What Is the Report of Foreign Bank and Financial Accounts (FBAR)?
The Report of Foreign Bank and Financial Accounts, or FBAR, is a tax form filed with the United States Treasury Department each year during tax seasons for individuals who hold money in foreign or offshore bank accounts. The FBAR must be filed on FinCEN, Financial Crimes and Enforcement Network, Form 114. Individuals filing the FBAR are not taxed on the amount of money they are reporting on this form; rather, the purpose of this form is to allow the government to keep track of all financial assets that are held in foreign accounts by U.S. citizens, Green Card holders, and other specified individuals.
Who Must File an FBAR?
Any U.S. person, or any person considered a U.S. resident for tax purposes, with any foreign bank account balance of $10,000 or more at any point throughout the tax year is required to file an FBAR. If your balance hits $10,000 for only one day throughout the year, you have met the requirement and will need to file the FBAR. The $10,000 threshold is an aggregate amount, meaning if you hold financial assets in multiple bank accounts, the sum total will be used to determine if you meet the threshold. If you hold $7,000 in one account and $4,000 in another, you have met the threshold and will need to file.
FBAR Filing Requirements
If you meet the threshold for filing an FBAR, there is some required information that you’ll need to have handy to make for an easy filing process. This information includes:
- Legal name on the foreign accounts.
- The type of account.
- The name and address of the person or institution with which the account is held.
- The maximum value in USD in each account during the tax period.
- The account number or other designation.
The FBAR filing requirements apply to all foreign financial accounts in which you have a financial interest or signature authority. Financial interest will be determined based on who is the owner of record or legal title. Signature authority means that, on some level, you have control over the assets through direct communication with a financial institution. You will also be required to report any joint accounts held with your spouse or another partner on the FBAR.
In addition to reporting any and all foreign bank accounts, some individuals may have additional filing requirements. If you hold any foreign stock or securities in a foreign financial institution, these must be reported on the FBAR. Any financial account held at a U.S. bank on foreign soil also must be reported, as must any foreign mutual funds or foreign issued life insurance.
How To File the FBAR
FBAR can be filed online relatively easily through the BSA E-Filing system on the FinCEN website. You will need to create an account with FinCEN, which requires some basic details such as your name, address of residence, and social security number. You will also be asked to include certain information about the foreign held bank accounts, such as where they are located, the maximum balance in USD, and the account numbers. When completing this process, it’s important to hold onto the confirmation of completion so you can prove compliance with FBAR in the coming years, should it become necessary.
What Is the FBAR Filing Deadline for Expats?
The FBAR will need to be filed by the same deadline as your federal income tax return, which in 2023 falls on April 18. If you miss the deadline in April, expats will receive an automatic extension until October. The final deadline for October this year falls on October 16, 2023.
Penalties for Not Filing FBAR
While the FBAR is simply a reporting form and is not used to determine any sort of tax payment, failure to file this form can be severe. There are different penalties depending on whether your failure to file was willful or not. If it is determined that your failure to file FBAR was willful, in that you were aware of requirements and chose not to file of your own will, the fine can be up to $100,000 or 50% of the foreign account’s balance at the time of violation, whichever is greater. A non-willful failure to file carries a $10,000 penalty per violation, although this penalty can be higher depending on the balance in your foreign bank account at the time of the violation.
The IRS applies penalties on a per-account basis, meaning that violators are fined separately for each account that they failed to report. These penalties can add up quickly, especially when applying the percentage of the account to the fine. The chances of getting caught failing to file an FBAR have been higher since 2010, as foreign financial institutions are now required to notify the IRS of their foreign accounts.
What Should I Do if I Haven’t Filed an FBAR?
Even though the penalties for failing to file an FBAR are severe, if you have not yet filed and believe you should have, don’t panic. The IRS has amnesty programs in place to help individuals get back into compliance.
The Streamlined Compliance Procedures are meant for U.S. expats who have failed to file an income tax return in addition to failing to file an FBAR. Individuals can become compliant through this program by self certifying that their failure to file was not willful, filing the previous three income tax returns they failed to file and paying taxes on them, as well as filing FBARs for the previous six years.
The Delinquent FBAR Submission Procedures are meant for U.S. individuals who have only failed to file FBAR but are up to date on their federal income tax returns. To get back into compliance through this amnesty program, you must self certify that your failure to file was not willful and file all delinquent FBARs.
Need Help Filing an FBAR? Contact Evolution Tax and Legal!
Determining whether you need to file an FBAR and gathering all the necessary information to do so each year can be complicated. Working with an Orange County expat tax attorney can help ensure you are in compliance and avoid the hefty fees associated with failure to file. Contact Evolution Tax and Legal today to learn how we can help you file your FBAR.