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1. Nonresident filers do not need to file
Only filers who are tax residents of the U.S. will have a FBAR filing requirement. If you are a nonresident filing a Form 1040NR (rather than the resident Form 1040), you do NOT have an FBAR filing requirement.
2. Resident filers with an AGGREGATE total of over $10,000 in foreign financial accounts AT ANY TIME during the tax year have an FBAR requirement.
Whether it’s 1 account with $10,001 or 100 accounts with $101, all accounts would need to be reported if the total of ALL accounts is above $10,000. Even if the aggregate exceeds $10,000 for only one day (for ex. when opening an account to fund a foreign venture), you must report all accounts.
3. Foreign financial accounts include more than just bank accounts
Financials accounts include checking, savings, mutual funds, stocks or securities, insurance or annuity contracts with a cash value, most types of foreign pensions, accounts held in foreign branches of US institutions, and indirect interest in assets through a foreign entity. They do not include mortgages and hedge funds.
4. Accounts in which you have signatory authority need to be included
If you have no financial interest in an account but have signatory authority (ex. a father who has signatory over his child’s foreign bank account), this account would also need to be listed on your FBAR.
5. Companies also have an FBAR filing requirement
Partnerships, LLCs, corporations, and trusts must also file an FBAR if they are organized under the laws of the US and meet the $10,000 total.
6. Maximum values must be reported
The FBAR requires that the maximum value at any time during the tax year be reported. As an example, if an account had a large value for just one second of one day because funds were being transferred out on January 1, the amount before transfer would be reported as this would be the max for the year.
7. The FBAR is an informational filing only. It is filed with the US Treasury and NOT with the IRS.
There is no tax that needs to be paid with filing an FBAR. It is filed separate from your tax return and can be completed on the Treasury’s website.
8. Penalties for not filing an FBAR are steep
Civil penalties start at $10,000 for an unintentional error and can escalate into the hundreds of thousands if willful. Willful failure to file can also land you in prison if determined to be a felony. Penalties can be waived in some cases but be prepared for an audit first.
9. There are options if you didn’t know about the FBAR and haven’t filed in years
If you did not fail to report any income and do not owe any tax but failed to file the FBAR non-willfully, you can file under the delinquent FBAR submission procedures and include a statement indicating why the FBAR is being filed late. The IRS will not impose a penalty in the case that the FBAR was innocently missed.
If you did not file a tax return or failed to report income and pay tax that is owed, you can file under the Streamline procedures. Failure to file must still be non-willful but no penalties will be applied. Please contact us if you fall under the Streamline procedures and need to file both late tax returns and FBARs.
10. Filing deadline is April 15 but an automatic extension until October 15 is currently in place until further notice.
Kaufman Accounting is experienced in helping taxpayers take the appropriate steps to report foreign bank and financial accounts on the FBAR. Contact us today to discuss your FBAR filing needs!
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