If you have a financial interest in, or signature authority over at least one financial account that is “maintained” outside of the United States (otherwise referred to as a foreign financial account), and the maximum aggregate value of all your foreign financial accounts exceeds $10,000 at any time during the calendar year, the Bank Secrecy Act may require you to file an annual report with the Department of the Treasury by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
An individual or entity is generally considered to have a financial interest in a foreign financial account if they are the owner of record for the account or the legal title holder. In addition, signature authority is determined by evaluating whether or not a person possesses the requisite authority to control the disposition of account assets via direct communication with the financial institution. Lastly, the maximum aggregate value is calculated by converting the value of the foreign holdings to U.S. dollars using the exchange rate at the end of the calendar year.
It should also be noted that only U.S. persons are required to file the FBAR. A U.S. person is any U.S. citizen, resident alien, or entity including corporations, partnerships, trusts, or estates created under the laws of the United States. Resident aliens of U.S. territories are also subject to FBAR reporting requirements.
FBARs must be received by the Department of the Treasury by June 30th. No time extensions will be granted. FBARs may also be filed electronically.
Under FACTA, certain individuals including U.S. citizens, resident aliens, and non-resident aliens that have a specified interest in foreign financial assets and meet the reporting threshold are required to file Form 8938, Statement of Specified Foreign Financial Assets, with their federal tax returns.
Generally, to trigger a reporting requirement under FACTA, an individual must have an interest in a foreign account or asset, broadly defined as any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset that would otherwise be required to be reported on an income tax return. In addition, an individual must meet the reporting threshold of $50,000 on the last day of the tax year (or $75,000 at any time during the tax year), as calculated by computing the aggregate fair market value of all the foreign assets and accounts in U.S. dollars utilizing the exchange rate on the last day of the tax year.
Form 8938 is filed with your federal tax return and is due on the same date as the return, including any extensions.
Determining foreign account and asset reporting requirements can be an extremely complex task. Don’t risk steep civil penalties and possible jail time by failing to file. If you are unsure whether you need to file FBAR or Form 8938, or you missed your filing deadline, contact an experienced tax attorney or call us at 800.681.1295 to discuss your filing requirements and options for a voluntary disclosure today.