Offshore account and foreign asset reporting in Richmond

If you live in the Richmond area and have an offshore account, you generally owe U.S. tax on what it earns. You may also owe separate federal reports on the account itself, and missing one can lead to large penalties. Whiteford Tax Defense reviews your filing history, finds any gaps and helps you correct them.

A gap in these reports is not, by itself, an accusation that you hid money. For people in the Richmond area, it can come from something ordinary:

• an account inherited from relatives overseas
• a pension earned during years of working abroad
• dual citizenship
• signing authority that came with a corporate job
• a move to Richmond from another country
• a family trust or a company stake abroad

The IRS calls conduct non-willful when it comes from negligence, inadvertence or mistake, or from a good-faith misunderstanding of the law. Whether your conduct was non-willful or willful shapes the options below.

The two main reports are the Report of Foreign Bank and Financial Accounts, known as the FBAR, and Form 8938. You file the FBAR (FinCEN Form 114) apart from your tax return once your foreign accounts together exceed $10,000 at any point in the year. Form 8938 goes with your tax return under the Foreign Account Tax Compliance Act, or FATCA, and has higher thresholds. Our pages on FBAR filing rules, FATCA thresholds and how offshore income is taxed cover the details.

Where Richmond FBAR penalty cases go

FBAR penalties arise under the Bank Secrecy Act, not the tax code, so the U.S. Tax Court cannot hear them. If the government sues a Richmond resident to collect one, it would ordinarily file in the Eastern District of Virginia. Appeals from there go to the Fourth Circuit, which sits in Richmond.

A case reaches court in stages:

1. An FBAR audit begins with written notice, IRS Letter 4265, mailed to your last known address. It gives the reason for the review and the years covered.
2. If the IRS proposes a penalty, you can take it to IRS Appeals first. The IRS generally has six years from an FBAR's due date to assess the penalty.
3. After assessment, you can pay the penalty and sue for a refund. Or you can defend the collection suit, which the government generally has two years from assessment to bring.

Our Richmond office reads the audit letter with you before any document goes back to the IRS. It also handles IRS Appeals and any tax litigation that follows.

The stakes turn on whether the IRS treats a violation as non-willful or willful. The dollar maximums are adjusted for inflation. Since January 2025, a non-willful penalty can reach $16,536 per report, and the IRS may reduce or waive it. A willful penalty can reach the greater of $165,353 or 50 percent of the account balance, for each account and year.

Two court decisions shape these cases. In Bittner v. United States (2023), the Supreme Court held that the non-willful penalty is counted per report, not per account. So a year's FBAR that left out several accounts supports one non-willful penalty, not one for each account. In United States v. Horowitz (2020), the Fourth Circuit held that recklessness is enough for the civil willful penalty.

What happened to offshore amnesty

No local "FATCA amnesty program" can give relief for a missed FBAR or Form 8938. Both are federal filings that the IRS enforces, so the question belongs with the IRS, not the City of Richmond or the Commonwealth. The IRS's own Offshore Voluntary Disclosure Program, often called offshore amnesty, closed on September 28, 2018.

The IRS now lists three ways back into compliance:

• the streamlined filing compliance procedures
• the delinquent international information return submission procedures
• the IRS Criminal Investigation voluntary disclosure practice

Which one fits depends on your reporting history and on whether the failure was willful. Acting before the IRS contacts you generally keeps more of them open and can reduce the penalties. Our international tax page explains how willfulness decides the choice.

The voluntary disclosure practice is for cases where a failure may have been willful. It begins with a preclearance request on Form 14457, which checks whether you are eligible. Timing decides eligibility: the IRS must receive your disclosure before it has done any of these things:

• started a civil examination or criminal investigation
• received information from a third party, such as an informant, another government agency or a John Doe summons, that alerts it to your noncompliance
• obtained information directly related to your noncompliance from a criminal enforcement action, for example a search warrant or grand jury subpoena

A John Doe summons is one that asks for records about taxpayers without naming them. A timely disclosure does not rule out prosecution, though it may lead the IRS not to recommend it. You must also pay the tax, interest and penalties in full, or through a full-pay installment agreement.

What to file for a trust or company abroad

Some Richmond families hold more abroad than an account: a foreign trust, or a stake in a company overseas. Creating or funding a foreign trust, or receiving a distribution from one, is generally reported on Form 3520. A U.S. owner of the trust must also make sure it files its own annual Form 3520-A. A stake in a foreign corporation or partnership may require Form 5471 or Form 8865, as our cross-border tax guide explains. Each form carries its own penalty, separate from the FBAR's.

You can still file late forms like these under the delinquent international information return submission procedures named above. Include a reasonable cause statement where one applies. The procedures are open only if you are not under IRS civil examination or criminal investigation, and the IRS has not contacted you about the missing forms. The IRS can still assess penalties, though for Forms 3520 and 3520-A it considers your statement first.