As an individual with financial interests abroad, you likely need to file a Report of Foreign Bank and Financial Accounts (FBAR). However, managing and filing FBAR can be complex and time-consuming.
Fortunately, taxpayers are allowed to assign the power of attorney to other individuals to handle their FBAR filing. While this can relieve a great deal of stress, assigning the power of attorney should not be done lightly. It gives an individual the power to act on your behalf but will not necessarily keep you from facing penalties if that power is misplaced. Thus, you should understand fully what assigning the power of attorney can do in your case.
For help determining whether assigning the power of attorney is right for you, Contact our FBAR tax attorneys at McCormick Tax Law today at (215) 630-0861.
Can the Power of Attorney for the FBAR Filing Be Assigned to Another Person?
Individuals who have a financial interest in or signature authority over foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year are required to file FBAR, an annual report with the Financial Crimes Enforcement Network (FinCEN). FBAR’s primary objective is to identify and prevent illicit financial activities, including money laundering and tax evasion. While filing the FBAR is an individual’s responsibility, the power of attorney over the filing can be assigned to another person.
Many people find the process of filing FBAR overwhelming, especially busy professionals who might not have the time to handle it themselves. As a result, assigning power of attorney for FBAR filing might seem like an attractive option. Despite the fact that FBAR regulations do not contain specific provisions on power of attorney for filing purposes, it is generally allowed under broader principles of the power of attorney law. Therefore, it is possible for individuals to appoint someone else to handle their FBAR filing on their behalf.
To assign power of attorney for FBAR filing, certain legal requirements must be met. These requirements vary depending on the jurisdiction and the specific circumstances of the case. Generally, granting power of attorney requires a written agreement signed by the grantor and the designated attorney-in-fact. The agreement should clearly outline the scope of authority granted and the duration of the power of attorney.
In the context of FBAR filing, the designated person would typically be authorized to access and review the necessary financial information and prepare and file the FBAR report on behalf of the grantor. Our international business tax attorneys can review your case to determine if assigning the power of attorney is in the best interest of your case. Whoever the assignee turns out to be, it is crucial that the designated person acts in the best interests of the grantor and complies with all applicable laws and regulations.
Why Would Someone Assign the Power of Attorney for an FBAR Filing?
If you have a complex financial situation or find it challenging to manage your own affairs, assigning power of attorney for FBAR filing can be highly advantageous. By doing so, you can delegate the responsibility of filing FBAR to someone you trust, who can take care of the process on your behalf. This can help to simplify the process, reduce the likelihood of errors, and ensure that your FBAR is filed accurately and on time. The following are a few ways that assigning power of attorney can benefit your case:
Time Efficiency
For those who lead busy lives and have limited time, it can be advantageous to grant power of attorney for FBAR filing. By entrusting this task to a reliable individual, they can devote their attention to their primary activities while guaranteeing adherence to FBAR regulations. This approach allows them to manage their time more effectively and ensures that the necessary compliance measures are taken care of.
FBAR Filing for Spouses and Family Members
When it comes to filing FBAR reports, couples might find it beneficial to opt for joint filing. In such cases, granting power of attorney to one spouse enables them to act on behalf of both, simplifying the filing process and minimizing the chances of any inconsistencies. This approach can prove to be a time-efficient and hassle-free method for couples who prefer to manage their FBAR reporting together.
Family members could also assign the power of attorney to other family members if that situation would be more convenient. For example, a resident of the United States has power of attorney for her elderly parents’ accounts in Canada. Even if she has never exercised the power of attorney, she is still required to file an FBAR if the power of attorney allows her to sign on behalf of the financial accounts. Whether or not the assignee has ever used her authority is irrelevant to the requirement of filing an FBAR. Once the power of attorney has been assigned, it is the responsibility of the assignee to ensure the FBAR is properly filed.
Are There Risks to Assigning the Power of Attorney for an FBAR Filing?
Assigning power of attorney for FBAR filing can be a complex and risky process, as it involves granting someone else the authority to act on your behalf in financial matters. This arrangement can potentially expose you to various risks, such as abuse of authority, breach of confidentiality, or non-compliance with legal reporting requirements. Penalties for failing to file the FBAR or filing late are not to be taken lightly, so the power of attorney should only be granted to those you have the utmost trust in.
To mitigate these risks, it is essential to carefully select a trustworthy and competent individual to act as your attorney-in-fact and to establish clear expectations and limitations within the power of attorney agreement. This might involve specifying the scope of the attorney’s authority, setting reporting deadlines, and providing for appropriate safeguards to protect your rights and interests.
Furthermore, seeking legal advice from a qualified attorney who specializes in tax and power of attorney law can help you navigate the legal complexities and ensure that your rights are fully protected throughout the process. With careful planning and diligent execution, assigning a power of attorney for FBAR filing can be a safe and effective way to manage your financial affairs.
What Are the Penalties for Failing to File the FBAR?
It is important to note that the IRS cautions that failure to submit an FBAR in a timely and accurate manner might lead to penalties, fines, and even criminal consequences for taxpayers. If a violation is determined to be unintentional, the penalty for each occurrence is generally capped at $10,000. It should be noted that this fine can be imposed for each separate violation.
In the event that the violation is found to be deliberate, the penalty will rise to either $100,000 or 50% of the account balance at the time of the violation, whichever is greater. Furthermore, if the IRS determines that an individual has intentionally committed a violation, they might face additional criminal sanctions.
Our FBAR Tax Attorneys Can Help You Plan Your Filing
For your free case evaluation, call our international tax lawyers today at McCormick Tax Law at (215) 630-0861.