Who Has to File the FBAR?
Filing a Report of Foreign Bank and Financial Accounts (FBAR) is mandatory for some Americans. Noncompliance can lead to lofty financial penalties and other consequences, so you should learn whether or not you need to file an FBAR.
If you own a foreign bank account that exceeds $10,000, you will likely have to file an FBAR. This annual report is required by the Financial Crimes Enforcement Network (FinCEN) and is due by Tax Day for any year your foreign bank accounts exceed the threshold. Filers must use FinCEN Form 114 to file an FBAR. Filing is generally done online, although paper filing is possible if you wish to apply for an exemption. You can face serious financial penalties if you don’t file an FBAR when required. Instead of taking that risk, turn to an experienced tax CPA for help.
Our tax professionals are here to make FBAR filing easier for Americans. To learn more about how the tax accountants at US Tax Help can make tax season simpler for you, call today at (541) 362-9127.
Do You Have to File the FBAR?
Filing a Report of Foreign Bank and Financial Accounts is crucial for Americans with bank accounts situated overseas. Compliance with FBAR reporting requirements is of the utmost importance, so it’s vital that you understand whether or not you need to file such a report with the Financial Crimes Enforcement Network.
Any American that owns a foreign bank account that has, at any point during the tax year, exceeded $10,000 must file an FBAR. The following parties are responsible for making this report if they own foreign bank accounts whose contents exceed the threshold:
- Citizens
- Residents
- Corporations
- Partnerships
- Limited liability companies
- Trusts
- Estates
Generally speaking, FBAR reporting requirements affect American expatriates and resident aliens the most. As long as you retain your American citizenship, you must file a Report of Foreign Bank and Financial Accounts with FinCEN if you have over $10,000 in a foreign bank account. It’s also important to note that filing an FBAR is required if the aggregate total of all your foreign bank accounts exceeds $10,000.
What Forms Do You Use to File the FBAR?
A Report of Foreign Bank and Financial Accounts is not filed with the IRS as some may initially expect. Instead, an FBAR is filed with the Financial Crimes Enforcement Network, meaning those responsible for completing this report may have to use unfamiliar forms and reporting processes.
Like the IRS, the Financial Crimes Enforcement Network is part of the Department of Treasury. This bureau monitors American money overseas to reduce instances of money laundering and other illegal activity. That is why, when filing an FBAR, you’ll need to use forms from FinCEN.
Depending on your situation, you may use FinCEN Form 114 or Form 114a to file an FBAR. Form 114 is for single FBAR filers, while Form 114a is for those filing jointly with a spouse. Your tax accountant can help you understand whether or not you can file an FBAR jointly with your spouse, which is only possible under certain circumstances.
Properly completing Form 114 requires FBAR filers to have specific information regarding their foreign bank accounts on hand. The following is just some of the information you must provide on FinCEN Form 114:
- Name on foreign bank account
- Bank account number
- Name of foreign bank
- Address of foreign bank
- Type of foreign bank account
Filers may also have to provide the maximum value of all foreign bank accounts within the past year. Completing FinCEN Form 114 in its entirety is crucial if you have an FBAR liability for the past tax year. If you’re having difficulty understanding Form 114 and how to complete it, reach out to an experienced tax accountant for help.
When is the FBAR Due?
Knowing that you may have to file a Report of Foreign Bank and Financial Accounts is not enough. Filers must also learn when they have to submit a completed Form 114 to the Financial Crimes Enforcement Network.
If your foreign bank accounts exceed $10,000 in aggregate value, you’ll have to file an FBAR. Generally speaking, these reports are due on Tax Day. You’ll qualify for an automatic six-month extension if you don’t submit an FBAR by the due date. You won’t have to file for an extension, which can be a relief for filers.
Although the FBAR is due on Tax Day, you can’t submit it alongside your annual tax return and other IRS forms. No, Americans with an FBAR liability must submit their completed paperwork directly to the Financial Crimes Enforcement Network. Currently, FinCEN requires filers to do this online by Tax Day. If you feel more comfortable filing a paper FBAR, your tax accountant can help you request an exemption from e-filing.
What Happens if You Don’t File the FBAR?
The Financial Crimes Enforcement Network takes the FBAR filing seriously. If you’re required to file an FBAR and fail to, you can face serious financial penalties that could potentially exceed the funds you have in your foreign bank account.
Those required to file an FBAR and fail to are likely to face steep financial penalties. For each year you don’t file an FBAR, you can incur a penalty of $100,000 or 50% of the contents of your foreign accounts, whichever amount is greater. If you continue not to file an FBAR and fail to pay financial penalties, you can even face time in prison.
Because of the Foreign Account Tax Compliance Act, foreign financial institutions must report bank accounts owned by American persons or companies to the IRS. That means that the IRS and FinCEN likely know whether or not you have to file an FBAR before you do. So, forgetting or ignoring FBAR reporting requirements won’t do you any good. Instead of risking serious penalties for failure to report your foreign bank accounts, enlist help from a tax accountant. That way, you can file an FBAR on time without worrying about any consequences.
We Can Help You File the FBAR Today
If you need assistance filing a Report of Foreign Bank and Financial Accounts, our tax CPAs are here to help. To learn more about the tax accountants at US Tax Help, call today at (541) 362-9127.
