IF you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.
Who Must File an FBAR?
United States persons are required to file an FBAR if:
• You had a financial interest or signature authority over financial account located outside the U.S.
• The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the year.
• United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States; and trusts or estates formed under the laws of the United States.
Who Do Not Have to File FBAR Forms?
• Certain foreign financial accounts jointly owned by spouses.
• IRA owners and beneficiaries,
• Participants in and beneficiaries of tax-qualified retirement plans.
• Individuals with signature authority over but no financial interest in a foreign financial account.
• Trust beneficiaries.
• Foreign financial accounts maintained on a United States military banking facility.
• United States persons included in a consolidated FBAR.
• Correspondent accounts.
• Foreign financial accounts owned by a governmental entity.
• Foreign financial accounts owned by an international financial institution.
Can You Give Us Some Tips on Reporting and Filing FBAR?
• You may have a reporting obligation even though the account produces no taxable income.
• You may be subject to civil penalties, criminal penalties, or both if you do not comply.
• Do not file FBAR with your federal income tax return.
• New due date is April 15 with an automatic extension to October 15.
• Online E-file is now required through the BSA E-Filing System website.
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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 Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].