Foreign Bank Account Reporting (FBAR)
Do you have a financial interest in or signature authority over a foreign financial account? If so, you may need to file Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (the “FBAR”) by June 30th. There is no fee to file it, however noncompliance penalties start at $10,000 and can go up dramatically from there.
FinCEN Form 114 supersedes TD F 90-22.1 (the FBAR form that was used in prior years) and is only available online through the BSA E-Filing System website. These filings have received heavy press over the last few years due to IRS amnesty programs regarding previously undisclosed foreign accounts and assets.
The FBAR must be filed on or before June 30th of the year immediately following the calendar year being reported. There is no extension beyond the June 30th due date.
If you answer “yes” any of the following questions, the filing of an FBAR by June 30th may be required:
- Have you ever lived or worked overseas?
- Do you have family living overseas?
- Do you hold an interest or signature authority over a foreign financial account or accounts?
- Did the value of the account or accounts at any point during the calendar year exceed $10,000 in the aggregate (not individually)?
What is a financial account?
Per IRS General Definitions, a financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions). The definition also applies to some retirement accounts maintained in foreign countries, such as the Registered Retirement Savings Plan (RRSP) in Canada.
Foreign financial accounts that produce no taxable income may still need to be disclosed. This means that funds held in a non-interest bearing account or funds held in a foreign retirement account could require disclosure. If your parent or sibling lives in a foreign country and has listed you on their account “in case of an emergency,” you may have a disclosure requirement.
If your company (or Not-for-Profit) maintains a foreign financial account and you have check writing or transfer authority for the account, even though the funds are not your personal funds, you may have a disclosure requirement.
You should not panic if you are just now learning of the disclosure requirement. If you would like more information on the FBAR, the IRS has great information available on its website.
At Anstiss & Co., P.C., we have extensive experience with FBAR compliance as many of our clients hold a financial interest in or signature authority over a foreign financial account. We have also assisted taxpayers in their participation in the IRS Offshore Voluntary Disclosure Initiative. Currently available is the 2012 Offshore Voluntary Disclosure Program (OVDP) for taxpayers to bring their disclosure and reporting requirements into compliance. This program can be discontinued by the IRS at any time. If you have FBAR questions or require assistance, we invite you to contact us at 978-452-2500.
