In general, U.S. citizens and resident aliens must report all income earned outside the U.S. borders and ownership interests in financial assets or accounts outside the United States. If you are required to report such information, you may be required to use two different forms to report the information to the US Government. You need to know which form to use to report different assets, when the forms must be filed, and to which part of the US Government the information must be reported. Below is information regarding FBAR filing.
When Do You Have to File the FBAR Form?
You have probably heard of at least one of the forms, the FBAR Form, that is Report of Foreign Bank and Financial Accounts.
You must file an FBAR form if:
- You are a U.S. citizen or a resident alien (including those having dual citizenship who lived or worked abroad during any part of 2016); and
- You personally or jointly own an interest in, or have signatory authority over, foreign financial accounts whose total value exceeded $10,000 at any time during 2016
Foreign financial accounts include, among other things, bank accounts, brokerage accounts, mutual funds, trusts, and other types of financial accounts.
You file the FBAR Form by completing FinCEN Report 114, which is only available online through the BSA E-Filing System. After you complete the electronic submission, you should receive an email notification of acceptance. The FBAR filing process is only complete when you receive a BSA identifier by email a few days later. So, be sure to watch for this email. Check your “junk/spam” email folder if you don’t see the notice in your regular email folder. Keep a copy of these annual filings for a minimum of 5 years. For additional information, see “Current FBAR Guidance” on the IRS website. The reporting website is http://bsaefiling1.fincen.treas.gov/main.html.
If you do not file the required FBAR form, you can be required to pay a civil penalty of $10,000 for each non-willful violation. However, if a person willfully violates the reporting requirement, that person is subject to a penalty of 50% of the account’s value or a sum of $100,000, whichever is greater.
FBAR Filing Must Occur the Same Date as Your Personal Tax Return
The date to file the FBAR Form (FinCen Report 114) has changed. Beginning with the 2016 filings, this form is due by April 15, the same date as your personal tax return. Formerly, the deadline was June 30th.
In addition to reporting income from foreign sources on Schedule B of your personal tax return and filing the FBAR form, you may also be required to submit Form 8938, FATCA (Statement of Specified/Special Foreign Financial Assets) with your tax return. The threshold for filing depends on several factors, including marital status and the value of the foreign accounts. The deadline for filing this form is also April 15. You must report the assets in US dollars. So, you will need to convert the foreign currency/value into US Dollars for the report.
A comparison of FBAR and Form 8938 requirements can be found at https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements
The requirements for filing both the FBAR form and the FATA form are very technical and somewhat complicated. The penalties for not filing the forms can be quite severe. So, if there is even just a possibility you may be required to file either or both of the forms, you should immediately contact a tax professional who deals with such issues.