Many taxpayers always face a dilemma when it comes to filing their first Foreign Bank and Financial Account Report (FBAR). For people in the IRS’s Overseas Voluntary Disclosure Initiative (OVDI) program, the IRS requires them to file the modified FBAR. Taxpayers with offshore bank and financial accounts are required to file their returns by June 30 of each year, as long as the offshore accounts have at least $10,000.

However, those not in the OVDI program can still make a voluntary disclosure under traditional IRS rules. They will then be required to file past FBARs that are due with the IRS and then commit to filing subsequent ones for as long as they are needed.

Failure to disclose offshore accounts, on tax returns, or failure to pre-fil FBAR can result in large penalties or even jail time. The IRS discourages the “silent disclosure” aspect of starting to file FBARs. Some of the “silent disclosure” things some contributors start with include:

Presentation of FBAR prospectively without addressing the past.

· Submit three years of previously expired FBAR in one envelope each in an attempt to avoid attention.

Submit six years of previously expired FBAR in one envelope each; gold

· Filing three, six, or even eight years of FBAR accompanied by a written explanation to the IRS stating that the taxpayer was not previously aware of the filing requirements and should avoid the penalties as a result.

Some people may have accurate total income on their tax returns, but do not disclose their previous foreign accounts. Others may be uncomfortable with filing expired FBARs under any conditions. In general, FBAR filing must be done even when there is no tax to be paid on the reported foreign income, for example, due to foreign tax credits.

The decision to start filing FBARs is a sensible one, regardless of whether or not one is trying to make late FBAR filings to correct the past. Penalties imposed for failure to file prior FBARs can be disputed through detailed explanations to the IRS for failing to do so, or by making the first FBAR filing accompanied by an explanation citing failure to file filing requirements.

Being a complete tax report on all income, including foreign income, does not exempt one from filing FBAR. People who have back taxes, due to not disclosing their foreign income and not filing FBARs, face a difficult decision on whether or not to start FBAR filings, due to the penalties they will likely face. Therefore, it is recommended to obtain the appropriate advice from the relevant sectors.