Late, Delinquent and Amended FBARs

Three questions to answer first

There is more than one route back into compliance, and the right one depends almost entirely on three facts. Establish them before doing anything else, because the answers determine the procedure — and choosing the wrong procedure can make matters worse.

1. Was the income from the accounts reported and the tax paid?

   If yes, the problem is a pure reporting failure and the simplest route is likely available. If no, a broader procedure that addresses both the tax and the reports is needed.

2. Has the IRS already contacted you?

   Nearly every favourable procedure requires that you come forward before the IRS begins an examination or requests delinquent returns. Contact closes doors.

3. Could the conduct be characterised as willful?

   This is the question that most needs an independent view. Certifying non-willfulness when the facts suggest otherwise is itself a serious matter. If there is any real doubt, speak to a tax attorney before filing anything.

Delinquent FBAR submission procedures

The simplest route, aimed at people whose only failure was not filing the form.

Who it is for. A filer who did not file one or more required FBARs, who properly reported and paid tax on all income from the foreign accounts, who is not under civil examination or criminal investigation, and who has not already been contacted by the IRS about the delinquent reports.

What you do. File the missing FBARs electronically through the BSA E-Filing System, in the ordinary way, for each year involved. The form asks for the reason the report is late; select the applicable option or use the free-text field to explain. Explain the actual reason, plainly and without embellishment.

What the IRS has said. Its published position is that it will not impose a penalty for failing to file delinquent FBARs where the income was properly reported and tax paid, and where you have not previously been contacted about an income tax examination or a request for delinquent returns.

What it does not do. It resolves nothing about unreported income. If any income from the accounts was omitted from your returns, this is not your procedure.

Amending a filed FBAR

Where a report was filed but was wrong — an omitted account, a mistyped value, a wrong account number — file an amended FBAR rather than a second original.

• Mark the report as an amendment and supply the identifier of the original filing, so the two are linked.
• Complete the amended report in full, including the information that was already correct — it replaces the original rather than supplementing it.
• Explain the reason for the amendment where the form provides for it.
• Correct every affected year, not just the most recent one.

Filing a fresh original report for a year already filed creates duplicate records and, in practice, confusion that takes longer to untangle than the original error.

Streamlined Filing Compliance Procedures

Where income as well as reports went unreported, and the conduct was non-willful, the Streamlined Filing Compliance Procedures are the principal route. There are two versions.

Points to understand before contemplating this route:

• The certification is made under penalty of perjury and must set out the specific reasons for the failure — a narrative, not a form-filling exercise. A thin or evasive certification is a liability.
• Non-willfulness is a factual assertion. If the facts do not support it, this is the wrong procedure.
• Eligibility is conditional, including on not being under examination.
• The procedures can be withdrawn. The IRS has said explicitly that it may end them at any time, as it ended its earlier offshore voluntary disclosure programme in 2018. Availability today is not a guarantee of availability later.

Voluntary disclosure practice

Where conduct may have been willful, the streamlined procedures are not available and the relevant route is the IRS Criminal Investigation voluntary disclosure practice, initiated by a preliminary acceptance request on Form 14457.

In outline, this route involves a structured disclosure of the full facts, payment of tax, interest and substantial penalties, and in exchange a realistic prospect — though not a guarantee — of avoiding criminal prosecution. It is materially more expensive and more demanding than the streamlined procedures, and it is not something to attempt without representation.

Comparing the routes

Why “quiet” fixes are risky

A “quiet disclosure” means filing amended returns and back FBARs without entering any programme and without explanation, hoping the matter passes unnoticed. The IRS has stated for years that it identifies such filings and that they may be examined. The approach carries the drawbacks of both alternatives — it exposes the underlying facts without securing the protections a formal procedure offers.

Two related temptations are worth naming:

• Filing only the most recent year and hoping earlier years are forgotten. Each unfiled year has its own six-year assessment window, and a partial fix highlights the gap rather than hiding it.
• Closing the accounts and saying nothing. Closing an account does not remove the obligation to have reported it, and under FATCA the institution may already have reported the account to the U.S. authorities.

Where to go next

• Penalties — what these procedures are protecting you from.
• Reasonable cause — the defence to a non-willful penalty.
• How to file — the mechanics of submitting prior-year reports.
• Official sources — the IRS pages describing each procedure.