Did you have more than $10,000 USD in foreign bank accounts during the year?

Having the equivalent of or more than $10,000 USD at any time during the year in one or multiple foreign bank accounts where you have signatory authority requires that you file the Report of Foreign Bank and Financial Accounts (FBAR) Report 114 with the Financial Crimes Enforcement Network (FinCEN), and yes, that sounds like a department name taken out from a movie. This report applies to any United States resident, including children, limited liability companies, corporations, partnerships, trusts, and estates.

The $10,000 line mark amount is not by individual accounts but rather by combined accounts, meaning if you have Mexican pesos in several Mexican bank accounts that combined add up to more than $10k, even if individually are less than $10,000, you will be required to file this report.

It is important to note that if you have signatory authority but you as an individual does not have a financial benefit in the financial accounts, you as an individual do not need to file the FBAR. Also, an account maintained with a branch of a foreign bank that is physically located in the United States is not a foreign financial account for purposes of filing this report.

Exceptions

Like most of the time, there are exceptions that are left out of this filing requirement:

  • Certain accounts owned jointly owned by spouses, where only one spouse would be required to file

  • Governmental entities are exempt from filing this report

  • Foreign financial institutions are not required either

  • Owners and beneficiaries of accounts that are invested in IRA's

  • A participant in or beneficiary of a retirement plan described in Internal Revenue Code section 401(a), 403(a), or 403(b) is not required to report a foreign financial account held by or on behalf of the retirement plan

When and where to file the FBAR

The FBAR is an annual report that needs to be file by the 15th of April for the year immediately following the calendar year being reported. The FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The application to file electronically is available at http://bsaefiling.fincen.treas.gov/

The FBAR has set a deadline mirroring the deadline of tax filing. For this same reason, the FBAR deadline automatically extends if the tax return is extended.

You can find the instructions to file this report here.

Penalties

It is There is a $100,000 penalty violation, if willful and a $10,000 penalty, if not willful.

Other considerations

Keep in mind what we have discussed above is different from what the IRS requires you to disclose in your tax return in Form 8938 and requirements vary. I will discuss more about Form 8938 in another fun size article.

If you have any questions regarding this filing, please contact me and let's discuss your situation.