Dropdown button for navigation mobile view

FBAR – Electronic Filing Instructions

Posted by: Zaher Fallahi
Posted On: Mar 28, 2014

The following instructions apply only to the electronic filing of the Report of Foreign Bank and Financial Accounts (FBAR), FinCEN Form 114, through the Financial Crimes Enforcement Network’s (FinCEN’s) BSA E-Filing System. Unless specifically mentioned in the text, these instructions do not apply to any other current or prior Bank Secrecy Act (BSA) reports. Also, the instructions or requirements for any prior or current BSA reports, including paper versions of the FBAR, do not apply to FBARs filed electronically under these filing requirements and instructions.

 

 

General Instructions

Purpose. FinCEN Form 114, Report of Foreign Bank and Financial Accounts, is used to report a financial interest in or signature authority over a foreign financial account. The FBAR must be received by the Department of the Treasury on or before June 30th of the year immediately following the calendar year being reported. The June 30 filing date may not be extended.

 

Who Must File an FBAR?

A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. See General Definitions, to determine who is a United States person.

 

General Definitions:

Financial Account. A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).

 

Joint Account. A financial account type listed above owned jointly by two or more persons.

 

Foreign Financial Account. A foreign financial account is a financial account located outside of the United States. For example, an account maintained with a branch of a United States bank that is physically located outside of the United States is a foreign financial account. An account maintained with a branch of a foreign bank that is physically located in the United States is not a foreign financial account. 5

 

Financial Interest. A United States person has a financial interest in a foreign financial account for which:

 

1. the United States person is the owner of record or holder of legal title, regardless of whether the account is maintained for the benefit of the United States person or for the benefit of another person; or

 

2. the owner of record or holder of legal title is one of the following:

 

a. An agent, nominee, attorney, or a person acting in some other capacity on behalf

of the United States person with respect to the account;

 

b. A corporation in which the United States person owns directly or indirectly: (i)

more than 50 percent of the total value of shares of stock or (ii) more than 50

percent of the voting power of all shares of stock;

 

c. A partnership in which the United States person owns directly or indirectly: (i)

an interest in more than 50 percent of the partnership’s profits (e.g., distributive

share of partnership income taking into account any special allocation

agreement) or (ii) an interest in more than 50 percent of the partnership capital;

 

d. A trust of which the United States person: (i) is the trust grantor and (ii) has an

ownership interest in the trust for United States federal tax purposes. See 26

U.S.C. sections 671-679 to determine if a grantor has an ownership interest in a

trust;

 

e. A trust in which the United States person has a greater than 50 percent present

beneficial interest in the assets or income of the trust for the calendar year; or

 

f. Any other entity in which the United States person owns directly or indirectly

more than 50 percent of the voting power, total value of equity interest or assets,

or interest in profits.

 

Person. A person means an individual and legal entities including, but not limited to, a limited liability company, corporation, partnership, trust, and estate.

Signature Authority. Signature authority is the authority of an individual (alone or in

conjunction with another individual) to control the disposition of assets held in a foreign

financial account by direct communication (whether in writing or otherwise) to the bank or other financial institution that maintains the financial account. See Exceptions, Signature Authority.

 

United States. For FBAR purposes, the United States includes the States, the District of

Columbia, all United States territories and possessions (e.g., American Samoa, the

Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the United States Virgin Islands), and the Indian lands as defined in the Indian Gaming Regulatory Act. References to the laws of the United States include the laws of the United States federal government and the laws of all places listed in this definition.

 

United States Person. United States person means United States citizens; United States

residents; entities, including but not limited to, corporations, partnerships, or limited liability 6 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.

 

Note. The federal tax treatment of an entity does not determine whether the entity has an FBAR filing requirement. For example, an entity that is disregarded for purposes of Title 26 of the United States Code must file an FBAR, if otherwise required to do so. Similarly, a trust for which the trust income, deductions, or credits are taken into account by another person for purposes of Title 26 of the United States Code must file an FBAR, if otherwise required to do so United States Resident. A United States resident is an alien residing in the United States. To determine if the filer is a resident of the United States apply the residency tests in 26 U.S.C. section 7701(b). When applying the residency tests, use the definition of United States in these instructions.

