Commonly known as FBAR, the FinCEN Form 114 came out of the Banking Secrecy Act (BSA) and requires US persons and residents to disclose overseas financial accounts. It is a requirement, of any US citizens and residents with an aggregate value exceeding $10,000 across their foreign accounts, at any time in a calendar year, to file a Report of Foreign Bank and Financial Accounts (FBAR).
Take a look at the complete IRS FBAR Reference Guide for more detailed guidance.
When is the FBAR due?
The FBAR is due on 15th April for the previous calendar year with an automatic extension to 15th October where applicable. Though see our post for the impact on 2019 deadlines as a result of COVID-19:
Who must file the FBAR?
A US person must file an FBAR if that person has a financial interest in or signature authority over any financial account(s) outside of the United States and the aggregate maximum value of the account(s) exceeds $10,000 at any time during the calendar year. IRS guidance outlines a US person as follows:
- A citizen or resident of the United States (including green card holders);
- An entity created or organized in the United States or under the laws of the United States. The term “entity”;
- includes but is not limited to, a corporation, partnership, and limited liability company;
- A trust formed under the laws of the United States; or
- An estate formed under the laws of the United States.
Do children need to file?
Yes. Although a minor cannot sign their own form, there is no exemption from filing based on age. When filing for minors, the form will need to be authorised by a parent/guardian signed on their behalf. Parents should note that where they have signature authority over a child’s account that may need to be reported on their own FBAR.
What needs to be filed?
In the vast majority of cases, FBAR filers will only be disclosing their foreign bank accounts. In more complex cases, you must also report
- Accounts owned indirectly through partnership trusts and companies
- Certain foreign stock or securities held at a foreign financial institution
- Financial accounts held at an overseas branch of a US bank
- Foreign mutual funds
- Foreign-issued life insurance with a cash value
- Pensions for which you have investment discretion
- Annuity contracts with a cash value
This is not an exhaustive list and so please seek advice from a qualified professional on your individual requirements.
What if my balance is below the threshold?
The FBAR is applicable when the aggregate balance exceeds $10,000 at any point during the year. All accounts, including those with zero balances and those with balances under the threshold, will need to be disclosed. Remember, the FBAR includes foreign pensions so, for example, if you live in the UK and have an employer provided pension plan, it is very likely you need to file an FBAR, even if you keep less than $10,000 in your bank accounts.
How do you file the FBAR?
The FBAR form cannot be sent via post. It can only be submitted through the BSA e-filing site. It can be submitted by the taxpayer or their tax preparer.
First-time and late filing
If this is the first time qualifying for the FBAR we recommend filing a complete and accurate form as soon as possible. If you have only just found out about the form, and need to submit several late forms the same level of urgency applies. FBAR forms are filed separately to your tax return and so there is no reason to wait. Late submissions must be explained and should link to disclosure information for the returns where applicable.
What happens if you missed the deadline or made a mistake?
There are penalties for late filing and inaccuracies and so it is important to make sure you make the necessary corrections and disclosures as soon as possible. The IRS uses voluntary disclosure of information as a mitigating factor, taking the information provided into consideration if penalties should be assessed.
It is best to make corrections through a disclosure program which will determine the penalty level. In most cases, no penalty is given, however, the penalty starts at $10,000 and it can range anywhere from 5% to 50% of your applicable balances in more serious cases.
I need help filing my FBAR
Get in touch with our expat tax specialists today. Experts in complex private tax filing, planning and returns, we can help you to successfully file your FBAR and FATCA forms. Contact us for a no-obligation call today.