The “offshore accounts” is usually referred to those account holders who are trying to dodge tax responsibilities. Especially after the Panama Papers, many observers are quick to assume the worst when someone holds assets outside of the United States.

Clearing the FBAR
For a U.S. citizen or resident having a financial interest in a non-U.S. bank or securities account, he or she must report it on FinCEN Form 114, also known as the FBAR. The only exception is for that account where the aggregate value of their foreign accounts doesn’t exceed $10,000 during one year. This rule also applies to U.S. entities, partnerships, corporations, estates, limited liability companies and trusts. If someone maintained foreign financial accounts, which are than $10,000 at any time in the calendar year, he must mention this fact on Form 1040, Schedule B of his income tax return.

Failing to file a Foreign Bank Account Report (FBAR) can carry a civil penalty of $10,000 for each non-willful violation. If violation is found to be willful, the penalty is the greater of $100,000 or 50 percent of the amount in the account.

There are precise terms that must be fulfilled to file FBAR’s.

General
Any U.S. person, whether citizen or resident foreigner, should file an FBAR if:
1. The U.S. taxpayer has a financial interest over at least one foreign account.
2. This foreign account is more than $10,000 at any time during the calendar year.

1. Delinquent FBAR Submission.
U.S. taxpayers who:
(i) Have not been communicated by the IRS about non-submission,
(ii) Are not under criminal analysis by the IRS.
(iii) Have not consulted the IRS about their inability of submission.

2. Streamlined Offshore Procedure
This Procedure contains two subcategories domestic and foreign.
To be eligible the taxpayer:
(i) Must be a citizen or permanent resident of the United States.
(ii) Must meet the non-residence requirement.

3. Offshore Voluntary Disclosure Program.
The program is planned to assist taxpayers resolve penalty obligations and defend them from criminal charge. If a taxpayer joins this program, the IRS will recommend that the taxpayer not be subjected to criminal trial. Taxpayers must voluntarily disclose the most recent 8 years period of delinquent filing.

Specified Foreign Assets
U.S. citizens and residents who hold specified foreign assets must mention them to the IRS on Form 8938. Nonresident aliens must also file Form 8938 if they hold specified foreign assets.

Transfers and Transactions
If a U.S. person or entity transfers property to a foreign corporation, the transferor must file Form 926, “Return by a U.S. Transferor of Property to a Foreign Corporation.”

If the transaction is with a foreign trust, one must report any transfers, whether he is donor or recipient. In this case, he will use Form 3520, “Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.”