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Report of Foreign Bank & Financial Accounts (FBAR)

Foreign Bank AccountsUnder the Bank Secrecy Act (BSA), enacted in 1970, the Report of Foreign Bank & Financial Accounts (FBAR) was created to combat tax evasion, money laundering and other financial fraud.

A US person who has a financial interest in or signature authority or other authority over any financial account (see below), including bank accounts, brokerage accounts, mutual funds, trusts, or other type of foreign financial accounts, with the aggregate of more than $10,000, may be required to report the account yearly to the Department of Treasury by e-filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR) June 30th of the following year.

Starting 2016, the deadline will be April 15th of following year (04-15-2017).  According to FinCEN on December 16, 2016, the new annual due date for filing Reports of Foreign Bank and Financial Accounts (FBAR) for foreign financial accounts is April 15.  This date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41 (the Act).  Specifically, section 2006(b) (11) of the Act changes the FBAR due date to April 15 to coincide with the Federal income tax filing season.  The Act also mandates a maximum six-month extension of the filing deadline.

To implement the statute with minimal burden to the public and FinCEN, FinCEN will grant filers failing to meet the FBAR annual due date of April 15 an automatic extension to October 15 each year.  Accordingly, specific requests for this extension are not required.  (Please note: The due date for FBAR filings for foreign financial accounts maintained during calendar year 2016 is April 18, 2017, consistent with the Federal income tax due date.) 

Effective July 1, 2013, the FBAR must be e-filed. The FBAR is not filed with the form 1040 regular federal tax return. When the IRS grants a filing extension for a taxpayer’s income tax return, it does not extend the time to file an FBAR.

Under FinCEN, United States person includes:

For FBAR purposes, a “foreign country” includes;

United States person includes

 

Foreign Financial Accounts

Foreign Assets subject to FBAR filing

  1. Financial (deposit and custodial) accounts held at foreign financial institutions.
  2. Financial accounts held at a foreign branch of a U.S. financial institution.
  3. Foreign financial accounts for which you have signature authority or other authority (subject to exceptions).
  4. Foreign stocks or securities held in financial accounts at foreign financial institutions (the account itself is subject to reporting, but the contents of the account do not have to be separately reported).
  5. Indirect interests in foreign financial assets through an entity if sufficient ownership or beneficial interest (i.e., a greater than 50%) in the entity.
  6. Foreign mutual funds.
  7. Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor (as to foreign accounts).
  8. Foreign-issued life insurance or annuity contract with a cash-value.

Foreign Assets NOT subject to FBAR filing

  1. Financial account held at a U.S. branch of a foreign financial institution.
  2. Foreign stock or securities not held in a financial account.
  3. Foreign partnership interests.
  4. Domestic mutual fund investing in foreign stocks and securities.
  5. Foreign hedge funds and foreign private equity funds.
  6. Foreign real estate held directly.
  7. Foreign real estate held through a foreign entity.
  8. Foreign currency held directly.
  9. Precious Metals held directly.
  10. Personal property, held directly, such as art, antiques, jewelry, cars and other collectibles.
  11. ‘Social Security’- type program benefits provided by a foreign government.

US persons with undisclosed foreign financial accounts

US taxpayers, who have undisclosed foreign financial accounts, Click here OVDP

Look-back period

The U.S. authorities have indicated that once they receive disclosure from a foreign financial institution with respect to its U.S. account holders, they will review all accounts back to August 1, 2008, including the closed ones. Therefore, closing an account in a foreign financial institution and transferring it to another one or another country is not a remedy to avoid FATCA or FBAR.

Who Must File an FBAR?

United States persons are required to file an FBAR if:

  1. The U.S. person had a financial interest in or signature authority over a financial account located outside of the U.S.; an,
  2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

Exceptions to the Reporting Requirement

Exceptions to the FBAR reporting requirements include, but may not be limited to:

  1. Certain foreign financial accounts jointly owned by spouses.
  2. U.S. persons included in a consolidated FBAR.
  3. Correspondent/Nostro accounts.
  4. Foreign financial accounts owned by a governmental entity.
  5. Foreign financial accounts owned by an international financial institution.
  6. Owners and beneficiaries of U.S. IRAs.
  7. Participants in and beneficiaries of tax-qualified retirement plans.
  8. Certain individuals with signature authority over, but no financial interest in, a foreign financial account.
  9. Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust).
  10. Foreign financial accounts maintained on a U.S. military banking facility.

Note. Review the FBAR instructions for more information on the reporting requirement and exceptions.

FBAR Penalties

Those required to file an FBAR who fail 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, plus criminal prosecution.

For complete guidance on circumstances that prevent timely FBAR filing, see FIN-2013-G002 (June 24, 2013).

U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938

Taxpayers having specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, and attach it to the from 1040. See FATCA

Offshore Voluntary Disclosure Program

If you are a US taxpayer with undisclosed foreign financial accounts and assets, including those held through undisclosed foreign entities, Click here OVDP

Delinquent FBAR Submission Procedures

Click here OVDP  lower portion

 

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