If you are a US taxpayer with financial accounts outside the United States, you may be required to file a Foreign Bank Accounts Report (FBAR). This report helps the US government track overseas assets and prevent tax evasion. Failing to file an FBAR when required can result in severe penalties, making it essential to understand your obligations.
What is the FBAR?
The FBAR is officially known as FinCEN Form 114 and is filed with the Financial Crimes Enforcement Network (FinCEN), not the IRS. The purpose of the form is to report foreign financial accounts if their aggregate value exceeds $10,000 at any time during the calendar year.
Who Needs to File an FBAR?
You must file an FBAR if:
- You are a US citizen, resident alien, or entity (like a corporation, partnership, or trust), and
- You have a financial interest in or signature authority over at least one foreign financial account, and
- The aggregate value of all foreign accounts exceeds $10,000 at any point during the year.
Financial accounts can include bank accounts, brokerage accounts, mutual funds, and even some retirement accounts held abroad. Joint accounts or accounts where you have signature authority but no financial interest must also be reported.
How to File an FBAR
The FBAR is filed electronically through the BSA E-Filing System. It is not filed with your tax return and must be submitted separately. The deadline for filing is April 15th, but there is an automatic extension to October 15th if you miss the original deadline.
Key details you’ll need to report include:
- Account holder’s name and address
- Account number
- Name and address of the foreign financial institution
- Maximum account value during the year
Penalties for Non-Compliance
Failing to file an FBAR can lead to significant fines and, in some cases, criminal charges. Penalties include:
- Non-wilful Violation: Up to $10,000 per violation.
- Wilful Violation: The greater of $100,000 or 50% of the account balance per violation.
If you discover that you have failed to file an FBAR, the IRS Streamlined Filing Compliance Procedures may allow you to come into compliance without facing severe penalties, especially if the failure was not wilful.
Final Thoughts
Filing an FBAR is a critical responsibility for US taxpayers with foreign financial accounts. Understanding your filing requirements and adhering to deadlines can help you avoid harsh penalties.
The information in this blog post is for general informational purposes only and does not constitute professional tax advice. We strongly recommend consulting a qualified tax professional before making any decisions. US Expat Tax Advisor is not liable for any actions taken based on this content.
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