The Foreign Account Transactions Compliance Act (FATCA) was fully implemented by the IRS on July 1, 2014. After four years of delays, the IRS is now requiring all foreign banks to report accounts held by U.S. taxpayers with an average balance of $10,000 during the tax year. And if you think there might be a place out there to hide your money without the IRS finding out, think again. Almost every country in the world is complying with FATCA; including Russia and China.

With FATCA implemented, it is more critical than ever for Americans with foreign bank accounts to file a Report of Foreign Bank Account (FBAR). Failure to file an FBAR by June 30 of the previous tax year can incur some heavy penalties:

• If it is determined that you willfully failed to file an FBAR, it can draw a fine of up to $500,000 and up to 10 years in prison.

• Even if the failure to file an FBAR is found to be non-willful (in other words, you did not mean to do it), you can still face a fine of up to $10,000.

Clearly, the IRS means business. This is essentially a zero tolerance policy against any U.S. taxpayer that fails to report a foreign bank account with a balance of $10,000 and above.

What if I Am Already Delinquent in Filing an FBAR?

There are quite a few Americans holding foreign bank accounts that have failed to file an FBAR. Many did not know it was required; others may have known that some kind of reporting was required, but assumed that there was little the IRS could do to find out. Either way, if you are in this situation, it is critical that you begin complying as soon as possible.

The IRS recently released updated delinquent FBAR submission procedures, and they have decided to give delinquent filers a break under certain conditions, including:

• You do not owe any taxes related to income derived from a foreign bank account.
• You are not currently under audit or being criminally investigated by the IRS.
• The IRS concerning a delinquent filing has not contacted you already.

If you meet these requirements, you may file your delinquent FBAR without penalty.

IRS procedures change regularly and there is no guarantee that they will be this lenient in the future. They are very serious about reigning in taxpayers hiding money abroad, but they also want to give those who were unaware of the filing requirements ample opportunity to comply. If you are believe you may have a foreign account that requires an FBAR filing, speak to a tax accountant immediately about the specific steps required to fix this situation.