As an American living abroad, you are probably well aware of your US income tax filing requirement. Every citizen who meets the filing threshold must file a US tax return, whether they live in the States or in a foreign country. One thing you may not be as familiar with, though, is the Foreign Bank Account Report (FBAR) – also known as FinCen Report 114. In addition to reporting your worldwide income, you may be required to complete your FBAR reporting if your foreign accounts exceed a certain monetary threshold. With an approaching deadline, here’s what you need to know about FBAR!
What Accounts Need To Be Reported?
While most will be reporting foreign bank account balances, any type of foreign account must be included on FBAR reporting. These include:
- Foreign mutual funds
- Foreign stock or securities held in a financial account at a foreign financial institution
- Financial account held at a foreign branch of a US bank
- Foreign-issued life insurance or annuity contract with a cash value
What Is The FBAR Reporting Threshold?
Similar to your income taxes, there is a dollar amount threshold that determines whether you must file an FBAR each year. If your foreign bank accounts exceed $10,000 total at any point during the calendar year (whether it’s a single account or multiple accounts that total $10,000), you must file an FBAR. This applies to any US citizen, regardless of age. Joint accounts exceeding the $10,000 threshold must also be reported on an FBAR form. If you and your spouse also have separate foreign accounts exceeding the threshold, you’d need to do FBAR reporting separately for those accounts. Also subject to FBAR reporting are US companies with foreign accounts exceeding the $10,000 threshold.
What Is The Deadline?
An important thing to note about FBAR reporting is that you will submit this form to the US Treasury instead of the IRS. It is separate from your US tax return, and the deadline for 2015 filing is June 30, 2016. There are no extensions available, so it’s important to be sure you meet this deadline.
For the 2016 filing year and beyond, the FBAR reporting deadline will have the same due date as Federal taxes – April 15th. You will receive an automatic extension if you’re living overseas on the due date. You will also have the ability to request an extension for six months, making the due date October 15th.
Even though you’ll have a bit more time in the future to submit your FBAR, it’s still important to stay on top of the deadline, because the penalties for late filing can be quite severe – read on for details.
What Are The Penalties?
If a US citizen fails to file the FBAR, the US Treasury will impose penalties on the taxpayer – which can be much more severe than those the IRS typically assesses for delinquent taxes. Don’t fret, though. If you are a US expat who truly didn’t realize you needed to file an FBAR, the Treasury has been known to be more forgiving when it comes to penalties. In some non-willful violation cases, the fine can be $10,000. However, if your failing to file was a willful violation, there are serious implications. You may be required to pay $100,000 in fines, or 50% of the balance of the account at the time of the violation – whichever is greater. If you haven’t filed for years at a time, you can see how these fines can add up big time – so it’s very important to do your homework when it comes to tax preparation!
What If I Haven’t Filed And Should Have?
Fortunately, the IRS has created two amnesty programs that can help you get caught up on your FBAR reporting without being subject to penalties. The most relevant program to help to expats is the Streamlined Filing Procedures. As long as you are a US citizen who has failed to submit FBAR filings due to lack of knowledge, you are eligible. To use this program, you will need to file the past three years’ worth of Federal Tax Returns as well as the last six years of FBARs.
It’s so important to get caught up on these filings so you can avoid the above-mentioned penalties. The Streamlined Procedures is a helpful tool to protect US expats who were unaware they needed to file, but you should know if the IRS finds you before you take action to catch up, you can face those penalties! In the end, it may be a good idea to consult a tax professional to be sure you’re all set when it comes to your FBAR reporting.
Have More Questions About FBAR Reporting?
Greenback can help! Contact us today – our expat-expert CPAs and IRS Enrolled Agents are here to answer your questions and help you stay on top of your expat tax requirements.