FBAR Filing Requirements
In recent years, the United States government has placed a significant emphasis on identifying and pursuing taxpayers who hold or control offshore accounts and assets without making required disclosures. Under FBAR and other laws requiring informational reports, FBAR filing requirements require taxpayers to disclose the existence of certain offshore accounts and assets. Failure to make such disclosures can result in significant penalties and additional tax enforcement actions against the individual.
Unfortunately, the risk of having one’s undisclosed assets and accounts has never been higher. Foreign Account & Tax Compliance Act (FATCA) not only imposes offshore account disclosure obligations of its own, but also it is designed to provide the United States government with tax information from around the world. More than 100 nations have agreed to information sharing agreements that implement FATCA. The information derived from these agreements will be used to enforce the FBAR and other disclosure duties.
The general rule for FBAR is that all U.S. citizens and others with a tax obligation are required to file FBAR when two facts are true. First, the individual must hold signature authority over or have an interest in at least one foreign financial account. Second the value of that account or the aggregate value of all foreign accounts must exceed $10,000 at any time during the tax year. It is irrelevant if the account balance exceeds the $10,000 reporting threshold for one day or for the entire tax year. Once the $10,000 reporting threshold is exceeded, a filing obligation exists.
However certain taxpayers may fall within an exception that relieves them of their FBAR filing requirements. In other circumstances the FBAR obligation may be covered by another filing. These situations include:
- Taxpayers whose FBAR obligation is satisfied by a separate consolidated filing.
- Certain financial accounts held jointly by spouses.
- Beneficiaries and owners of U.S. based IRAs.
- Some taxpayers who have signature authority, but no actual authority over a foreign asset or account.
- Individuals holding certain financial accounts maintained at a U.S. military banking facility.
However, determining whether you fit within an expectation is a technical endeavor. Working with an experienced and dedicated tax professional can eliminate the guesswork and reduce the likelihood of facing serious offshore penalties.
What Form Must I Use to File FBAR?
Until July of 2013, taxpayers had the option to satisfy their FBAR obligation through multiple filing methods. However, in 2013, the option to file one’s FBAR disclosure using pen, paper, and the mail was eliminated. Today, taxpayers who are required to disclose foreign accounts and assets through a FBAR filing must make that filing online.
FBAR is filed by logging onto the Financial Crimes Network’s (FINCEN) Bank Secrecy Act E-Portal. A number of forms can be downloaded and completed from this portal, so it is essential that the taxpayer accesses the correct form. The form that is used for FBAR is FINCEN Form 114.
What Account & Asset Information Must I Disclose in My FBAR Filing?
There are an array of accounts and assets that taxpayers must disclosure under FBAR. These accounts and assets may include:
- Shares or interest in shares in a foreign mutual fund.
- Assets held in a foreign trust.
- Savings accounts in a foreign bank.
- Checking accounts in a foreign bank.
- Foreign stocks or securities.
- Interests in foreign retirement plans.
- Foreign life insurance plan.
- Foreign financial accounts where you hold signature authority.
These account types are merely a few of the accounts covered by FBAR. Taxpayers must be sure to make a comprehensive disclosure when they file or risk significant penalties for an FBAR violation. Of further note is the fact that FBAR may not be the only disclosure obligation held by the taxpayer. In many cases the taxpayer is required to make an additional disclosure to satisfy parallel FATCA disclosure obligations.
Understanding when one is required to file FBAR can be a difficult and technical determination. Furthermore, assessing the accounts, preparing the FBAR filings, and handling other details requires dedication and meticulous eye for detail. At the Tax Law Offices of David W. Klasing our attorneys are experienced with FBAR filing requirements and are committed to reducing the consequences faced by taxpayers with FBAR and offshore account issues. To schedule a confidential, reduced-rate legal consultation call us at call 800-681-1295 or contact us online today.Need help or have a FBAR filing question? Contact us!