Are you aware of the Foreign Bank Account Report (FBAR)? If not, it’s time to get you well-acquainted. Americans abroad are often required to file FBAR and fail to do so, mostly because they didn’t know they needed to file it. While this may be an innocent oversight, the Treasury Department isn’t inclined to give you a ‘free pass.’ They are becoming increasingly strict and are cracking down on US taxpayers who fail to comply. Thankfully the filing process isn’t overly complicated and you can self-file the FBAR online. Let’s take a closer look at the filing requirements and process.
What is the FBAR?
In a nutshell, the FBAR is another attempt by the IRS and Treasury Department to uncover tax cheats who are hiding money in overseas accounts. It is pursuant to Title 31 of the Bank Secrecy Act, which is not actually part of the IRS. Any US person with a financial interest in or signing authority over foreign financial accounts with an aggregate balance of $10,000 at any point during the year must file FBAR.
According to FinCEN’s website, the definition of a financial account is:
A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).
How Do I File?
Prior to July 1, 2013, all FBAR’s were filed via Form TD 90-22.1 and mailed to the Treasury Department by June 30th each year. Now all FBAR’s must be filed electronically via FinCEN Form 114. The deadline remains June 30th, and as always, there are no extensions available.
If you are going to self-file the FBAR, you will do so through FinCEN’s BSA E-Filing System. The application to file can be found at http://bsaefiling.fincen.treas.gov/main.html.
From here you will start the process by denoting whether you are an institution or an individual. You will then be prompted to download the E-File form, fill it out, sign, save and then proceed to the page where you can upload the completed form. Once the process is complete you will receive a confirmation email, which you should retain for your records.
What Kind of Records Must I Have on Hand to File?
There are several things you will need to reference in order to file your FBAR:
- The name in which each account is maintained
- The name and address of the foreign financial institution that holds the account
- The type of account
- The maximum account value of each account during the reporting period
It is recommended that you keep these records for the 5 years following your June 30th reporting. Also, retain a copy of the filed FBAR in case there is a discrepancy.
You are responsible for filling out the form completely and accurately, though there are places denoted by asterisks that are required. Make sure you enter all phone numbers and identifying numbers in a single text string without characters (ie, a phone number would not be entered 111-222-3333 but 1112223333).
When recording your maximum account balances, record all amounts in US dollars, rounded up to the next whole dollar. If your accounts are held in a different currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (select Exchange Rates under Reference & Guidance at www.fms.treas.gov) for the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and make sure you provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.
Can I Have Someone File the FBAR for Me?
FBARs may be completed and filed on your behalf and/or owner of the foreign account(s) by a third party preparer, such as a professional tax preparer. The filer or owner who is using a third party preparer must complete and maintain a record of FinCEN Form 114a, FinCEN BSA E-Filing Signature Authorization Record, to authorize the third party filing. You don’t need to file or send the completed Form 114a to FinCEN—you simply hang onto that form in case the IRS requests it. Spouses filing a joint FBAR also may use the Form 114a to approve/designate which spouse will sign the report.
What if I Need Help?
If you need assistance during the filing process, you can contact the E-Filing Help Desk by calling 1-866-346-9478 (option 1) or via E-mail sent to [email protected].
You can also contact the expert CPA’s and IRS Enrolled Agents at Greenback to file on your behalf. We are always here to help!