FBAR for a Corporation, Business, Partnership & Trust (2018)
The FBAR is the Report of Foreign Bank and Financial Account Form, aka “FinCEN 114”
Who Must File an FBAR
The FBAR requirement is not limited to U.S. Individuals, but rather, U.S. Persons, which is more encompassing than just individuals, and includes businesses.
Who Is a U.S. Person?
A U.S. person can typically be broken down into two (2) categories:
When it comes to international tax and foreign/offshore IRS, FBAR and FATCA Reporting, one of the biggest sources of confusion (understandably) is who is considered a US person.
When dealing with individuals, a U.S. person is typically going to include:
- U.S. Citizens
- Legal Permanent Resident; and
- Foreign Nationals who meets the Substantial Presence Test.
An Additional category of U.S. person that most people overlook is U.S. Businesses, including Corporations, Partnerships, and other U.S. businesses.
A U.S. is considered a U.S. person, and if a U.S. business has foreign accounts, then it may have to file an FBAR if the reporting threshold is met.
FBAR Reporting for Businesses
A U.S. business is considered a US person and the FBAR requirement is for U.S. persons – not merely U.S. “individuals.”
If a business is considered a U.S. Person then the business is also required to file an FBAR when business has foreign accounts overseas and meets the “more than $10,000 in annual aggregate total” threshold.
Even if the foreign account is in the name of the U.S. Business, and not an individual, the U.S. Person business must still “FBAR Report” the account.
As provided by the IRS:
United States persons are required to file an FBAR if:
United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability 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
Golding & Golding – Common FBAR Business Examples
A U.S. corporation begins to conduct business outside of United States. In many countries it is easier and almost necessary for a U.S. person to open a foreign bank in order to make purchases in local currency, pay vendors, contractors, etc. Therefore, the corporation opens a corporate account in the foreign country.
As a result, the U.S. corporation is required to file the FBAR.
A U.S. partnership decides it is less expensive to operate solely as a U.S. partnership and expand by securing registered agents in many different countries. Despite the fact that it is still a U.S. partnership that does not have any foreign entities associated with the partnership, the partnership still must disclose any foreign accounts that the partnership has in any one of the countries.
Employee of the Corporation
David is an employee of the corporation and has signature authority over the account. Even though none of the money personally belongs to David, David is an employee of the company who has signature authority over the foreign account. Therefore David is required to complete the FBAR portion relating to signatories (some exceptions apply)
A US trust has beneficiaries outside of the United States. In order for the trust to make payments beneficiaries outside of the United States, the trust opens foreign bank accounts outside of United States.
As a result, the US trust is required to disclose foreign bank accounts on an FBAR – even though the trust is a US trust.
** The trust can avoid having to file a form 3520-A if it a US trust, but would still have to file the FBAR.
U.S. Individual with a Foreign Business
This is a common situation. For example, Peter owns multiple rental properties in Latin America. He owns the companies in a Sociedad Anonima. He is a 90% owner of the business with a local registered agent serving as the other 10% owner.
The foreign corporation has multiple accounts and Peter is the majority owner of the foreign corporation. Since Peter has signature authority over the accounts, he is required to report the accounts, even though he has never stepped foot into the foreign financial institution.
Unreported Foreign Accounts
If you had and FBAR filing requirement but have not filed the FBAR in one or more years, you may consider getting into compliance through One of the approved FBAR Amnesty IRS voluntary disclosure programs.
Do I Need an FBAR Attorney?
Maybe…and maybe not.
When You May Not Need an FBAR Attorney
If your FBAR filing is timely in the current year, and you have a CPA or Tax Professional who understands the form – and you do not have any years of non-compliance, then you may not need an Attorney.
That is because if there is no untimeliness, and no lack of compliance – then there should be no FBAR penalty issues.
Under most other circumstances, you will need an FBAR Attorney to assist you.
**You may have other international informational returns which should have been filed, but never were. The non-filing of these forms may subject you to additional fines and penalties. Therefore, if in addition to a bank account(s) you also have foreign investments, trusts, businesses, etc. you should consider speaking with an experienced FBAR attorney to assess your tax and international reporting requirements.
When You Need an FBAR Attorney
If you are out of compliance for not properly (aka timely and accurately) filing the FBAR in one or more years, you should speak with an experienced FBAR Attorney.
Each person’s facts and circumstances are different. And, depending on the specific facts and circumstances surrounding the failure of timely filing the FBAR a person may find himself or herself subject to extremely high monetary fines and penalties, including a penalty that reaches a 100% value of the unreported foreign accounts and assets (in a multi-year audit in which a person is found willful) and/or by themselves subject to a criminal investigation for tax fraud or tax evasion.
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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.