Tax Tips
Volume 9, Issue 11
For distribution 11/18/19; publication 11/21/19
Complying with FBAR: Foreign Bank and Financial Accounts
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).
Who Must File
United States persons are required to file an FBAR if:
1) The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States, and
2) The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
United States persons 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.
Reporting and Filing Information
A person who holds a foreign financial account may have a reporting obligation even when the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.
The FBAR is a calendar year report and is due April 15 of the year following the calendar year being reported, with a 6-month extension available. FinCEN will grant filers failing to meet the FBAR due date of April 15 an automatic extension to October 15 each year. A specific extension request is not required. The FBAR must be filed electronically through Fin-CEN’s BSA E-Filing System. The FBAR is not filed with a federal income tax return.
U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938
Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. Those foreign financial assets could include foreign accounts reported on an FBAR. The Form 8938 filing requirement is in addition to the FBAR filing requirement. Form 8938 must be filed by certain U.S. taxpayers living in the U.S. and holding foreign financial assets with an aggregate value exceeding $50,000 ($100,000 married filing jointly) on the last day of the tax year, or more than $75,000 ($150,000 married filing jointly) at any time during the year.
If you need help with FBAR compliance, please reach out to us; we’re happy to help.
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Tax Tip: If you have a financial interest in or signature authority over a foreign financial account, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR). [link]
Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, in addition to filing their income tax return. [link]
If you are required to file Form 8938, don’t forget you still have to file the FBAR. [link]
A person who holds a foreign financial account may have a reporting obligation even when the account produces no taxable income. Find out more here: [link]
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