Accountant, Tax Prep & Bookkeeping | Hilton Head & Bluffton

If you have a financial interest in or signature authority over a foreign financial account, in­cluding a bank account, brokerage account, mutual fund, trust, or other type of foreign fi­nancial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Trea­sury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).

Who Must File

United States persons are required to file an FBAR if:

1. The United States person had a financial in­terest in or signature authority over at least one financial account located outside of the United States, and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time dur­ing the calendar year reported.

United States person includes U.S. citizens; U.S. residents; entities, including but not lim­ited to, corporations, partnerships, or limited li­ability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Exceptions to the Reporting Requirement

There are filing exceptions for the following Unit­ed States persons or foreign financial accounts:

• Certain foreign financial accounts jointly owned by spouses.
• United States persons included in a consolidated FBAR.
• Correspondent/Nostro accounts.
  • Foreign financial accounts owned by a governmental entity.
  • Foreign financial accounts owned by an international financial institution.
• Owners and beneficiaries of U.S. IRAs.
  • Participants in and beneficiaries of tax-qualified retirement plans.
  • Certain individuals with signature authority over, but no financial interest in, a foreign financial account.
  • Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust).
  • Foreign financial accounts maintained on a United States military banking facility.

Reporting and Filing Information

If you hold a foreign financial account you may have a reporting obligation even when the ac­count produces no taxable income. The report­ing obligation is met by answering questions on a tax return about foreign accounts (for ex­ample, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.

The FBAR is a calendar year report and is due April 15 of the year following the calendar year being reported with a 6-month extension avail­able. FinCEN will grant filers failing to meet the FBAR due date of April 15 an automatic extension

to October 15 each year. A specific extension request is not required.

The FBAR must be filed electronically through FinCEN's BSA E-Filing System. The FBAR is not filed with a federal income tax return.

The IRS can waive the penalty for failure to timely file or request an extension for any person required to file an FBAR for the first time. If you are required to file an FBAR and fail to properly file a complete and correct FBAR you may be subject to a civil penalty not to exceed $10,000 per violation for any non-willful violation that is not due to rea­sonable cause. For a willful violation, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation.

Additional information about the FBAR can be found at: https://www.irs.gov/ Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR.

U.S. Taxpayers Holding Foreign

Financial Assets May Also

Need to File Form 8938

If you have specified foreign financial assets that exceed certain thresholds you must re­port those assets to the IRS on Form 8938, Statement of Specified Foreign Financial As­sets, which is filed with an income tax return. These foreign financial assets could include foreign accounts reported on an FBAR. The Form 8938 filing requirement is in addition to the FBAR filing requirement.

Form 8938 must be filed by specified individu­als who include U.S. citizens, resident aliens, and certain non-resident aliens if reporting thresholds are met.