Report of Foreign Bank & Financial Accounts (FBAR)
Disclaimer: The following is intended for general information only and not legal or tax advice.
Zaher Fallahi, Tax Attorney, CPA, represents taxpayers nationwide with IRS audit, offshore accounts; OVDP), streamlined procedures, delinquent FBARs and foreign gifts. For an Attorney-Client Privileged Consultation, Call Nationwide Toll Free 1-(877) 687-7558.
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FBAR Background Information. Under the 1970 Bank Secrecy Act (BSA), the Report of Foreign Bank & Financial Accounts (FBAR) was created to combat tax evasion, money laundering and other financial fraud.
What is FBAR? FBAR is the Report of Foreign Bank and Financial Accounts (FBAR), by a United States (“U.S.”) person to the Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) on Form 114, disclosing a financial interest in or signature authority over a foreign financial account.
Who Must File an FBAR? A U.S. person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the accounts exceeds $10,000 at any time during the calendar year.
Who is a U.S. Person? U.S. person refers to U.S. citizens; U.S. residents; legal entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the U.S. or under the laws of the U.S.; and trusts or estates formed under the U.S. laws.
Financial Interest. A U.S. person has a financial interest in a foreign financial account for which:
1- the U.S. person is the owner of record or holder of legal title, regardless of whether the account is maintained for the benefit of the U.S. person or someone else; or
- the owner of record or holder of legal title is one of the following:
- An agent, nominee, attorney, or a person acting in some other capacity on behalf of the United States person with respect to the account;
- A corporation in which the United States person owns directly or indirectly:
(i) more than 50% of the total value of shares of stock or
(ii) more than 50% of the voting power of all shares of stock;
- 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;
- 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;
- 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
- 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.
Signature Authority. Signature authority is the authority of an individual to control the disposition of assets held in a foreign financial account by direct communication to the bank or other financial institution that maintains the financial account.
United States. For FBAR purposes, the U.S 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 U.S. Virgin Islands), and the Indian lands as defined in the Indian Gaming Regulatory Act. References to the laws of the U.S. include the laws of the U.S. federal government and the laws of all places listed in this definition.
What is a Financial Account? A financial account includes, but is not limited to, checking, deposit, savings, demand, time deposit, securities, brokerage, or other accounts maintained with 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 available to the general public with a regular net asset value determination and regular redemptions.
What is a “Foreign Financial Account”? A foreign financial account is a financial account located outside of the U.S.
What is FBAR filing Deadline? The FBAR must be received by FinCEN on or before April 15th of the year immediately following the reporting calendar year. FinCEN will grant filers failing to meet the FBAR annual due date of April 15th an automatic extension to October 15th each year without specific requests for it.
Foreign Assets subject to FBAR filing (partial list)
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 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).
4- Indirect interests in foreign financial assets through an entity if sufficient ownership or beneficial interest (i.e., a greater than 50%) in the entity.
5- Foreign mutual funds.
6- Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trusts for which you are the grantor (as to foreign accounts).
7- Foreign-issued life insurance or annuity contract with a cash-value.
8- Certain cryptos.
Foreign Assets NOT subject to FBAR Filing (partial list)
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 funds 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.
12- Certain cryptos not held in financial institutions.
1- 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 non-willful violations that are not due to reasonable cause.
2- 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.
3- U.S. taxpayer with non-filed FBARs, Click here OVDP.
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Zaher Fallahi, Tax Attorney, CPA, licensed in California and Washington D. C., represents taxpayers nationwide with IRS audit, offshore voluntary disclosure program (OVDP), streamlined procedures, delinquent FBAR filing, delinquent international information return filing and foreign gifts. For an Attorney-Client Privileged Consultation, Call:
(877) 687-7558 Nationwide Toll Free
(310) 719-1040 (Los Angeles)
(714) 546-4272 (Orange County)