The ins and outs of FBAR filing requirements.
A US federal tax deadline for expats is upon us. FinCEN Form 114, Report of Foreign Bank and Financial Accounts, commonly known as the Fbar, must be e-filed by June 30th by all US persons who have an interest in any foreign financial account meeting the reporting threshold. This deadline cannot be extended.
What does this really mean? Let me lay out a very common scenario. A green card holder moved back to home from France five years ago. When he left, he had a bank account in his name that he opened 20 years ago and left open after moving back.
If at any point during 2014 the balance in that account was greater than the equivalent of $10,000 (in Euros), he has to file an Fbar report by June 30 and disclose the highest balance that account ever reached in the 2014 calendar year. A similar reporting requirement would be triggered if an American expatriated to France had opened a French account which at any point exceeded the equivalent of $10,000.
Other types of foreign assets also must be reported on the Fbar filing. In general, any financial account that is either in your name or one you have signature authority over must be reported if it exceeds the $10,000 reporting threshold. This includes all foreign deposit accounts, investment and brokerage accounts, or financial interests indirectly held through a foreign entity, foreign mutual fund, and foreign-issued life insurance account with a cash surrender value component.
Of particular note to many of my clients, foreign real estate interest directly held do not need to be reported on the Fbar.
Exceptions to the Reporting Requirement
There are filing exceptions for the following US persons or foreign financial accounts:
- Certain foreign financial accounts jointly owned by spouses
- US 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 US 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 US person reports the account on an Fbar filed on behalf of the trust)
- Foreign financial accounts maintained on a United States military banking facility.
There is no tax or any type of payment due with a timely filed Fbar, however a penalty of up to $10,000 could be assessed for a non-willful failure to file. This is considered an informational report rather than a tax return.
As long as you keep the Treasury Department informed of your foreign financial assets in a timely manner, tax or penalties will not be assessed on the balances. Additional taxes will be due, however, on interest or any other income generated by those foreign financial assets.
About Five Stone Tax Advisers
Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome for you. Our International Tax Advisory and Compliance unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact that will provide services for all the legal, compliance and financial reconstruction aspects of offshore account cases.