New Foreign bank account rules were designed to combat money laundering, terrorism, and tax evasion. Unfortunately, folks like you and me get snared in the process. We get penalized if we don’t follow the new rules.
I have written a series of simplified articles on this subject to help you understand the new rules and protect yourself from harsh penalties if you fail to report foreign assets.
Q. Am I required to report bank accounts in a foreign country?
A. Yes, if you have more than $10,000 at any time outside the U.S.
Q. Am I exempted from reporting if my accounts are in Euros, Chinese Yuan, Philippines pesos, or Mexican pesos?
A. No, you are not exempt from reporting foreign accounts just because they are not in US dollars. Convert international denominations to US dollars and report FBAR if the amount is more than $10,000.
Q. What is FBAR?
A. FBAR is a Report of Foreign Bank and Financial Accounts on FinCen Form 114 (was Form TD F 90-22.1).
Q. Who must file an FBAR?
A. Any United States person who has a financial interest in or signature authority over any financial account in a foreign country, if the aggregate value exceeds $10,000 at any time during the calendar year.
Q. Who is a United States person?
A. “United States person” includes a citizen or resident of the United States, a domestic partnership, a domestic corporation, or a domestic estate or trust (the term “domestic” means formed in the US)
Q. What is a foreign country?
A. “Foreign country” includes all geographical areas outside the United States, Puerto Rico, Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands.
Q. What constitutes signature or other authority over an account?
A. A person has signature authority over an account if such person can control the disposition of money.
Q. When is the FBAR due?
A. The FBAR is due by June 30 of the year following. There is no extension of the due date. (TIP: If you do not have all the available information to file the return by June 30, file and amend later).
Q. How do you amend a previously filed FBAR?
A. Make the corrections, staple it to a copy of the original FBAR, and attach a statement explaining the corrections.
Q. Should I file FBAR with my income tax return?
A. No, the FBAR is a separate report and should not be filed with your Federal tax return.
Q. What happens if an account holder fails to file a required FBAR report?
A. Failure to file an FBAR may result in civil penalties, criminal penalties or both.
Q. Can cumulative FBAR penalties exceed the amount in a taxpayer’s foreign account?
A. Yes, penalties can be assessed every year. Repeated penalties can exceed what is inside the bank accounts. Ouch!
FBAR UPDATE FOR 2014: EFILE online required starting 1/1/14 through the BSA E-Filing System website.
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Sy Al-os Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies. The firm celebrates its 38th anniversary in 2015.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in 704 Mira Monte Place, Pasadena, CA 91101. He has 50 years of experience in accounting, consulting, and tax work.
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The Firm proudly welcomes Arlene Al-os in 2015. She obtained her bachelors of Science in Accountancy from Mindanao State University and MBA from Ateneo de Manila University. She teaches intermediate accounting at UCLA and was a professor of Economics at Asia Pacific College. She has over 15 years of experience including member firms of KPMG and BDO Seidman accounting firms.
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Our readers may call (626) 744-0200 or email tax questions to [email protected]. Please visit our website for about 300 tax tips at www.victorsycpa.com.
