If you have to ask whether something is FUBAR or not, then it probably is.  There are many reasons that I commonly refer to the FBAR form as filing a FUBAR.  If you don’t know what FUBAR means look it up on urban dictionary.  The FBAR is just about the strangest form you will ever come across.  For starters it is not administered by the IRS; it is instead administered and filed with the Department of Treasury.  All the normal procedures are thrown out the window since the Internal Revenue Service isn’t involved.

Perhaps the lamest thing about the form is the due date.  It is due June 30th each year, for the 2012 year it works out to June 28th, 2013.  Unlike basically every IRS form, there are no extensions available.  And unlike everything you file with the IRS, you can’t just put it in the mail on June 28th. The Department of Treasury needs to have received it by June 28th.

The FBAR has existed for a long time, but it wasn’t until recently that the enforcement and penalties for non-filing have been increased.  There is no tax due on an FBAR, but it exposes accounts where people  maybe have been avoiding US taxes.  The penalty for someone who fails to properly file an FBAR is $10,000 per year.  A willful failure to properly file finds you with a $100,000 or 50% of the account balance penalty, whichever is greater.  Let that sink in. If they think you willfully failed to file, they can penalize you $100,000 or 50% of the account balance, whichever is greater.  Yikes! That should be sufficient motivation to file.

Of course the instructions do say that “If there is reasonable cause for the failure and the balance in the account is properly reported, no penalty will be imposed.”  That is about all it says about avoiding penalties and I wouldn’t really want to use that one sentence to try and decipher what counts as “reasonable cause” when facing a minimum $10,000 penalty.  The bottom line is that the way to avoid penalties is to timely and accurately file the FBAR.

You need to file a FBAR if you are a United States Citizen and have a foreign account with more than $10,000 in it at any point during the year.  Also, if you have signature authority over a relative’s account or business bank account, that will also require you to file the FBAR.  The Department of Treasury is casting a wide net here hoping to catch a few big fish that have been hiding assets overseas, and while they caught a few big fish and collected some taxes, they are also catching a lot of minnows that haven’t been avoiding any taxes.