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Failed to declare foreign bank accounts and file FBAR. Now what?

Failed to declare foreign bank accounts and file FBAR. Now what?

Old Jul 20th 2019, 4:15 pm
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Default Failed to declare foreign bank accounts and file FBAR. Now what?

For some reason when my (UK citizen now dual UK/US) spouse first came over the the US, he thought “offshore accounts” when filing US referred to tax-free haven type things but we have just found out that on our tax returns we should have been declaring our British bank accounts and on some years filing FBAR. We’re not talking massive amounts of money here. One year there was 20k in an account briefly but generally the balances have been extremely low and in a couple of cases the accounts have been empty and unused and some are now closed, so the amount of actual tax we owe is very minimal (though am aware that’s not really the point)

We are very anxious to resolve this situation and are willing to approach the IRS to do so (via a tax lawyer who has been efficient but obviously he doesn’t want to make guesses or predictions) Has anyone been through anything similar and can advise us what penalties we should expect to face and what sort of time frame for sorting it all out?


I know we have been incredibly stupid but it genuinely wasn’t intentional. We just need some advice now. I have googled and the penalties are huge, potentially meaning us losing everything and even going to jail. Maybe we deserve to for being idiots. I really couldn’t feel any worse about this and am in a pit of despair. Just need some reassurance that we’re not going to lose everything.


Last edited by WorriedMary; Jul 20th 2019 at 4:19 pm.
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Old Jul 20th 2019, 5:29 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Originally Posted by WorriedMary View Post
For some reason when my (UK citizen now dual UK/US) spouse first came over the the US, he thought “offshore accounts” when filing US referred to tax-free haven type things but we have just found out that on our tax returns we should have been declaring our British bank accounts and on some years filing FBAR. We’re not talking massive amounts of money here. One year there was 20k in an account briefly but generally the balances have been extremely low and in a couple of cases the accounts have been empty and unused and some are now closed, so the amount of actual tax we owe is very minimal (though am aware that’s not really the point)

We are very anxious to resolve this situation and are willing to approach the IRS to do so (via a tax lawyer who has been efficient but obviously he doesn’t want to make guesses or predictions) Has anyone been through anything similar and can advise us what penalties we should expect to face and what sort of time frame for sorting it all out?


I know we have been incredibly stupid but it genuinely wasn’t intentional. We just need some advice now. I have googled and the penalties are huge, potentially meaning us losing everything and even going to jail. Maybe we deserve to for being idiots. I really couldn’t feel any worse about this and am in a pit of despair. Just need some reassurance that we’re not going to lose everything.

My understanding if you make a voluntary filing and the assets were not large, using a tax attorney it would be extremely rare to suffer the most draconian penalties so better to file soon and not have worry of the unknown.
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Old Jul 20th 2019, 5:55 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Originally Posted by morpeth View Post
My understanding if you make a voluntary filing and the assets were not large, using a tax attorney it would be extremely rare to suffer the most draconian penalties so better to file soon and not have worry of the unknown.
Thank you so much for responding. We intend to get this sorted as soon as possible.

Does anyone know how long things like this typically take? From filing to resolution?
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Old Jul 21st 2019, 2:32 am
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Originally Posted by WorriedMary View Post
For some reason when my (UK citizen now dual UK/US) spouse first came over the the US, he thought “offshore accounts” when filing US referred to tax-free haven type things but we have just found out that on our tax returns we should have been declaring our British bank accounts and on some years filing FBAR. We’re not talking massive amounts of money here. One year there was 20k in an account briefly but generally the balances have been extremely low and in a couple of cases the accounts have been empty and unused and some are now closed, so the amount of actual tax we owe is very minimal (though am aware that’s not really the point)

We are very anxious to resolve this situation and are willing to approach the IRS to do so (via a tax lawyer who has been efficient but obviously he doesn’t want to make guesses or predictions) Has anyone been through anything similar and can advise us what penalties we should expect to face and what sort of time frame for sorting it all out?


I know we have been incredibly stupid but it genuinely wasn’t intentional. We just need some advice now. I have googled and the penalties are huge, potentially meaning us losing everything and even going to jail. Maybe we deserve to for being idiots. I really couldn’t feel any worse about this and am in a pit of despair. Just need some reassurance that we’re not going to lose everything.

FYI FBAR is FinCEN not IRS, you may also need to amend your IRS tax returns if you have not declared things there, although the requirements are different for both.

FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts, that must be filed with the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department. The form must be filed electronically and is only available online through the BSA E-FilingSystem website“

https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html
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Old Jul 21st 2019, 7:55 am
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Most folks in this situation would use the IRS SDOP (Streamlined Domestic Offshore Procedures) to catch up. Do you have any UK pension plans or only cash in bank/ building society accounts?
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Old Jul 21st 2019, 8:41 am
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Originally Posted by Cook_County View Post
Most folks in this situation would use the IRS SDOP (Streamlined Domestic Offshore Procedures) to catch up. Do you have any UK pension plans or only cash in bank/ building society accounts?
Was reading about the SDOP yesterday so it’s good to hear it may be for us.

Right now we just have a tiny amount of cash over a few bank accounts between us, no private pensions or anything else. We have been in the process of winding them down over the last few years, using them when we’re in the UK then closing them when they’re empty. For example, my greatest balance on any account is about £25 right now and I was planning on closing my remaining accounts when I went back to Britain in August.

