If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). See the ‘Who Must File an FBAR’ section below for additional criteria.
FBAR must be filed on or before June 30th. Need to file?? We can help! Call our office at 734-464-3660 to make your appointment today!
Who Must File an FBAR
United States persons are required to file an FBAR if:
- The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
- The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
Exceptions to the Reporting Requirement
Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
- Certain foreign financial accounts jointly owned by spouses;
- United States persons included in a consolidated FBAR;
- Correspondent/nostro accounts;
- Foreign financial accounts owned by a governmental entity;
- Foreign financial accounts owned by an international financial institution;
- IRA owners and beneficiaries;
- Participants in and beneficiaries of tax-qualified retirement plans;
- Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
- Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust); and
- Foreign financial accounts maintained on a United States military banking facility.
Review the FBAR instructions for more information on the reporting requirement and on the exceptions to the reporting requirement.
Reporting and Filing Information
A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.
The FBAR is a calendar year report and must be filed on or before June 30 of the year following the calendar year being reported. Effective July 1, 2013, the FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The FBAR is not filed with a federal tax return. A filing extension, granted by the IRS to file an income tax return, does not extend the time to file an FBAR. There is no provision to request an extension of time to file an FBAR.
A person required to file an FBAR who fails to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed $10,000 per violation for nonwillful violations that are not due to reasonable cause. For willful violations, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation. For guidance when circumstances such as natural disasters prevent the timely filing of an FBAR, see FinCEN guidance, FIN-2013-G002 (June 24, 2013).
U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938
Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. A chart providing a comparison of Form 8938 and FBAR requirements may be accessed on the IRS Foreign Account Tax Compliance Act web page.
Offshore Voluntary Disclosure Program
On Jan 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program following continued interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program offers people with unreported taxable income from offshore financial accounts or other foreign assets another opportunity to resolve their tax and information reporting obligations, including the FBAR. Although the program does not have a closing date, the IRS may end the program at a later time.
For non-resident U.S. taxpayers presenting a low compliance risk, the IRS implemented new streamlined filing compliance procedures effective September 1, 2012. The procedures are designed for non-resident U.S. citizens, including but not limited to dual citizens, residing outside the U.S. since January 1, 2009, and who have not filed U.S. income tax and information returns. The procedures require the filing of delinquent income tax and information returns for the past three years and the filing of delinquent FBARs for the past six years. For qualifying filers, reviews of submissions are expedited and the IRS will not assert penalties or pursue follow-up actions. When filing delinquent FBARs on the BSA E-File System, participants can annotate that the filing is in relation to either the Streamlined Filing Compliance Procedures or the OVDP. For more information go to Instructions for New Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers.
The following educational products have been developed for your use in learning more about why, when and where to file the FBAR: