The Reporting Landscape
U.S. taxpayers must report worldwide income and disclose foreign financial accounts exceeding thresholds. Two primary obligations: FBAR (FinCEN Form 114) for aggregate accounts exceeding $10,000 at any time during the year, and FATCA (Form 8938) with higher thresholds varying by filing status and residence.
Penalties
Non-willful FBAR violations: up to $10,000 per violation per year. Willful violations: the greater of $100,000 or 50% of account balance per account per year. Courts interpret willfulness broadly, including reckless disregard of the filing requirement. Penalties can easily exceed the account values.
Coming into Compliance
The Streamlined Filing Compliance Procedures cover non-willful failures: amended returns for three years, delinquent FBARs for six years, and a 5% miscellaneous offshore penalty (waived for overseas residents). The Voluntary Disclosure Practice covers potentially willful failures, primarily protecting against criminal prosecution.
Foreign account compliance is not optional, and penalties can be catastrophic. Remediation programs offer manageable paths, but require careful analysis and precise execution.