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Foreign Bank Account Reporting: FBAR Filing, Deadlines, and Forms

Categories: Finance,Latest News

If you are an American national, you probably know that you must file a tax return in the United States wherever you live abroad. However, you may not know that you must also file an FBAR. This guide will tell you exactly what this is and how to do it.

an american flag in the background with an IRS paper in the foreground representing fbar filing for expats living abroad

What is an FBAR?

An FBAR (Report of Foreign Bank and Financial Accounts) provides the U.S. government with information about foreign financial accounts held by U.S. taxpayers. The form is used to report foreign financial accounts to the Financial Crimes Enforcement Network (FinCEN), a department of the Treasury Bureau. This is whether you are a U.S. citizen, Green Card holder, resident alien, or dual citizen.

Who files an FBAR?

U.S. taxpayers must file an FBAR if they hold financial interests in or have signature authority over foreign financial accounts (business and personal) with a total value of over $10,000 at any point in the calendar year (highest balance). Keep in mind that the $10,000 is a combined balance. So, for example, if someone has 2 bank accounts, account 1 has $6,000, and the second account has $5,000 as the highest balance throughout the year as the sum exceeds $10,000, the FBAR needs to submit.

Why you need to do this

FBAR filing aims to report foreign financial accounts exceeding a certain threshold to the U.S. government. The aim is to help the U.S. government combat financial crimes by U.S. taxpayers who hold assets in international financial institutions or other offshore accounts.

an image of an IRS cheque

What do you have to do?

Complete the FBAR on Financial Crimes Enforcement Network (FinCEN) Form 114.

FinCEN Form 114 should be filed electronically (it is important to note that you don’t file with your usual tax return). For this, the team at Blue Umbrella can help.

Report the highest value of currency or non-monetary assets in the account during the calendar year. Use account statements if they show the highest account value during the year. Calculate this in your account’s currency. To determine the exchange rate, use the Treasury Bureau of the Fiscal Service exchange rate on the last day of the year.

If you wish to file an FBAR by paper, call FinCEN’s Resource Center and ask permission. If approved, the FinCen form will be sent by post. After completion, mail to the IRS using the address given. A printed FinCEN form 114 is not allowed and will not be accepted. It is also possible to have someone file the FBAR for you. You need to use FinCEN Report 114a, Record of Authorization to Electronically File FBARs, to give them authorization. No need to send it when filing/posting your FBAR, but keep it in case requested.

Keep the details of what you submitted for five years, including the name on the account, the account number, the name of the foreign bank, the type of account, and the max value in an account at any time.

What to include

Along with foreign bank account balances, you must also report the following:

  • Financial accounts at foreign financial institutions containing foreign stocks or securities (the account itself must be reported, but the contents need not be reported)
  • An account at a foreign branch of a U.S. bank
  • Mutual funds from foreign countries
  • Annuity or life insurance contracts with a cash value issued by a foreign entity

What not to include

Some types of accounts do not need to be reported on an FBAR form, including:

  • Foreign financial accounts owned by a governmental entity
  • Foreign financial accounts owned by an international financial institution
  • Foreign financial accounts owned by a tax-qualified (employee) retirement plan or individual retirement plan
  • Foreign financial accounts owned by a trust of which you are a beneficiary but not an owner
  • Foreign financial accounts held in a U.S. military banking facility
  • If you are named on a consolidated FBAR filed by a greater than 50% owner
  • Correspondent/Nostro Accounts (accounts used solely for bank-to-bank settlements)

What to do about joint accounts?

If you hold only joint accounts with someone, they can also sign FinCEN Form 114a, which allows you to file the FBAR on their/your behalf.

If they have accounts you’re not named on and it meets the criteria for reporting, then they would file their FBAR separately. When filing separately, include the value of the joint accounts on your FBAR form. For example, if two account holders each own 50% of an account with a total value of $20,000, they would need to report their share ($10,000) on their respective FBAR forms.

What happens if I don’t file when I should?

You must file your FBAR because failing to do so can result in severe penalties. A non-willful failure to file can result in a fine of $10,000, while a willful failure to file can result in a fine of $100,000 or 50% of your account balance.

Criminal violations of FBAR rules can lead to fines and/or five years in prison for those who fail to file an FBAR when required. However, if an FBAR is filed late and the IRS finds reasonable cause for the late filing, the IRS will not penalize the individual.

What to do if you realize you need to file one but haven’t?

No need to panic just yet. Millions of Americans have past-due FBAR forms, and the IRS has created amnesty programs to help you. The Streamlined Filing Procedures or Delinquent FBAR Submission Procedures will be the most helpful. This program is available to U.S. citizens living in the U.S. and abroad, and all who still need to file due to a lack of knowledge of their obligations are eligible.

When is the deadline to file it?

April 15th is the deadline for filing FBARs, but an automatic extension is granted until October 15th.

To conclude, it is crucial to file an FBAR if you have foreign financial accounts exceeding $10,000. To comply with the law and avoid penalties, a tax professional is recommended to assist in the filing process of FBARs. If you want, Blue Umbrella can do it as part of your tax return. Send them an email to: [email protected]. Or visit their website.