Over the past several years, the U.S. government has increased its regulatory and enforcement efforts aimed at the disclosure of foreign bank and financial accounts. As a result, there is heightened pressure this year for taxpayers to file a brand-new “Report of Foreign Bank and Financial Accounts” (FBAR) by June 30.
Beginning this year, the FBAR report must be filed electronically through the Bank Secrecy Act (BSA) E-filing system on FinCen Form114, the successor to the previously-used TD F90-22.1.
Before getting into the specifics of the new FBAR form, we should emphasize that the FBAR is filed separately from tax returns and is not processed by the IRS. Accordingly, the FBAR form must be filed by June 30, even if your tax return is on extension.
Who Must File an FBAR?
United States persons are required to file an FBAR if:
- The United States person 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 to be reported.
United States person means U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
Exceptions to the Reporting Requirement
Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
- Certain foreign financial accounts jointly owned 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;
- IRA owners and beneficiaries;
- 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); and
- Foreign financial accounts maintained on a United States military banking facility.
Review the FBAR instructions for more information on the reporting requirement and on the exceptions to the reporting requirement.
Reporting and Filing Information
A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.
The FBAR is a calendar year report, which must be filed with the Department of Treasury on or before June 30 of the year following the calendar year reported. Generally, extensions of time to file an FBAR are not granted. The FBAR is not filed with a federal tax return. Any filing extensions of time granted by the IRS to file a tax return does not extend the time to file an FBAR.
A person required to file an FBAR who fails to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed $10,000 per violation for violations that are not due to reasonable cause. For additional guidance when circumstances such as natural disasters prevent the timely filing of an FBAR.
The June 30 Deadline
As in past years, there is no extension to the June 30 deadline for filing the FBAR form. If you do not have all of the available information, the government recommends that you file the return by June 30, and amend the report when additional or new information becomes available. Failure to file a complete and correct FBAR in a timely fashion may result in a civil penalty of up to $10,000 for nonwillful violations; willful violations of FBAR reporting may result in substantial penalties as well as potential criminal prosecution.
The website to file electronically is http://bsaefiling.fincen.treas.gov/.