FBAR Requirements – Which Foreign Accounts Are Required?

FBAR Requirements – Which Foreign Accounts Are Required? (Golding & Golding, Board-Certified Tax Specialist)

FBAR Requirements – Which Foreign Accounts Are Required?

For some individuals, estates, and entities better considered us persons and maintain foreign accounts become assets or investments maybe required file annual FBAR statement with the IRS to report their foreign accounts.

FBAR Requirements

The FBAR requirement is a very important requirement because the IRS has made enforcement of noncompliance to a key priority.

The penalties for failing to timely file the FBAR form are staggering — and depending on the facts and circumstances the person could get hit with willful and/or criminal penalties as well.

FBAR Filing Requirements

In order to avoid a nasty situation with Internal Revenue Service, in person meant either timely submitted their FBAR, or work with experienced counsel and submit to one of the IRS offshore amnesty programs.

Either way, the FBAR Requirement is important and we will explain some tips to help you successfully prepare the FBAR (if you were inclined to do it by yourself).

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FBAR Requirements

FBAR Preliminary Questions

FBAR Requirements 2019 

FBAR Requirements 2019 generally refers to filing the 2018 FBAR, which is due to be filed in 2019. The FBAR requirements for 2019 are summarized below.

FBAR Requirements 2018

FBAR Requirements 2018 generally refers to filing the 2017 FBAR, which was due in 2018. The FBAR requirements for 2019 are summarized below.

Who is Required to FIle an FBAR?

Any U.S. person — individuals, Businesses, and estates — in any year in which the filer has an annual aggregate total that exceeds the filing threshold requirement

What are the FBAR Threshold Filing Requirements?

Unlike FATCA (Form 8938) in which the filing threshold requirements Mayberry based on filing status and US versus Bourne residency, the FBAR firing threshold requirements are constant.

If the U.S. Person (foreign account holder) has an annual aggregate total of more than $10,000 on any given day during the year — the account holder will have to file the FBAR for that year.

For example, if David had transferred $190,000 into the only foreign bank account that he has in Taiwan for a few days and then transfer the money back out — David would still have to report the account on the FBAR.

Do Non-Residents Need to File an FBAR?

Do Non-Residents Need to File an FBAR?

Yes, whether or not the person resides in the United States or outside United States is not dispositive when it involves threshold reporting requirements for the FBAR.

In other words, if a person is considered a US person and meets the FBAR reporting requirements, they will still have the file the FBAR even if they live overseas

Simple Steps for Successful FBAR Preparation

Here are some simple steps to successful FBAR preparation

How Many Foreign Bank and Financial Accounts?

Accounts include a laundry list of different items, including investment accounts, foreign life insurance, foreign retirement funds, and foreign provident accounts. You should make a list of ALL your accounts.

Are the Foreign Accounts Yours?

Depending on whether you own the foreign accounts, or just have signature authority over the account(s) will help determine where and how to report the accounts  — and whether it also needs to be reported on FBAR, form 8938 (interest in the account vs. signature authority) and other forms.

What is the Value of the Foreign Accounts?

What is the Value of the Foreign Accounts?

You should use whichever exchange rate you prefer for the actual year in which you’re performing the analysis.  So if you’re analyzing for 2014 —  you would use 2014 exchange rates, not the current year rates.

What Different Types of Foreign Accounts Do You Have?

You should separate the accounts by type, value, and whether you have ownership or signature authority over the account.

Exchanging the Foreign Accounts into USD

In many countries, foreign financial institutions maintain multiple “currency sub-accounts” within the accounts, and the accounts may be in different currencies (common in Hong Kong and Taiwan)

For example, since the exchange rate for the HKD dollar and CNY are similar, but the exchange rate for the Taiwanese dollar (TWD) is much different, it is important to calculate the exchange amount properly to avoid over reporting or underreporting.

Aggregate Your Foreign Account Values

Calculate the total amount of each type of account and whether you own it, or have signature authority over it to determine the total value.

Remember: You May have Other International Reporting Forms

Refer to the list of forms above to determine which forms you have to file (note: you may have other forms to file as well)

How Many Years Have You Owned the Foreign Accounts? (Very Important)

Determine whether you have met the requirements in prior years as well, and review your prior returns to assess if you were in compliance during those prior years as well.

*Generally, the compliance period is 3-6 years.

What Year Should You Have Started Filing the FBAR?

If this is the first year you have to file, you are in luck.

Presuming you are timely, as long as you give it your best effort and perform a diligent and reasonable completion of the forms, usually that will be sufficient.

Do You Have to FIle Late FBARs for Prior (or Current) Years?

If you come to the realization that you are out of compliance for prior years, then you should STOP. 

Before submitting for the current year you are required to go back and get into compliance for the prior years using one of the approved IRS offshore voluntary disclosure/Tax Amnesty Programs.

While the IRS is done away with OVDP, other programs are still available such as 

• Traditional IRM Voluntary Disclosure
• Streamlined Disclosure
• Reasonable Cause

*If you decide to just submit without getting into compliance first, just keep in the mind that the IRS has indicated it will take a heavy hand against individuals who take this position, and it may result in significant fines and penalties.

**That is not an attempt to scare you, since there are probably plenty of people who do it anyways, and get away with it no problem (although we really don’t recommend it, since the downside is tough).

Beat the IRS to the Punch!

If you are out of compliance for not properly disclosing foreign income, accounts, assets, and/or investments — and are not under audit or examination — you may consider submitting to IRS Voluntary Disclosure (IRM, Streamlined or Reasonable Cause) in order to get into compliance.

Safely Get Into IRS Offshore Compliance

Presuming the money was from legal sources, your best options are either the Traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Programs.

Golding & Golding (Board Certified Specialist in Tax Law)

Interested in Filing under FBAR Streamlined or VDP Procedures?

No matter where in the world you reside, our international tax team can get you IRS offshore compliant.

Golding & Golding specializes in offshore tax and reporting amnesty. Contact our firm today for assistance with getting compliant.