Do you need to file a Foreign Bank Account Report (FBAR)?
Taxes are confusing, and international tax laws are even more complex. The IRS has been working diligently to create a better system to bring offshore accounts into compliance, and one way they have done this is through FBAR requirements including Offshore Voluntary Disclosure Program (OVDP)/Offshore Voluntary Disclosure Initiative (OVDI)

If you are a United States person (including U.S. citizen and U.S. resident, as well as U.S. entities such as corporations, partnerships, or limited liability companies, and trust or estates formed under the laws of the U.S.), you must file an FBAR if:

• “You had a financial interest in or signature authority over at least one financial account located outside of the United States; and
• The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported” [1]

Are there any exceptions to the FBAR reporting requirements?

For a complete list of exceptions to the FBAR reporting requirements, reference the complete FinCEN requirements. There are exceptions for the following groups of U.S. persons, but refer to the FinCEN requirements for specifics:

• Certain foreign financial accounts owned jointly 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 a U.S. IRA/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 US military banking facility. [1]

Reporting and Filing information

Even if your account produces no taxable income, you might still be required to report your foreign financial account. Your tax return will ask a series of questions regarding your foreign accounts, and from those questions you can ascertain whether or not you are required to file an FBAR.

If you find you are obligated to file an FBAR, your FBAR must be filed by June 30 of the year following the calendar year being reported. As of July 1, 2013, all FBARs must be electronically submitted through FinCEN’s BSA E-Filing System. All FBAR filing is by calendar year, and if you are granted an extension for your personal income tax that does not apply to your FBAR filing deadline.

If you are required to file an FBAR and fail to do so, you will face a civil penalty not to exceed $10,000 for non-willful violations not due to reasonable cause. For a willful violation, the penalty may be the larger of $100,000 or 50% of the account balance at the time of violation, for each violation.

U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938

Some specified foreign financial assets which exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which accompanies your income tax return. These assets can include foreign accounts which were disclosed on an FBAR, and Form 8938 is in addition to your FBAR filing requirement.

Visit the IRS website to see a chart comparing a Form 8938 to the requirements for FBARs, or refer to the Foreign Account Tax Compliance Act website for additional assistance.

Need assistance?
The expert team at RJS LAW is happy to help in any way we can, and international tax issues are our specialty. Feel free to contact us or call (619) 595-1655 if you have further questions or need assistance preparing your FBARs. To read more about FBARs and the Offshore Voluntary Disclosure Initiative, click here.

[1] Reports of Foreign Bank and Financial Accounts (FBAR) https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR

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Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.