In our current day and age, it’s all too common for some American taxpayers to store cash or savings in one or more financial accounts (be it banking, a pension, or an investment account) outside of the United States. If you have any money outside of the United States, it’s important to understand FBAR rules. There’s a form that those looking to keep their money offshore will need file with the Treasury Department’s Financial Crimes and Enforcement Network (FinCEN), and failure to do so will result in stiff fines. This form is called the FinCEN Form 114, otherwise commonly referred to as FBAR.
If you are required to file an FBAR, be sure to do so in a timely manner to spare yourself from any FBAR penalties. For tax year 2019, taxpayers who had one or more foreign accounts that combined equaled more than $10,000 dollars at any given point, must file your FBAR before April 15th 2020. The deadline for filing the FBAR generally coincides with the deadline for filing tax returns, meaning that any expats outside of the U.S. will automatically have their FBAR application deadline extended to June 15th 2020 along with their tax returns. In addition, anyone qualifying for the 6-month extension to file until October 15, 2020 will see their FBAR deadline extended along with that also.
Who Must File for an FBAR?
U.S. citizens, resident aliens, and green card holders, whether living within the United States or abroad, who are an owner or otherwise able to control an offshore account’s funds must file an FBAR. This form must be filed if the combined total of these foreign accounts exceeds $10,000 at any point during the calendar year, even briefly.
A U.S. citizen who is residing abroad in the United Kingdom, for example, with several accounts with a British Bank that have together held $20,000 during 2019 then must file this form, even if each account had just $4,000 or so each.
Any bank accounts or securities accounts based outside of the United States and its territories are considered foreign financial accounts for the purposes of filing an FBAR form. Some jointly owned accounts do avoid FBAR filing requirements, however.
How Do I File an FBAR?
Filing an FBAR can be done either online via FinCEN’s BSA E-Filing System or by utilizing a preparation service the ability to file the form. It’s possible to file a joint FBAR, however only in very few situations. If both yourself and your spouse own an overseas account jointly, and only one or none of you have a separate account of your own, then it is possible for you to file a single report. In any other situation, however, it’s required that each spouse files one of their own.
If you are filing FBARs for previous years or amended FBARs, then FinCEN’s website must still be used to do so, and any separate accounts must still be filed.
When Is the FBAR Form Due By? Can it Be Submitted With My Tax Return?
Both the FBAR and your tax return have the same due date: April 15, 2020. As mentioned before, if you happen to live abroad, then your tax return’s due date is automatically extended to June 15, 2020, and the FBAR will go along with it. If you qualify for the 6-month extension for your tax return, then the FBAR deadline will be extended along with your tax return once again until October 15th, 2020.
It needs to be noted though that the FBAR will not be filed with or attached to a federal tax return, however; it’s instead filed directly with FinCEN. If you meet the guidelines to submit a FBAR form, it’s important to note that the form needs to be filed, even if the IRS does not require you to file a United States tax return.
Why Should I File an FBAR?
Due to the current terms of the FBAR rules, anyone who must submit a FBAR but either doesn’t file it before the deadline or fails to correctly report their foreign accounts can be subject to a fine of up to $10,000 for every violation. This penalty fine is even applicable to anyone who claims they were unaware that they needed to file an FBAR. Also, and this will be dependant upon the balances of the account in question at the time of the violation. This penalty fine can be as high as $100,000 per violation or even more.
In the 10 years between the penalty fines being introduced in 2005 and 2015, FBAR filings saw a steady and sharp increase from around 280,000 FBAR filings in 2005 to over 1 million in 2015, according to data obtained from FinCEN and the IRS.
Other Points of Interest
Typically speaking, United States citizens and resident aliens should be reporting any and all income earned worldwide, such as income from foreign bank and securities accounts and foreign trusts. In the majority of these cases, a Schedule B (Form 1040) will need to be completed and attached to their tax returns. Part III will ask the taxpayer about the existence of foreign accounts and will also require that U.S. citizens report in which country or countries the account or accounts are located.
Along with this, some people may be required to complete and attach Form 8938 too. The majority of all United States citizens, resident aliens, and also certain non-resident aliens must ensure that they are reporting any and all specified financial assets that exceed certain thresholds on this form.
Remember that you will still need to file the FBAR along with Form 8938.
Feeling overwhelmed by FBAR requirements? Abajian Law offers FBAR legal services to represent taxpayers who are disclosing significant cash in off-shore bank accounts as well as those who are being investigated for potential FBAR violations. Schedule a consultation with Abajian Law to learn more about how an OVDP tax attorney can help with complicated FBAR circumstances.