NEW Foreign bank account rules were aimed to fight terrorism financing, tax evasion, fraud, and money laundering.
Sorry to say, but folks like me and you get snared in the process. If we don’t follow the new rules, we get penalized.
Here is a written 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. What is FBAR?
A. FBAR is a Report of Foreign Bank and Financial Accounts on FinCen (Financial crimes Enforcement Network) Form 114 (was Form TD F 90-22.1).
Q. Am I required to report bank accounts in a foreign country?
A. Yes, if at any time you are outside the U.S and at anytime during the calendar year the aggregate value of all financial accounts is more than $10,000.
Q. Am I exempted from reporting if my accounts are in Euros, Chinese Yuan, Philippines pesos, or Mexican pesos?
A. No, just because they are not in US dollars does not exempt you from reporting foreign accounts. Convert to U.S. dollars any international denominations and report in the FBAR if the amount is more than $10,000.
Q. Who must file an FBAR?
A. Any United States person who has signature authority over or financial interest in any financial account in a foreign country, if the collective value exceeds $10,000 at any time during the calendar year.
Q. Who is a United States person?
A. “United States person” includes a resident or citizen of the United States, a domestic corporation, a domestic estate or trust, or a domestic partnership (the term “domestic” means formed in the U.S.)
Q. What constitutes signature or other authority over an account?
A. Applies only to individuals. If such person can control the disposition of assets in the account, then, he is a person that has signature authority over an account.
Q. What is a foreign country?
A. “Foreign country” includes all geographical areas outside the United States, Northern Mariana Islands, Guam, American Samoa, the United States Virgin Islands, and Puerto Rico.
Q. When is the FBAR due?
A. It is due by June 30 of the year following. There is no extension of the due date. (TIP: File and amend later if you do not have all the available information to file the return by June 30). Returns for taxable years beginning after December 31, 2015, new deadline is April 15.
Q. How do you amend a previously filed FBAR?
A. Fill out a new FBAR completely and check the amend box. Use the original BSA identifier provided from your prior report after selecting the amend box.
Q. What happens if an account holder fails to file a required FBAR report?
A. Failure to file an FBAR could result in criminal penalties, civil penalties or both.
Q. Should I file FBAR with my income tax return?
A. No, It should not be filed with your Federal tax return because the FBAR is a separate report.
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.
FBAR UPDATE FOR 2015: EFILE online required starting 1/1/15 through the BSA E-Filing System website.
In accordance with IRS Circular 230, this communication is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose.
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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.
