Foreign Bank Account Report (FBAR or FinCen114)

Mar 11 2016

U.S. citizens or Resident Aliens (greencard holder) with financial accounts located outside the U.S. have to consider additional reporting requirements.  The Foreign Bank Account Report, or FBAR, is one of these additional reporting requirements. 

What is the FBAR

The FBAR is an information return, as opposed to a tax return, as it does not generate tax or amounts due. It is required of U.S. citizens, Resident Aliens, and U.S. Companies with financial accounts located outside the U.S., of which the total of the balances of those accounts exceed $10,000 USD at any time during the calendar year.  The form is required to be filed by individuals and companies who own, have an interest in, or have signature authority over foreign accounts. 

History of the FBAR

The FBAR was actually legislated in 1970 when Congress enacted the Bank Secrecy Act.  The purpose of the FBAR reporting is to aid the U.S. government in carrying out criminal, tax and regulatory investigations.  In 2003, Congress strengthened the penalties for failing to comply with the FBAR reforeign bank; fbarquirement and gave the IRS the task of handling FBAR compliance and enforcement.  In 2009, the IRS began offering offshore voluntary disclosure programs, which included FBAR compliance.  The FBAR is actually filed with the Financial Crimes Enforcement Network (FinCen) of The Department of the Treasury.  While the IRS handles FBAR compliance and enforcement, the FBAR is not part of the tax return and must be filed electronically and separately with FinCen.

FBAR Requirements

As mentioned above, if your interest in financial accounts held outside the U.S. exceed $10,000 USD at any time during the calendar year, you have a reporting requirement.  This includes accounts for which you have a signatory interest in but no ownership.  Foreign financial accounts include, but are not limited to: checking, savings, brokerage accounts, and foreign mutual funds, as well as certain life insurance policies that accumulate value.  In addition, indirect interests in accounts held through an entity are reportable.  The report is required to be filed electronically via the FinCen website and is due by April 18, 2017, for 2016 filings.  An extension is granted until October 15,2017 for FBARs not received by the April 18th due date.

What’s the big deal?

In a word, penalties.  The penalty for not filing an FBAR form, if required, is $10,000.  Willfully failing to file or fully disclose the required information may subject you to criminal charges and penalties up to 50% of the highest aggregate balance at the time of the violation.

What if I haven’t filed?

If you have a filing requirement for previous years and have not made those filings, you need to seek the advice of a CPA knowledgeable of FBAR and its requirements.  The IRS does have programs in place to correct delinquent filings.  However, making a “silent filing,” filing an FBAR for the current year when previous years were required and not filed, is not recommended.

What do I do now?

If you have previous filings that need to be made or questions about the FBAR, contact us today for a free consultation. 

©2017 SDC, LLC
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult tax, legal and accounting advisors before engaging in any transaction.

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