Getting behind on your Foreign Bank Account Report, or FBAR filing is one of the most expensive mistakes an expat can make. Read our guide to FBAR filing below so that you’re confident you have all the info you need.
FBAR Filing Requirement for Expats
FBAR truly is just a filing requirement – no taxes are levied on your foreign bank accounts due to the FBAR. And if you meet the thresholds, an annual FBAR filing will be required of you. The threshold for expats is $10,000 or more in aggregate in foreign bank accounts. So, check the amount of money in your foreign bank accounts on the days when they were highest, and if they all add up to $10,000 or more, you’ll be required to complete an FBAR filing. Even if they are at $10,000 for only a single moment out of the whole year, a filing requirement is still triggered.
The IRS essentially defines foreign financial accounts as any financial accounts located abroad. Therefore, even if the foreign financial account did not produce taxable income, the requirement remains. But, some exceptions also apply, such as the types of accounts listed below:
- Correspondent/Nostro accounts,
- An account owned by a governmental entity,
- An account owned by an international financial institution,
- Accounts maintained on a US military banking facility,
- Any account held in an individual retirement account (IRA) you own or are beneficiary of,
- Any account held in a retirement plan of which you’re a participant or beneficiary, or
- Part of a trust of which you’re a beneficiary if a US person has already filed FBAR on behalf of this account.
The Process for Filing FBAR
FBAR is not filed through the IRS the way your expat tax returns are. FBAR is managed by FinCEN (Financial Crimes Enforcement Network), which is a bureau of the US Department of the Treasury. To ensure successful FBAR filing, complete FinCEN Form 114 (the Report of Foreign Bank and Financial Accounts), which satisfies your FBAR filing requirement, and submit it online. FinCEN does not accept paper forms; online is the only way to file. However, an enrolled agent, CPA, or attorney can submit the form on someone else’s behalf if you grant them authority to do so.
FBAR is technically due April 15th of each year, or whichever is the date that coincides with the Federal Tax Day, should April 15th fall on a holiday or weekend. However, the FinCEN grants an automatic extension until October 15th of each year.
Those who were unaware of the FBAR filing requirement can be fined up to $10,000 per violation. If the IRS believes you avoided filing purposefully, the fine can be $100,000 or 50% of the balance of the account at the time of the violation – whichever is greater. This becomes very expensive, very quickly!
Getting Caught Up
If you’ve been behind on your filing requirements for several years, you may be able to get caught up with the Streamlined Filing Procedures. These provisions allow you to become tax compliant – penalty free – so long as your non-compliance was non-willful (meaning, you were unaware of the requirements)! Before filing, you’ll need to prepare the past three years of Federal Tax Returns and six years of FBARs.
Greenback Can Help With Your FBAR Filing
Ready to get compliant? Get started with Greenback today!