 

Exceptions:

Certain Accounts Jointly Owned by Spouses. The spouse of an individual who files an FBAR is not required to file a separate FBAR if the following conditions are met: (1) all the financial accounts that the non-filing spouse is required to report are jointly owned with the filing spouse; 2) the filing spouse reports the jointly owned accounts on a timely filed FBAR electronically signed; and (3) the filers have completed and signed Form 114a, “Record of Authorization to Electronically File FBAR’s” (maintained with the filers’ records). Otherwise, both spouses are required to file separate FBARs, and each spouse must report the entire value of the jointly owned accounts. See instructions for specific items, Part III, Items 25-33.

 

Consolidated FBAR. If a United States person that is an entity is named in a consolidated FBAR filed by a greater than 50 percent owner, such entity is not required to file a separate FBAR. See Explanations for Specific Items, Part V.

 

Correspondent/Nostro Account. Correspondent or nostro accounts (which are maintained by banks and used solely for bank-to-bank settlements) are not required to be reported.

 

Governmental Entity. A foreign financial account of any governmental entity of the United States (as defined above) is not required to be reported by any person. For purposes of this form, governmental entity includes a college or university that is an agency of, an instrumentality of, owned by, or operated by a governmental entity. For purposes of this form, governmental entity also includes an employee retirement or welfare benefit plan of a governmental entity.

 

International Financial Institution. A foreign financial account of any international financial institution (if the United States government is a member) is not required to be reported by any person.

 

IRA Owners and Beneficiaries. An owner or beneficiary of an IRA is not required to report a foreign financial account held in the IRA.

 

Participants in and Beneficiaries of Tax-Qualified Retirement Plans. A participant in or beneficiary of a retirement plan described in Internal Revenue Code section 401(a), 403(a), or 403(b) is not required to report a foreign financial account held by or on behalf of the retirement plan.

 

Signature Authority. Individuals who have signature authority over, but no financial interest in, a foreign financial account are not required to report the account in the following situations:

 

1. An officer or employee of a bank that is examined by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit

Insurance Corporation, the Office of Thrift Supervision, or the National Credit Union

Administration is not required to report signature authority over a foreign financial

account owned or maintained by the bank.

 

2. An officer or employee of a financial institution that is registered with and examined by the Securities and Exchange Commission or Commodity Futures Trading Commission is not required to report signature authority over a foreign financial account owned or

maintained by the financial institution.

 

3. An officer or employee of an Authorized Service Provider is not required to report

signature authority over a foreign financial account that is owned or maintained by an

investment company that is registered with the Securities and Exchange Commission.

Authorized Service Provider means an entity that is registered with and examined by

the Securities and Exchange Commission and provides services to an investment

company registered under the Investment Company Act of 1940.

 

4. An officer or employee of an entity that has a class of equity securities listed (or

American depository receipts listed) on any United States national securities exchange is

not required to report signature authority over a foreign financial account of such entity.

 

5. An officer or employee of a United States subsidiary is not required to report signature

authority over a foreign financial account of the subsidiary if its United States parent has

a class of equity securities listed on any United States national securities exchange and

the subsidiary is included in a consolidated FBAR report of the United States parent.

 

6. An officer or employee of an entity that has a class of equity securities registered (or

American depository receipts in respect of equity securities registered) under section

12(g) of the Securities Exchange Act is not required to report signature authority over a

foreign financial account of such entity.

Trust Beneficiaries. A trust beneficiary with a financial interest described in section (2)(e) of the financial interest definition is not required to report the trust’s foreign financial accounts on an FBAR if the trust, trustee of the trust, or agent of the trust: (1) is a United States person and (2) files an FBAR disclosing the trust’s foreign financial accounts.

 

United States Military Banking Facility. A financial account maintained with a financial

institution located on a United States military installation is not required to be reported, even if that military installation is outside of the United States.

 

For assistance with any tax matters, including FBAR filing, the IRS representation and disclosing your unreported foreign bank accounts, you may contact Zaher Fallahi, Tax Attorney, CPA, at (310) 719-1040 (Los Angeles) or (714) 546-4272 (Orange County), or e-mail to taxattorney@zfcpa.com