Note: When calculating the highest balance during the year for FBAR purposes, use the exchange rate at the end of the year.
Note: IRS considers annuities, IRA-type retirement accounts and cash value life insurance products to be foreign accounts.
- 1. The penalty amount is raised to 25% (up from 20%) of the highest aggregate amount in all foreign accounts from 2003 to 2010. Some taxpayers will be eligible for 5% or 12.5% penalties.
- 2. In general, the 5% penalty involves accounts which were not opened by the taxpayer; the taxpayer had minimal contact with the account; no more than $1,000 per year has been withdrawn; and there is no untaxed principal in the account. Also, non-residents who filed and paid taxes in the foreign country of residence and who earned less than $10,000 a year in U.S. source income may be eligible for the 5% penalty.
- 3. For those who do not qualify for the 5% penalty, the 12.5% penalty applies when the aggregate balance of all foreign accounts from 2003 through 2010 never exceeded $75,000.
- 4. Participants must file returns (or amend returns), pay back-taxes and interest for up to eight years as well as pay accuracy-related and/or delinquency penalties, by August 31, 2011. Under the first initiative, the period was six years.
- 5. A major exception: lf all foreign income has been reported but FBARs were not filed, there is no penalty for filing delinquent FBARs. This exception applies Form 3520 reporting failures of required foreign trust distributions, gifts and inheritances.