FBAR – An Introduction to IRS Foreign Bank Account Reporting
Not Sure What Goes on an FBAR, or How/Where To File the FBAR?
The IRS Rules for FBAR Reporting are tough. FBAR is the Report of Foreign Bank and Financial Account Form (aka FinCEN 114). The reason why it is important to understand the basics of the FBAR, is because the penalties for non filing the FBAR — or filing them late — are rough.
Golding & Golding, A PLC – FBAR Attorneys
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What is an FBAR?
An FBAR is the Foreign Bank Account Reporting form (aka FinCEN 114). It is electronically filed annually with the Department of the Treasury online.
Before 2016, the FBAR form had to be filed no later than June 30th of the current tax year in order to report the accounts for the prior tax year (File in 2018 to report the 2017 maximum account balances).
The law has changed, and FBARs are due in April, with an automatic extension through the October filing extension date.
Is it more than $10,000 per account, or in Total?
An FBAR is required to be filed when a person or business (explained below) has an annual aggregate total of foreign accounts that exceeds $10,000 on any day throughout the year. It does not matter if all that money is in one account or if a person had 11 accounts with $1000.00 in each account. Once your overseas foreign accounts exceed $10,000, it is now time to report all of the foreign accounts.
You are required to report the maximum balance throughout the year. If you do not have the maximum balance available, you can mark the box that notes the Max balance is unavailable — or alternatively you can use the best value you have, and then note that information on the FBAR.
Who Has to File an FBAR
The form must be filed by U.S. persons. In order to confuse you, the IRS does not define US person to mean the same as U.S. Citizen. A U.S. person (individual) typically falls into three categories: U.S. Citizen, Legal Permanent Resident, Foreign National who meets the IRS Substantial Presence Test (typically individuals on H-1B Visa, L-1 Visas, and E-2 Visas – although it is not a requirement to have one of these Visas).
If you are a US person, then you move onto step two.
The threshold requirements are relatively simple. On any day of the year, if you aggregated (totaled) the maximum balances of all of your foreign accounts, does that total amount exceed 10,000? If it does, then you have to file the form. The most important thing to remember is you do not need to have more than $10,000 in each account; rather, it is an annual aggregate total of the maximum balances of all the accounts.
When is the FBAR Due?
The FBAR is due in April, the same time your taxes are due. Currently, the FBAR is on automatic extension until October.
The 10 Most Common FBAR Questions & Answers
If you have either just filed your FBAR, or you are online researching whether or not you should file an FBAR, and have some basic FBAR questions — we have put together a short list of the 10 most common FBAR questions and answers we receive.
What if the Money is not mine?
Even if the money is not yours, but you have signature authority over the foreign account – you are required to report the account on the FBAR. This also includes accounts in which you are a joint account holder but the money is not yours – it still must be reported.
None of my Individual Accounts are over $10,000
It is important to note that the requirement is not for each account to have more than $10,000. Rather, if in any year the annual aggregate total all all of your accounts combined exceeds $10,000 on any day of the year, then you have to report all of the accounts on the FBAR.
I am not Sure What the Maximum Balance is?
If you aren’t sure what the maximum balance is (especially a fund that changes values constantly) there are usually two options: the first option is to estimate the best you can with whatever information you are able to obtain from the foreign financial institution. The second option is to mark off maximum balance unknown on the FBAR. Just because you do not have specifics about a certain account or accounts does not mean you can exclude it from the FBAR.
I Transferred the Money Between Accounts?
This is a common concern we receive often. The FBAR is used to report information. Therefore, if you had $100,000 and transferred it five times, into five different accounts it may appear on your FBAR that you have $500,000. That does not mean the IRS presumes you have $500,000. The purpose of the FBAR is for the US government to have a better understanding of what types of accounts, and how many counts you have oversees (and to be overall intrusive). This is why there is no box (as of yet) for you to total the actual amount of money that you have in foreign accounts.
The Money is not all mine
It is important to make sure you complete the portion of the FBAR that pertains to you, and your situation. Therefore, if the money u is not yours, you should be sure to complete the proper section of the FBAR to correspond with your situation.
I Never Filed Past FBARs
We realize that there are many attorneys and CPAs out there that seem to have nothing better to do then the publish misinformation, and try to scare people. If you never filed your past FBAR(s), then you should speak with an experienced FBAR attorney to evaluate the options. Depending on the facts and circumstances of your situation, you may qualify for one the various different Amnesty programs.
Do I Include Retirement Accounts on the FBAR?
In most situations, your foreign retirement will be included on the FBAR. For example if you have a CPF, Superannuation, or other Provident Fund and you have an account number and a balance, you would have to include the account number and the balance. The FBAR provides additional space for you to classify what type of account(s) you have. You mark off “other” and then identify the account. Remember, the IRS/FinCEN is not asking you whether you were receiving distributions, it is just asking you about the account information.
The Accounts Pre-date my U.S. Status
This is one of the more common questions we receive from Legal Permanent Residents and other individuals who were not born U.S. citizens. Even if the accounts were opened before you obtained U.S. status, and/or were opened with money that was earned or received before you became US person, you still have to include the account(s) on the FBAR. In other words, the FBAR is asking for a snapshot, not a history.
Can I Just Go Back and File Past FBARs?
No. If you do, it is considered a Quiet Disclosure and that is an illegal submission. With that said, just because you have one year or several years of unfiled FBARs does not mean the IRS is going to penalize you, or that you do not have options available to get into compliance. There are many different programs the IRS has developed to assist individuals with safely getting compliance. Some of these programs include:
Can Your Firm Help Me?
Yes. At Golding & Golding, we specialize in IRS Offshore Disclosure, which primarily deals with disclosing foreign accounts, assets calm investments (and related issues, including Expatriation and International Criminal Investigations in accordance with FBAR, FATCA and other related Government acronyms.
Golding & Golding FBAR Lawyer Recent Case Highlights:
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
Interested in FBAR Reporting Amnesty ?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant with all FBAR, FATCA and other foreign reporting and disclosure requirements.
Golding & Golding specializes in IRS offshore voluntary and streamlined disclosure procedures. Contact our firm today for assistance with getting compliant.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.