Filing An FBAR
Do You Know the FBAR Reporting Requirements?
In this article, we’ll explain the FBAR filing requirements and explain what to do if you haven’t filed prior year reports. Plus, we’ll cover filing an FBAR. Let’s do it!
The threshold for FBAR filing is quite low; if your total value in foreign financial accounts exceeds $10,000 at any point during the calendar year, you must file. This includes checking and savings accounts, stocks and securities in offshore accounts, as well as other types of investments such as mutual funds. For instance, if you have a checking account in France and another in Singapore with a combined balance that exceeds $10,000 at any point throughout the year, you must file the FBAR.
Additionally, please note that if you are an owner or signatory of an offshore account held by your employer—such as a corporate retirement plan—you are still required to report it on an FBAR even if the value of the account does not exceed $10,000. Understanding these requirements can help you avoid an FBAR penalty associated with filing late or incomplete reports.
What Is an FBAR and Do You Need to Be Filing An FBAR?
FBAR stands for Foreign Bank Account Report, and it’s an important form to know about when it comes to taxes. The FBAR is an annual report prepared on a FINCEN form 114, that must be sent to the Treasury Department by anyone who has a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year.
So why is filing an FBAR so important? Well, FBARs provide the IRS with information about taxpayers’ foreign accounts and help ensure that U.S. taxpayers are compliant with their tax obligations in relation to those accounts. Failing to file a required FBAR can lead to steep fines and penalties.
If you haven’t filed in prior years, there is no need to panic—the IRS offers various ways for taxpayers to get right with the law. You can make a voluntary disclosure and comply with back filing requirements or you can explore one of the special criteria programs available. It’s important that you discuss your options with a qualified tax professional as soon as possible if you have not filed an FBAR in prior years.
FBAR Filing Thresholds and Requirements
Are you required to file an FBAR? It all depends on the thresholds. To be more precise, if you have a financial interest in or signature authority over at least one foreign financial account with an aggregate value of more than $10,000 during the year ending December 31, then you’re going to need to file an FBAR.
The definition of ‘foreign financial account’ is broad – it includes any bank accounts, securities accounts, and certain other accounts. Think of individual retirement accounts (IRA) too – basically anything located outside of the United States. Even if your foreign account is actually in USD, but held in a non-U.S. jurisdiction and not held in the United States!
In addition to meeting these thresholds, you must also meet other filing requirements such as:
- Being a US citizen, US resident alien or certain entities such as corporations and partnerships
- File electronically through FINCEN’s BSA E-Filing System by April 15th each year
- Keep accurate records of each foreign account you own or have signature authority over for 5 years
If you haven’t filed prior year reports and don’t meet these requirements now, then don’t worry – thanks to the IRS’s Streamlined Program, it’s easy to get caught up on your taxes without facing any hefty penalties!
FBAR Due Dates and Extension Requests
If you have foreign accounts that need to be reported, the good news is that you can request an extension to file your FBAR report. The due date for FBAR filing is April 15th each year, but if you’re not prepared come that day, you can request an automatic extension until October 15th.
But just getting this extension doesn’t mean your obligations are over—you’ll still need to file any prior year reports as well. A late FBAR can result in a penalty so it’s important to do all required filings on time.
If for some reason you haven’t filed prior year reports, your best bet is to get into compliance and submit them as soon as possible. The Internal Revenue Service (IRS) has set up a program called the Streamlined Offshore Process (SOP) with reduced penalties in certain cases.
You should consult a financial expert or tax lawyer if you have additional questions about FBAR filing requirements or how to become compliant in the most cost-effective way possible.
How to File Your FBAR Form
If you determine that you need to file an FBAR, it’s actually easier than you think. It all starts with getting the form from the Financial Crimes Enforcement Network (FinCen) website. You’ll need to fill out your personal information, including your name, address and taxpayer identification number (TIN).
What to include on your FBAR Document
Once you have your form, you’ll need to provide information about any financial accounts held outside the U.S. If you have a foreign bank account, investment account or credit card, this will need to be reported on the FBAR. You’ll also need to report any other kinds of foreign financial assets such as stocks and securities or life insurance policies with a cash value.
How To File FBAR Online In the FinCEN portal
Once your form is complete, make sure to submit it through the FinCEN portal as soon as possible so that you can get ahead of any potential penalties for late filing. Submitting via the FinCEN portal should take no more than an hour of your time—including reading instructions—and is a much faster process than mailing it in.
If for some reason you haven’t filed prior year FBAR reports, don’t panic — just contact a professional who can help guide you through the process of gathering all the necessary information and getting caught up on filings.
Penalties for Failing to File an FBAR
Missing the FBAR filing deadline can result in serious penalties from the IRS. If you are found to have willfully failed to file an FBAR, you may be looking at fines of up to $100,000 USD or 50% of the total value of the account at the time of violation.
In addition to these financial penalties, you may incur more severe criminal penalties as well. This includes jail time, so it’s important to take steps if you have not filed prior year reports.
If you haven’t filed before, it’s important that you do so as soon as possible. There are special programs available through the IRS that can help mitigate any potential penalties for non-willful failure to file. Additionally, if you have already filed a late FBAR and are concerned about potential fines or other consequences, contact the IRS immediately to try and work out a settlement or agreement on payment terms.
Filing an FBAR doesn’t have to be complicated. With the help of an experienced financial professional, you can make sure you file the correct reports and avoid the risks of running afoul of the law. Depending on your situation, filing a voluntary disclosure form may be a good option if you haven’t filed your FBARs in prior years and you want to get back on the right side of the rules. Finally, don’t forget to keep up-to-date records of your foreign account activity going forward—this is the best way to make sure filing an FBAR won’t be a headache next year.