Tag Archives: FinCEN

Paperwork and Punishment: It’s Time to Fix FBAR

6 Jan

Long Arm of IRS to Expats

Paperwork and Punishment: It’s Time to Fix FBAR” is an academic paper published in Tax Notes International in October 2014 by Allison Christians, Associate Professor who holds the H. Heward Strikeman Chair in Tax Law at McGill University Faculty of Law. In it she vividly details the fallacy of FBAR as a tool to catch criminals, tax evaders, money launderers and terrorists. To wit, the responsibility for collecting the Foreign Bank Account Report has been handed over to FinCEN, Financial Crimes Enforcement Network, described by the Treasury Department as the Financial Intelligence Unit of the United States. Thus there is a criminal stigma associated with entering oneself in a crime enforcement registry. In her introduction, she states, “Unfortunately, its increasingly draconian requirements and consequences now apply to millions of innocent bystanders who are collateral damage in the ongoing battle against financial crime. Their inclusion in the FBAR regime is a massive waste of both government and taxpayer resources, effectively criminalizing activities that are wholly unconnected to financial crime, and perversely discouraging compliance. All of this is unnecessary because as the administrator of FBAR, Treasury can immediately fix the problems. The difficulty is that FBAR is still relatively obscure to those not caught in its grasp, and the extent of the damage it is doing to U.S. taxpayers and to the integrity of the tax system is thus under-appreciated. This damage is real, but it can be reversed by re-focusing FBAR where Congress intended: on likely criminal activity. In short, this Essay demonstrates that the FBAR regime is broken and it is time for Treasury to fix it.

Did you know that the FBAR came about as part of the Bank Secrecy Act of 1970? The $10,000 threshold for requiring that all foreign financial institution accounts be reported has not changed since it was first chosen as the criterion for reporting. With no inflation adjustment, its impact has significantly broadened over the years, and it now inflicts huge penalties on millions of individuals who should never have been in its sights. Had it been inflation adjusted, it would require you to list all your foreign accounts if their total reached approximately $50,000.

U.S. persons  living  permanently  in  other  countries  may  disagree  with  the  U.S. policy of taxing citizens on a global basis. A harsh regime that involves extensive and duplicative financial reporting with a criminal stigma attached is a recipe for deepening resentment. If the United States takes the sensible route in adopting residence based taxation, the extreme cost of FBAR filing, measured in dollars and time spent as well as an increasingly fragile taxpayer morale, will disappear along with millions of unnecessary annual returns showing no tax owed. This will free up scarce administrative resources, allowing the IRS to turn its focus where it belongs; on those who are determined to cheat and evade the system to the detriment of everyone. Until then, it is in the  interest of al  taxpayers, the IRS, and the  income  tax  as a whole that FBAR compliance be a  normal rather than criminal experience, and that it be no more difficult or draconian than is absolutely necessary.

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FBAR Electronic Filing is Here (weither you like it or not)

27 Feb

Where have I been? When did all this come about? Now, the ONLY way to file your mandatory FBAR (Foreign Bank Account Report) is from your computer via the internet!!! What about those people who don’t have a computer? What about those that don’t have internet connectivity? What? Go to an Internet Cafe where someone can easily steal all your private financial information? I suppose the future is now!

To go back a bit, I will describe to you how I found this out. For some reason or other, there I was today, wondering if the time had come that I would be able to electronically file my TD F 90-22.1. I did a search for “e file fbar” and the first web site of the 247,000,000 search results was to the IRS web page which informed that “the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114.”

US-FinancialCrimesEnforcementNetwork-Seal.svg

What was this FinCEN? I had never heard of them, so I went to the Financial Crimes Enforcement Network home page. It is the first cousin of the IRS — the other arm of the U.S. Treasury, whose mission it is “to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.” Little did I know that all those years that I have been reporting my FBAR to what I thought was the IRS, I have been playing a role in combating money laundering and protecting the national security of the U.S.A. Well, let me tell you, this year, I won’t grind my teeth as I meticulously fill out my FBAR, wondering why Uncle Sam’s money collectors want to know about my measly pension fund and checking account over here in Israel. So electronically file my BSA forms with FinCEN I will, and with a great deal of pride that I am doing my small part for protecting the freedom of America.

And for those of you out there in EXPAT-land, you can access these interactive BSA forms at the FinCEN by merely clicking here and then click on this icon:Download FBAR(FinCEN Form 114)