IF you have offshore bank accounts, should you report the accounts to the U.S. government? Yes, if the aggregate balances exceed $10,000 at any time during the year. What if you had the accounts before you left for the U.S.? Yes, you should. There are reasons why our government wants to know: combat money laundering, fight terrorism, and avert tax evasion. If you are not guilty of any of these conducts, there is nothing to worry about. Filing the report causes no harm, no foul. But there are penalties if you don’t. Read on and learn about FBAR.
What is FBAR: It’s a Foreign Bank & Financial Accounts Report on FinCEN Form 114.
Who Must File the FBAR: A United States person must e-file new FinCEN Form 114 if that person has financial interest in or signature authority over any financial accounts in a foreign country and the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.
Definition of a United States Person:
• A citizen or resident of the United States.
• A domestic partnership, domestic corporation, domestic trust or estate.
Definition of Foreign Financial Accounts:
• Bank accounts such as savings accounts, checking accounts, and time deposits.
• Securities accounts such as mutual funds, brokerage accounts, and securities derivatives.
• Accounts where assets are held in a commingled fund that is a mutual fund.
• And are located outside the United States, District of Columbia, Guam, Puerto Rico, U.S. Virgin Islands, American Samoa, Northern Mariana Islands, Trust Territories of the Pacific Islands.
Examples of Financial Interest:
• A U.S. citizen left bank accounts of more than $10,000 in the Philippines. He must file FBAR.
• U.S. resident (not U.S. citizen) has bank accounts of more than $10,000 in England. He must file FBAR.
Reporting for Joint Accounts:
• If two persons jointly maintain an account, or if several persons each own a partial interest in an account, then each U.S. person has a financial interest in that account and each person must file an FBAR.
• A spouse having a joint financial interest in an account with the filing spouse should be included as a joint account owner and does not need to file a separate FBAR.
• If the filer’s spouse has separate accounts, that spouse must file a separate FBAR for all of the accounts, including those owned jointly with the spouse.
Recordkeeping: The records should contain the following:
• Name maintained on each account and number or other designation of the account.
• Name and address of the foreign bank.
• Name and address of other person with whom the account is maintained.
• Type of account and maximum value of each account during the reporting period.
Penalties for Failure to Report Foreign Accounts:
• IRS may assess an inflation-adjusted civil penalty not to exceed $12,459 per violation for non-willful violations that are not due to reasonable cause.
• For willful violations, the inflation-adjusted penalty may be the greater of $124,588 or 50 percent of the balance in the account at the time of the violation, for each violation.
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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].
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