What Is the FBAR?
FBAR, also known as FinCEN Form 114, reports your foreign bank account information to the US Treasury. It’s not technically a tax form, as it doesn’t generate taxes or amounts due. Instead, FBAR is simply informational. The purpose of the form is to prevent US citizens from hiding offshore assets and income to avoid US taxation. The FBAR must be filed by individuals and companies who own, or have an interest in, foreign bank or financial accounts that exceed the reporting threshold for the given year.
Who Needs to File the FBAR?
1. Individual Foreign Bank Account Holders
US citizens or Resident Aliens (Greencard holders) will need to file an FBAR if they have at least one foreign financial account with a total balance exceeding $10,000 at any point during the calendar year. All US persons must file an FBAR if they meet these requirements, regardless of age or circumstance. Guardians of minors and those unable to file for themselves must file the FBAR on behalf of their charges.
2. Joint Foreign Bank Account Holders
Joint account holders will actually need to file separate FBAR forms if they have other separate accounts to report as well, but both persons will report the full balance of the joint account(s) on their respective forms. If a couple has only a jointly held account (no separate accounts), they may file a single FBAR form to report the account.
3. US Companies with Foreign Accounts
US companies must also follow the FBAR reporting requirements. A US company is considered to be any corporation, partnership, LLC, estate or trust that is formed or organized under the laws of the US.
If you own, or have an interest in, any foreign financial accounts, it’s important to stay on top of the financial information. If at any point during the calendar year, the account balance exceeds $10,000, you must file an FBAR form – so it’s very important to keep a close eye on these accounts in order to stay compliant.
Foreign financial accounts include things like:
- Mutual funds
- Whole-life insurance policies
- Any other accounts held with a financial institution
Foreign Bank Account Reporting Deadline
The Foreign Bank Account Reporting filing is due on April 18. However, if you’re unable to file your FBAR by the regular deadline, you’ll receive an automatic extension until June 15. You can also request a further extension to October 17.
Filing your FBAR in a timely manner is important.
- The penalty for a non-willful failure to file is $10,000 for each year that the required FBAR wasn’t filed
- The standard penalty for willful failure to file is $100,000 or 50% of the balance of the account at the time of the violation, whichever is higher, for each year that the required FBAR wasn’t filed
Worse still, recent court rulings have made it clear that the IRS is taking a per-account approach to FBAR penalties rather than per-form. Per-form would have meant that a single penalty would apply for each form that wasn’t filed per year. Instead, a per-account policy means that expats may be penalized for each separate account that they fail to disclose.
For example, let’s say a person failed to disclose their three foreign accounts for four required years. Because the IRS is taking a per-account approach, that person could be faced with a $10,000 penalty for all three accounts over the four delinquent years, adding up to a total penalty of $80,000 (3 x $10,000 x 4 = $120,000).
Needless to say, this makes it more important than ever that US expat remain compliant with FBAR filing requirements.
Note: if you need to file an FBAR that is past due, you may be able to avoid the penalty if you have reasonable cause for failing to file and you are up to date on your US tax returns.
How to File the FBAR
The FBAR must be filed electronically through the BSA e-Filing System. In order to complete the form, you’ll need the following information:
- Your name, Social Security Number (SSN) or ITIN and address
- The names, addresses and SNN/ITIN of all joint owners of the account
- The names and addresses of your foreign bank(s)
- The type of account – bank, securities or other
- Your foreign bank account number for each account
- The maximum balance of your foreign financial account during the year, converted to US dollars
How Should I Proceed with FBAR Filing?
Consulting with a tax professional is always recommended when it comes to US expat taxes and FBAR filings, as both can be quite complex! In any instance, you should first carefully review your foreign bank account information to see if any warrant an FBAR filing. If so, gather all the necessary information and head to the BSA e-Filing website, where your FBARs must be electronically submitted. Head over to our blog for more details about filing your FBARs.
This post was written by David McKeegan, co-founder of Greenback Expat Tax Services. Greenback specializes in the preparation of US expat taxes for Americans living abroad. Greenback offers straightforward pricing, a simple, hassle-free process, and CPAs and IRS Enrolled Agents who have extensive experience in the field of expat tax preparation. For more information about FBAR, expat taxes or Greenback, please visit greenbacktaxservices.com.