When people in the United States have assets or accounts abroad and they meet certain criteria, they are required to file annual reports with the federal government. Known as a Report of Foreign Bank and Financial Accounts (FBAR), any failure to comply with this process can lead to serious consequences. One of the potential issues you might run into is an audit.
FBAR audits in Baltimore can happen for a number of reasons, even when you are fully compliant. The good news is that you do not have to deal with the government on your own. Let a dedicated FBAR lawyer serve as your advocate while you navigate this process.
The FBAR is a mandatory filing for U.S. persons with financial interests in foreign accounts that exceed $10,000 in aggregate during any point in a calendar year. There is no need to file an FBAR report for accounts that do not meet these thresholds. However, the federal government could conduct an investigation and even require a Baltimore FBAR audit of eligible accounts for the following reasons:
The IRS closely monitors taxpayers with a history of failing to file FBARs or properly report foreign accounts. If you have previously been audited, penalized, or warned about noncompliance, your likelihood of facing an FBAR audit increases dramatically.
Even an accidental omission of important documents like FinCEN Form 114 can be flagged. Taxpayers who meet the reporting threshold but do not submit the required forms may be subject to audits, particularly in cases where there are signs within tax returns that an offshore account exists.
Like many IRS enforcement efforts, some FBAR audits are the result of statistical sampling or random selection. While less common, a randomly selected taxpayer may still face extensive scrutiny of their offshore holdings and income sources.
Discrepancies between reported income and available financial data can alert the IRS of a potential foreign account. Any hint of concealed income or omitted assets may result in an audit, especially when tied to high-risk jurisdictions or large transfers.
Not all Baltimore FBAR audits are exactly the same. There are times when federal authorities are only seeking additional documentation regarding your accounts. They might be interested in other information related to specific transactions as well. Of course, there are also times when providing this documentation is not enough to satisfy their investigation.
Some taxpayers will receive a document known as Letter 4265, which is informally known as an FBAR Appointment Letter. This document notifies taxpayers about scheduling an examination as part of the audit.
The length of the audit can also vary dramatically. Most of the time, these audits will take several months to complete, whether or not an in-person examination is requested. While it is worth noting that there is a 180-day deadline to complete these audits, the reality is that there are many ways for the government to extend this deadline. If additional documents or details are requested from you, it is common for an extension to be granted.
FBAR audits in Baltimore can be intimidating, but it is often possible to address any concerns from federal investigators and resolve these issues without litigation. It can be especially helpful to have an attorney on your side who understands your rights and has a track record of handling these audits directly. Reach out as soon as possible to schedule a confidential consultation to learn how we can help.