The Delinquent FBAR Submission Procedures (FBAR only) are designed for individuals who have failed to file one or more FBARs but do not have any tax noncompliance associated with that failure. This program has been used to both file delinquent FBARs and to make corrections to FBARs that were imperfectly filed. There are no penalties associated with this program (unlike the 5% penalty that has to be paid with the submission of a streamlined disclosure).

This program includes six years of FBARs based on the most recently passed FBAR deadline. 

When determining which FBAR years to include with the disclosure, keep in mind that FBARs have a strict six year statute of limitations.  This means that six years after the due date of your FBAR, the statute of limitations has passed and it would take something extraordinary for an FBAR from one of these earlier years to become an issue. Also keep in mind that during 2015, as part of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41, the FBAR deadline was changed from June 30th to April 15th (with an automatic extension granted to October 15th). This means that there is a period of time each year wherein these six year disclosures are only going to include 5 years (at least until 2022).

This program also includes an explanation statement that is included on the cover page of each of the FBARs. This explanation statement is much more difficult to compose than you would expect as there is a hard cap of 750 characters. This is an incredibly limited amount of space to attempt to sufficiently explain the reasons that your FBARs were unfiled or weren’t complete and accurate when they were filed.

I have not had any of the FBAR only disclosures that I have been involved in challenged by the IRS. This does not mean that they won’t begin to scrutinize these disclosures more closely in the future, potentially reaching out with additional queries, but we do have a non-negligible amount of data that suggests the IRS is more interested in encouraging future FBAR compliance for cases in which there has been no tax non-compliance.

We have had a large variety of different reasons that clients have needed to utilize the FBAR only program. 

Some of these reasons include: 

being entirely unaware of the existence of the FBAR filing requirements; 

being unaware of the fact that signatory authority accounts need to be included on their FBARs;

being unaware of the existence of signatory authority accounts (generally relatives adding their names to accounts or providing them with power of attorney over accounts);

being unaware of accounts that were opened on your behalf by family members while you were a minor, 

being unaware of the fact that accounts held by corporations that they own or operate need to be included (and included as accounts that you have a financial interest in when you own more than 50% of the corporation);

and people being unaware of the need to include retirement accounts or life insurance accounts on their FBARs, 

This program doesn’t require reasonable cause or a non-willful certification, and when utilizing this program you aren’t even afforded a meaningful opportunity to explain your circumstances. These factors likely contribute to the IRS choosing few to none of these submissions for a substantive review (I’m sure some have been reviewed and penalized, I’m just personally unaware of this happening to any clients).