THE IRS requires specified individuals who file FBAR forms with an interest in “specified foreign financial asset” have a further requirement to file From 8938 (Statement of Specified Foreign Financial Assets) if on the last day of the tax year the aggregate value of all such assets exceeds $50,000 or $75,000 at any time during the tax year. Filing of Form 8938 does not relieve you of the requirement to file FinCen Form 114.
Q. What is a financial account?
A. A “financial account” includes the following:
• Savings, checking, deposit, demand or any other account maintained with a financial institution.
• Bank, securities derivatives, securities or other financial instruments accounts.
• Accounts in which the assets are held in a commingled fund including mutual funds.
• Annuity policy and insurance policy with a cash value.
Q. If you own three foreign financial accounts with maximum account balances of $100, $12,000 and $3,000. Do you have to file an FBAR? Do you have to report all three accounts?
A. Yes, because the aggregate value of foreign financial accounts X, Y and Z is $15,100. Even though two accounts have values below $10,000, you must report all three X, Y and Z. Reporting threshold total value of assets is $10,000 at any time during the calendar year.
Q. Is an FBAR required for accounts maintained with financial institutions located in a foreign country if the accounts hold noncash assets, such as gold or silver?
A. Yes. Whether the account holds cash or non-monetary assets, an account with a financial institution that is located in a foreign country is a financial account for FBAR purposes.
Q. If you own two foreign financial accounts with account balances of $3,000 and $8,000, do you have to file an FBAR? Which accounts must be reported?
A. All accounts, albeit no single account is over $10,000, because the aggregate or total value of accounts A and B is over $10,000.
Q. Does the term “other authority over a financial account” mean that a person, who has the power to direct how an account is invested but who cannot make disbursements to the accounts, has to file an FBAR?
A. No, because the person has no power of disposition of money in the account, an FBAR is not required.
Q. Is an FBAR required if the account does not generate interest or dividend income?
A. Yes, whether or not the foreign account generates any income, you must file FBAR.
Q. Does more than one FBAR form need to be filed for a husband and wife owning a joint account?
A. No, one is enough as long as the Social Security numbers and the names of the joint owners are fully disclosed and the conditions are met.
Q. What are the exceptions to the FBAR filing requirement?
A. Owner and beneficiary of an IRA ,trust beneficiaries if the trust, trustee, or agent of the trust is a US person and files FBAR disclosing the trust’s foreign financial accounts, accounts in U.S. military banking facilities and an employee or officer of a bank if the officer or employee has no personal financial interest in the account although have signature authority over such account.
Q. How long should account holders retain records of the foreign accounts?
A. You should retain your records for a period of five years.
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.
