What is FBAR? (Foreign Bank Account Report)
FBAR is a Foreign Bank Account Report, which must be filed electronically as FinCEN Form 114 by June 30th every year. Every person in the United States who owns one or more foreign bank accounts that at any point during the year reached an aggregate balance of $10,000 must file a form with the United States Treasury Department, which lists all of their foreign bank accounts.
The IRS has clarified that FBAR filings due June 30, 2009 and subsequent years, the terms United Stated resident means a resident or citizen of America, a domestic estate or trust, domestic partnership, domestic corporation. This is a temporary retreat from revised instructions previously issued requiring FBAR filings by any individual in and doing business in the U.S.A. Which casts a very wide net.
Who has to file FBARs
United States individuals are required to file an FBAR if:
- The U.S., individual had a financial interest in or signature authority over at least one financial account located outside of the U.S.
- The aggregate value of all foreign financial accounts, which exceeded $10,000 at any time during the calender year they reported.
United States person will include U.S., residents, citizens and entities, which include but not limited to partnerships, corporations, or limited liability, organized or created in the United States or under the laws of the United States, and estates or trusts formed under the laws of the United States.
Exceptions to FBARS
Exceptions to FBAR requirements include:
- Foreign financial accounts maintained on a United States military banking facility.
- Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust)
- Certain foreign financial accounts jointly owned by spouses
- Correspondent/Nostro accounts
- United States persons included in a consolidated FBAR
- Owners and beneficiaries of U.S. IRAs
- Foreign financial accounts owned by a governmental entity
- Foreign financial accounts owned by an international financial institution
- Participants in and beneficiaries of tax-qualified retirement plans
- Certain individuals with signature authority over, but no financial interest in, a foreign financial account
Filling and reporting information
Any person who owns a foreign financial account might have reporting obligation even if the account creates no taxable income. The reporting obligation is met by answering questions on tax return regrading foreign accounts such as questions about foreign accounts on Form 1040 Schedule B and filing an FBAR.
An FBAR is a calender year report, which must be filed before or on June 30th of the year that follows the calender year that is being reported. Effective July 1, 2013, an FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The FBAR is not filed with federal tax returns. When the IRS grants filing extensions for taxpayer’s income tax return, it does not extend your time to file an FBAR. There are no provisions for requesting an extension of time on filing on FBAR.
If you are required to file an FBAR, but fail to file a correct and complete FBAR may be subjected to civil penalties, which may not exceed $10,000 per violation for non-willful violations, which are not due to reasonable cause. For willful violations, the penalties might be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation.