The October 15th FBAR (Foreign Bank Account Reporting) filing deadline is on the horizon – in fact, it will be here in less than a week! This is the final deadline for expats – not just for FBARs, but also for Federal Tax Returns if an extension was filed by June 15th. Are you prepared?
FBAR Deadline for Expats
With the final deadline less than a week away, it’s important for expats to understand precisely what is required of them! The stakes are higher than ever, with passport revocation unfortunately on the table for those who owe taxes over a certain amount. Reporting foreign bank accounts is one of the requirements that US citizens maintain no matter where they live across the globe. Though different from the annual tax-filing requirement, FBAR is equally important in order to keep your tax-compliant status. The FBAR is not filed to the IRS but is separately submitted to the US Department of Treasury via form FinCEN 114. FinCEN stands for Financial Crimes Enforcement Network, and the creation of the FBAR was intended to help find US citizens who were intentionally hiding their money in overseas accounts in order to avoid US taxes. So, though you may be required to report on your foreign bank accounts, no tax is applied to the balance of the accounts.
FBAR Requirement Thresholds and Reported Information
An annual FBAR filing is required if you had $10,000 in all of your foreign bank accounts in total at any point during the year. If you have three bank accounts with $3,350 in each, you would need to file. Even if you reached that threshold only one day of that year, you are still required to file an FBAR.
So, if you meet that threshold, what will you need to report? Typically, expats will be reporting the account balances. However, if you have any of the following items, you would also report these on your FBAR in order to be compliant:
- Foreign stock or securities held in a financial account at a foreign financial institution (the account must be reported, but the content does not)
- Financial account held at a foreign branch of a US bank
- Foreign mutual funds
- Foreign-issued life insurance or annuity contracts with cash values
- Foreign pensions
- Registered Retirement Savings Plans (RRSP) may need to be reported if you can access and withdraw the funds at any point. And, keep in mind that sometimes RRSPs are considered foreign trusts, so you may also need to file Form 3520
What to Do If You’ve Never Filed Before
If you’re behind on your FBAR filings or expat taxes, getting caught up doesn’t have to be intimidating. Most expats who are filing their taxes late are only late because they were unaware of the filing requirement in the first place. If that’s the case for you, you’re in luck! You can use the Streamlined Filing Procedures, an amnesty program that the IRS created to help those who are unintentionally behind on their taxes become caught up penalty-free! To use these procedures, you are required to file the last three years of Federal Tax Returns as well as the last six years of FBARs. The FBAR is electronically filed, with the addition of special notation that confirms your participation in the Streamlined Filing Procedures.
You will want to get caught up as soon as possible because the penalties for not being up-to-date on your FBAR filing can be steep! For example, if your lack of filing was non-willful (meaning you were unaware of the requirements), the fine can be $10,000 per violation. If you were aware of the obligation and are still non-compliant, the fine can be $100,000 or 50% of the balance of the account at the time of the violation – whichever is greater. Even worse, if you don’t come forward on your own, you can face jail time for hiding money in overseas accounts, as in the case of one expat doctor who was sentenced a few weeks ago. So, don’t wait; use the Streamlined Filing Procedures to get caught up so that you can avoid penalties on both your expat taxes and late FBARs!
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