FBAR Filing: When to Do It and How to Do It
There are many advantages to living overseas – personal, professional, and financial – all of which are worth exploring for those from all walks of life. However, transitioning from a domestic American citizen to a U.S. taxpayer living outside the U.S. means familiarizing yourself with a variety of new filing requirements. Not only are there changes to the income tax filing process to consider, but expats also have to think about when and how to report on their foreign financial assets, a requirement put in place through several U.S. laws and enforced by two separate agencies. Perhaps the most common report filed by expats is the FBAR; to find out when to file this form and how to do it, keep reading as the international tax accountants at US Tax Help provide the answers you need.
What is the FBAR?
Unlike other acronyms used in tax filings, the term “FBAR” doesn’t quite correspond to the actual name of the thing it references – the Report of Foreign Bank and Financial Accounts; also unlike other financial forms, the FBAR is not submitted to the Internal Revenue Service but to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network, or FinCEN. This can sometimes lead expats to overlook the need to file an FBAR, but know that this form is every bit as important as any other you might submit come Tax Day.
Since its creation under the Bank Secrecy Act, the FBAR has aided the federal government in seeking out and prosecuting those who hide funds from taxation in overseas accounts, so they take foreign account U.S. tax compliance very seriously. As a result, the penalties for failing to file an FBAR can be quite expensive.
When to Think About Filing an FBAR
As the (full) name implies, a Report of Foreign Bank and Financial Accounts lays out what financial assets you might have stored in foreign bank accounts, though it’s worth noting that an FBAR does not require submitting any form of payment to the IRS or FinCEN; it’s strictly an informational return, and not everyone who lives abroad needs to file one, though many expats will.
To find if you need to file an FBAR, simply look at the total value of your foreign bank accounts, which means not only those accounts that contain your personal funds but also those over which you have authority. If the sum of all these accounts is greater than $10,000 at any point in the year for which you’re filing your taxes, you’ll have to submit an FBAR in addition to your regular tax documents.
For those wondering when to file their FBAR, the due date is the same as that of virtually all tax documents: April 15. However, anyone who must submit an FBAR filing has the benefit of an automatic deadline extension, pushing the effective deadline back to October 15; no formal request is required to receive this extension.
How to File Your FBAR
Although it’s supposed to be submitted at the same time as your individual tax return, the FBAR form is submitted independently through an electronic filing process, not sent in with other financial documentation. To file an FBAR, you’ll need to go through FinCEN’s BSA E-Filing System and find FinCEN Report 114 – the technical name for the FBAR. Once you’ve found the form on the BSA E-Filing website, you’ll see that you have two options: to file it through your browser or to download a PDF of the document, which you’ll fill out and submit as a separate step. Use whichever method is easiest for you, or speak with an accountant for foreign financial account reporting who can handle the FBAR filing process on your behalf.
Late FBAR Filing Options for Expats
Because so many expats (understandably) equate leaving the U.S. with freedom from U.S. tax laws, it’s not uncommon for American citizens living abroad to neglect their filing obligations. Unfortunately, the federal government taxes all citizens on their income, no matter where in the world they live, and the rules governing FBAR filings work the same way. However, those who have forgotten about these requirements or who were not aware they existed in the first place will be happy to know that the IRS offers streamlined procedures for foreign accounts that allow delinquent taxpayers and FBAR filers to settle their tax and reporting obligations without having to worry about late fees or other penalties.
These procedures can be very beneficial if you didn’t know about FBAR filing or didn’t realize it applies to you, but they are only available to those whose lapse was accidental. In addition, any taxpayer who is under civil investigation by the IRS cannot use these procedures, and you must pay any previous penalties before you can avail yourself of this option. It should also be noted that the streamlined reporting procedures are a one-time deal; after you use them once, they are closed to you forever. If you believe you may have unpaid or unreported financial obligations and would like to avoid steep penalties and fines, speak to a qualified international accountant today and ask about your options.
Assistance with All Your FBAR Filing Needs Available Today from US Tax Help
Even the simplest tax filing procedures can be stressful and complicated to the layperson, and that goes double for taxpayers living abroad. Whether you moved to another country for work or pleasure, it’s important to consider the expectations of the IRS and FinCEN when tax season hits, or else you could find yourself on the hook for thousands of dollars in penalties. To avoid trouble with filing an FBAR or any other tax document, contact the international tax experts at US Tax Help to set up a consultation, and put our decades of experience to work on your behalf; reach us online or call (541) 362-9127 today.