When you file your first FBAR, are you announcing you have committed a crime? According to attorney Robert W. Wood, an FBAR filing is certainly not an admission of any criminal activity, but many people worry they will get into trouble over their first filing.
Should you file FBAR? “Surely the answer is yes,” says Wood. “After all, you can’t ignore the rules without risking civil penalties and even criminal charges. However, if you file currently and not for the past, aren’t you asking for trouble?”
When you start to file FBARs, Wood reports, it could be seen as a quiet disclosure – a practice discouraged by the IRS. But what can you do? You’ve got to file, or risk penalties. According to Wood, some people file prospectively while not addressing past filings (or non-filings). Some people choose to file something like three to six years of past-due filings hoping not to draw too much attention, while others may include a letter that says they didn’t know of the need for filing and therefore could penalties be waived.
So what should you do? Wood states, “In general, starting to file FBARs makes sense even if you do not try to correct the past with late FBARs. The IRS could assess penalties for your past failure to file FBARs, but you could contest the penalties.” If you don’t owe any extra taxes, past FBARs filed with a letter will probably be good enough to make a clean slate, says Wood. What do you think? Are you worried about filing your first FBAR?