Fbars and Foreign Accounts
If you are a “U.S. Person” and 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, the Bank Secrecy Act may require you to report the account yearly to the U.S. Department of Treasury by filing the Report of Foreign Bank and Financial Accounts (FBAR) FinCEN Form 114 (which, as of July, 2013, has replaced the former FBAR Form TD F 90-22.11).
The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.
- Who Must File an FBAR
- Exceptions to the Reporting Requirement
- Reporting and Filing Information
- Electronic Filing for FBAR Forms – MANDATORY Beginning July 1, 2013
- Delinquent Filings
- U.S. Taxpayers (and) U.S. Taxpayers Holding Foreign Financial Assets New Reporting Requirements
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 means United States Citizens; United States 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 FBAR 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 and
- Foreign financial accounts maintained on a United States military banking facility
Look to the form’s instructions to determine eligibility for an exception, and to review exception requirements.
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. Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040, the “Other Information” section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder’s reporting obligation.
The FBAR is not filed with the filer’s federal income tax return. The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR. The FBAR is an annual report and must be received by the Department of the Treasury in Detroit, MI, on or before June 30th of the year following the calendar year being reported. Electronic Filing for FBAR Forms – MANDATORY Beginning July 1, 2013.
On June 29, 2011, FinCEN announced that all FinCEN forms must be filed electronically with certain exceptions. The FBAR was granted a general exemption from mandatory electronic filing through June 30, 2013. E-filing is a quick and secure way for individuals to file FBARs. Filers will receive an acknowledgement of each submission. Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.
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 will be open for an indefinite period until otherwise announced.
CAUTION: IT IS RECOMMENDED THAT DELINQUENT FILERS CONSULT WITH A QUALIFIED TAX PROFESSIONAL TO CONSIDER THE RAMIFICATIONS OF THEIR PARTICULAR CIRCUMSTANCES PRIOR TO CONTACTING IRS!
U.S. Taxpayers Holding Foreign Financial Assets New Reporting Requirements
Beginning with tax year 2011, 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. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file the FBAR. A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web page. This form, when required, is filed with the Taxpayer’s annual tax return, if an income tax return filing is required.