If you are a U.S. Citizen who resides outside the country, it’s most common that you have financial accounts located outside U.S. territory. However, did you know that by simply owning foreign financial assets you might need to complete special reporting?
It’s true, and the main reporting necessity is the FBAR, also known as the Report of Foreign Bank and Financial Accounts. The actual form required to complete is FinCen Form 114. Below we will review the basics that you should know about FBAR.
What is the FBAR?
The Foreign Bank and Financial Account Report (FBAR) exists to combat tax evasion. This report forces U.S. Citizens to report money and assets that are located in non-U.S. banks. The FBAR is reported to FinCen, which is the U.S. Treasury Department’s Financial Crime and Enforcement Network. Failing to file the FBAR may result in criminal charges/penalties. It is in your best interest to stay up to date to avoid those penalties.
Who should file an FBAR?
Where you live in the U.S. or outside the U.S., if you are a U.S. person (U.S. citizens, green card holders, and resident aliens) and your combined balance of all the foreign accounts you own or have a financial interest/ signature authority in is more than $10,000 at any point during the year, you are required to file FinCen Form 114 (an FBAR).
For the purposes of this article,
- Financial interest is determined based upon who is the owner of a record or legal title, and;
- Signature authority is defined as someone who has some level of control over the disposition of assets.
Foreign financial accounts include but are not limited to bank accounts, securities accounts, certain foreign retirement arrangements, etc. Accounts located outside the 50 states, D.C., the U.S.S possessions, and tribal territories are considered foreign accounts.
When is the deadline to file the FBAR?
The FBAR is an annual filing and to avoid penalties, you should always make sure to file on time. The FBAR deadline is the same as your income tax return due date, which is normally on April 15 (with an automatic extension to October).
Tax Attorney:
No matter your situation, you should always seek professional advice from a tax attorney. If you want to learn more about whether you need to file FinCen Form 114 (an FBAR), schedule your FREE 15-minute call here.
