On this page, you’ll learn what the FBAR is, whether or not you’ll need to file an FBAR, and how you can file without penalties (even if you’ve never filed an FBAR before), and why it is essential that you file your FBAR’s immediately.
What is an FBAR (Foreign Bank Account Report)?
Simply put, an FBAR report is used to notify the IRS of interest in financial accounts outside of the United States.
Do I Have To File An FBAR?
You need to file an FBAR if all of the following are true:
- – You are an American citizen or Green Card holder
- – You have interest in (or signature authority over) a financial account located outside of the United States
- – This account had a total of $10,000 or more at any time during the past year
If all of the above apply to you, then you are required to file an FBAR. Importantly, your FBAR report must contain information on all of your accounts which are located outside of the United States (even those with a $0 or negative balance).
The requirement to file FBAR’s does not apply to ITIN holders even though ITIN holders are subject to US Income Tax on their worldwide income.
When Is The Deadline To File An FBAR?
The deadline is April 15th. This year as the first year with this new date, there is an automatic 6 month extension until October 15th but normally no extensions are available.
If I Haven’t Been Filing My FBAR’s, am I in trouble with the IRS? What Should I do?
Here’s the good news: There is a special program (called the Streamlined Program) which will allow you to come clean with the IRS without incurring any penalties at all. Under the Streamlined Program, you’ll need to file six years back of FBAR’s, three years of tax returns, and submit a Certification of nonwillful conduct (essentially a statement that you did not purposely evade filing your FBAR).
Here’s the bad news: The IRS can decide to end this program at any time, which will leave expats who have not filed their FBARs out in the cold.
So, If you are behind on your FBAR filing, please contact us immediately.
What Is The Penalty For Not Filing An FBAR?
If the failure to file was due to a non willful cause (for example, you did not know about your obligation to file this form), you can face a penalty of up to $10,000 per instance of noncompliance (ie. for each yearly FBAR not filed). If the failure to file was willful, you can face a penalty of the greater of 50% of the total balances in your foreign bank accounts at the time of noncompliance or $100,000. There is a separate penalty for each year in which there was a failure to file. Additionaly, the failure to file is considered a criminal offence and can result in criminal proceedings.
If I Missed The FBAR Filing Deadline For This Year, Should I File It Late?
Although there are potential penalties for filing late, we have seen that the risk involved in not filing at all is higher than that involved in filing late. This is a sensitive question though, and each taxpayer is encouraged to discuss their specific sitaution with one of our experts.
What Does “Financial Interest In An Account” Mean?
If any of the following are true, then you have “Financial Interest” in the account:
- You own the account.
- An agent who is acting on your behalf in regard to the account owns the account.
- A corporation of which you own more than 50% of the shares or voting power owns the account.
- A partnership in which you own more than 50% interest in the partnerships profits or capital.
- A trust of which you are the trust grantor and in which you have an ownership interest for federal tax purposes owns the account.
- Any entity of which you own more than 50% of the total value of assets, interest in profits, or voting power.
What Types Of Accounts Need to Be Reported?
- All types of bank accounts
- Securities, demand, deposit, and time deposit accounts
- Commodity futures or options accounts
- Insurance policies that have a cash value
- Annuity policies that have a cash value
- Shares in a mutual fund or comparable pooled fund
- Certain pension funds
- Accounts jointly owned with other people
What Types Of Accounts Do Not Need To Be Reported?
- Correspondent/Nostro account
- Foreign financial accounts of international financial institutions
- Foreign financial accounts of US governmental entities
- Foreign financial accounts held by owner or beneficiary of an IRA or tax qualified retirement
- Financial accounts of financial institutions located on a US military installations.
If My Accounts Are Owned Jointly With My Spouse, Do We Each Need To File An FBAR?
If your spouse’s only foreign accounts are those owned jointly with you, then one FBAR suffices both of you. In this case, the spouses would need to fill out and sign a Form 114a “Record of Authorization to Electronically File FBAR’s”. However, if your spouse has financial interest in or signature authority over any account that is not included in your FBAR, then a separate FBAR would have to filed for him/her.