Report of Foreign Bank & Financial Accounts (FBAR)
Disclaimer: The following FBAR material is intended for general information only and not legal or tax advice.
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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.
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 considering 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 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.
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 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. Foreign Assets Subject to FBAR
What is the 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.
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 VDP.
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