- 1 Do Children File FBAR?
- 2 Minor Children & Foreign Accounts: Common Scenarios
- 3 Overseas Minor’s Account
- 4 Foreign Life Insurance
- 5 Bank Accounts or Investment Accounts Abroad
- 6 Current Year vs Prior Year Non-Compliance
- 7 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 8 Golding & Golding: About Our International Tax Law Firm
Do Children File FBAR?
As ridiculous as the answer may seem, even minor children with foreign accounts still have to file an annual FBAR – even if they do not have to file a tax return. So while there are age restrictions for movies, amusement parks, and other kid-related activities – the FBAR does not currently have any exceptions for minor children. Therefore, if your child has ownership or signature authority over a foreign account, then they have to file their own FBAR each year to report the account(s) on FinCEN Form 114. It is important to note that even if the child is not required to file a tax return and/or the parents are filing a tax return on the children’s behalf to report the associated income — children with foreign accounts still must file the FBAR.
Minor Children & Foreign Accounts: Common Scenarios
Here are some of the more common minor child foreign accounts that must be reported on an annual FBAR:
Overseas Minor’s Account
A minor’s account is a common type of foreign account that leads to FBAR filing for minor children. In many foreign countries, parents will open an account on behalf of their child, and under their child’s name — even though the child may not be able to access the money until they reach a certain age. These accounts are typically reported on the FBAR. And, if the adult has a signature authority or is otherwise identified on the account (aside from being a beneficiary under most circumstances) they are also required to report the account.
Foreign Life Insurance
In many countries, it is customary for parents to open a ULIP insurance policy under the name of their minor children, and on their behalf. In a common scenario, the parents will open a life insurance policy and fund it, with the idea that it will pay out at a future date once all the premiums are paid. This can also lead to FBAR filing for the minor child.
Even though the child is not making any contributions to the premiums, since the child is the owner of the insurance policy, they would generally include it on the FBAR.
Bank Accounts or Investment Accounts Abroad
If the child is identified as an owner, co-owner, or signatory on bank accounts, then they generally have to report these accounts on their own individual FBAR, if the threshold requirement is met. As stated above, it is important to keep in mind that the child does not have to have actual ownership or access to the money at the current time, but if the account is under their name then they will have to report it.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.