You have heard the term, yet need to understand it. If you are American with foreign bank accounts then read to gain the information you need.
What is the FBAR?
The FBAR stands for Foreign Bank Account Report, and it refers to the annual report that the US Department of Treasury requires for Americans with who own over $10,000 in foreign financial accounts. The FBAR requirement began as part of the Bank Secrecy Act of 1970 in an effort to prevent tax evasion. Since then, more and more Americans have moved abroad and opened bank accounts and many expats are unaware of the requirement to file an FBAR.
Who Needs to File an FBAR?
Any US person with over $10,000 in foreign (non-US) bank accounts at any point in the year needs to file an FBAR. The amount is the aggregate of all bank accounts, so if you own two foreign bank accounts which each have a value of $5000, then the aggregate would be $10,000 and you would need to file an FBAR. In addition, if you have signature authority over an account, such as a company account, then you need to include that account on your FBAR.
- When is the FBAR due?
The due date for the FBAR has changed over the past few years. The current due date for the FBAR is April 15th. However, there is an automatic six-month extension which gives individuals until October 15th to file.
What needs to be reported on the FBAR?
Any foreign financial account needs to be included on the FBAR. Financial accounts include bank accounts, stock and securities accounts, and retirement accounts. If you are required to file an FBAR, then you must include the following information about each foreign financial account you own:
- Name of the Financial institution
- Address of the Financial Institution
- Type of Account
- Names and Identification number of joint owners, if any
- Highest account value during the year
Each account needs to include the highest balance during the year. Even if the highest balance only lasted for a day, the Department of Treasury still requires that the highest balance be included. Likewise, if the balance was transferred from one account to another, the highest balance of each of the accounts needs to be included.
What are the penalties for not filing the FBAR?
The Department of the Treasury applies different penalties depending on whether the individual was willful or non-willful in failing to file or misreporting information on an FBAR. If the individual was non-willful and did not know of the responsibility to file an FBAR, then the penalty is $10,000 per violation. If the individual is determined to be willful, and either know of the responsibility to file an FBAR and chose not to file, or misrepresented information on the FBAR,then the penalty can be $100,000 or up to 50% of the value of the account at the time of the violation.
How do you file the FBAR?
There are two ways to file an FBAR. The first way to file an FBAR is through the Department of Treasury’s BSA E-Filing System’s website: https://bsaefiling.fincen.treas.gov/main.html. There are a few websites which charge for filing the FBAR, however, if you file through the Department of Treasury’s website then there should be no fee. The second way to file an FBAR is through your accountant. Most accountants will help you find and organize all the information needed for the FBAR and they can efile your FBAR on your behalf. You are unable to file by mail.
Joshua Katz, CPA is the founder of Universal Tax Professionals. Joshua graduated from Boston University’s School of Management and worked for several large accounting firms before realizing that …read more.
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