I’m afraid I fell foul of googling our situation, finding all those scary tax lawyers’ sites which implore you to use their services otherwise you will go to jail or whatever, and panicking like crazy. We just want to rectify our error. The amount of tax we have not paid to the IRS because of this is absolutely minimal so there was no financial reason for us not to have declared our UK accounts, we were just idiots.

As for FBAR, thanks to the poster who pointed out this is a separate issue. It looks like we should have declared this twice in the past and will rectify that however we can.
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Old Jul 21st 2019, 8:42 am
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Originally Posted by tht View Post


FYI FBAR is FinCEN not IRS, you may also need to amend your IRS tax returns if you have not declared things there, although the requirements are different for both.

FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts, that must be filed with the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department. The form must be filed electronically and is only available online through the BSA E-FilingSystem website“

Thank you, this is very useful
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Old Jul 21st 2019, 2:22 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

If you paid UK tax on your bank accounts then you would get credit for that on your IRS taxes. The net result could be that you would not owe the IRS any tax at all, in which case you have very little to worry about and I think all you need to do is submit the last 6 years worth of FBARs with a note explaining why you are doing so. If you do owe a small amount of tax I believe you can amend and submit you past tax returns and FBARs using a streamlined procedure.
The main thing is, if the tax owed is small, and you were not willfully evading taxes then you have little to worry about. The web sites from the various FBAR lawyers out there are designed to scare you death and are very effective in doing so, all in the name of generating business for them. The reality is that the IRS want to assist in getting people compliant with little or no penalty, and that is in everyones interest. If you intentionally evaded tax, or have any criminal activities, then you should worry, but that does not seem to be the case here. Google, "streamlined FBAR procedures" and go to the IRS site, they really can be quite helpful.

This link may help you.
https://www.irsvideos.gov/business/F...rSomeTaxpayers
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Old Jul 21st 2019, 2:42 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

There is no credit available in the US for any UK tax withheld because under UK domestic law there would have been no tax due.

The amount payable under the SDOP is the US tax due on the interest, IRS interest on the tax, plus a penalty equal to 5% of the largest of the values on 31 December 2016, 2017 or 2018. Schedule B, including Part III, will need correcting. FBARs would be filed for the years 2013 to date.

Last edited by Cook_County; Jul 21st 2019 at 2:43 pm. Reason: correct
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Old Jul 21st 2019, 3:53 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Originally Posted by Cook_County View Post
There is no credit available in the US for any UK tax withheld because under UK domestic law there would have been no tax due.

The amount payable under the SDOP is the US tax due on the interest, IRS interest on the tax, plus a penalty equal to 5% of the largest of the values on 31 December 2016, 2017 or 2018. Schedule B, including Part III, will need correcting. FBARs would be filed for the years 2013 to date.
Am I correct in understanding that the FBARs are best filed after the delinquent tax returns are filed to avoid any FBAR penalty as one can state that they have paid any taxes due on the accounts being reported.
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Old Jul 21st 2019, 5:17 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Thanks to all who responded, you’ve really put our minds at rest.

From some rough calculations we’ve just done, the outstanding tax on any interest we owe would be under $100 (plus the interest we would owe on that ourstanding amount) and the 5% of the end of year total on the year of the last three with the highest end of year balance would be under $1k so we could cover that and it would be well worth it to get it all done.

I’ve had a quick look at the forms we would need to complete. Would it be worth getting the tax lawyer to file on our behalf or is it doable ourselves? We are really quite bright and capable, even if the contents of this thread suggest otherwise

Last edited by WorriedMary; Jul 21st 2019 at 5:49 pm.
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Old Jul 21st 2019, 6:11 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

If it was me I would contact the IRS and talk to them directly. You will likely save enough to pay your fine. Unless you are unlucky they can be quite personable. If you start and can't finish you can always involve a tax lawyer.
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Old Jul 21st 2019, 6:32 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Originally Posted by Glasgow Girl View Post
If it was me I would contact the IRS and talk to them directly. You will likely save enough to pay your fine. Unless you are unlucky they can be quite personable. If you start and can't finish you can always involve a tax lawyer.
Thank you Glasgow Girl. We are leaning towards doing our ourselves. It looks doable and as you say, if we have any problems we could always ring the IRS.

We were in a panic when we had the initial appointment with the lawyer and to be honest, he didn’t seem to know much about our particular issue but said he would do some research. I’m not totally averse to using a lawyer but I definitely don’t want to be pushed into an expensive and punitive course of action because he isn’t familiar with our situation or because he wants to charge us large fees. Not saying he would do this, but I am wary.
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Old Jul 21st 2019, 6:51 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

Sent you a private email.
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Old Jul 21st 2019, 8:22 pm
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Default Re: Failed to declare foreign bank accounts and file FBAR. Now what?

So I think we’re going to file ourselves. The forms look straightforward and we’ve set aside next weekend to complete them.

The only part we are concerned about is how to show non-wilfulness in the written statement part. I mean, this absolutely was non-wilful, we made incorrect assumptions about what constituted a “foreign account” and as soon as we found out, we wanted to rectify it. Is that basically the right thing to say (along with other declarations about the accounts being already set up before we even moved here etc) or are we dropping ourselves in it?
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