By Karol Haugan

Do you have any financial accounts in a foreign country? If so, you may be required to file Form FinCEN 114, Report of Foreign Bank and Financial Accounts (FBAR). Otherwise, you could face hefty penalties.

Here’s an overview of the deadline, requirements to file an FBAR, and FBAR penalties.

The filing due date is April 15th each year. In addition, an automatic extension to October 15th each year is granted to taxpayers who are unable to meet the first due date.

If you meet the following requirements, you must file an FBAR:

You are a United States Person. This means you could be a United States citizen, a resident alien living in the United States, or a United States corporation, trust, limited liability company, or other type of business entity.

You have a financial interest in or signature authority over foreign financial accounts. A “foreign financial account” includes bank, securities, insurance policies, mutual funds, or other financial accounts located outside of the United States. “For example, an account maintained with a branch of a United States bank that is physically located outside of the United States is a foreign financial account. An account maintained with a branch of a foreign bank that is physically located in the United States is not a foreign financial account.”*

“A financial interest in a foreign financial account” means you are the owner of record or have legal title to the account, regardless of whether you open the account for your own benefit or the benefit of others.  Moreover, if you are an agent, nominee, attorney, or a person acting on behalf of another United States Person, you also have a reportable financial interest in a foreign financial account.

Having a “signature authority” means you have the authority to control the disposition of money, funds, or other assets held in a foreign financial account by direct communication to the bank or financial institution that maintains the financial account.

The aggregate account balance of all your foreign financial accounts exceeds $10,000 at any time during the calendar year. For example, you have three foreign financial accounts and the highest balance in each account is $5,000; note that individually the balance of each account doesn’t exceed the $10,000 filing threshold. However, the aggregate balance of all three accounts is $15,000 and exceeds the $10,000 threshold. Therefore, all three accounts must be reported on your FBAR.

An important thing to remember is that if you have foreign financial accounts and you are not required to file an FBAR, you still have to answer “yes” to the following question: “At any time during 2018, did you have a financial interest in or signature authority over a financial account located in a foreign country?” You can find this question on your Form 1040, Schedule B, Part III.

Finally, the following FBAR penalties may be applied for non-compliance:

Non-willful violation. If you’re required to file an FBAR and fail to do so, you may be subject to a civil penalty of up to $10,000 per violation.

Willful violation. “A person who willfully fails to report an account or account identifying information may be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation. Willful violations may also be subject to criminal penalties…”*

Please, consult with your Untracht Early advisor for further details or visit the United States Department of the Treasury Financial Crimes Enforcement Network website Fincen.gov for more information.

Source:
*”FinCEN Form 114: BSA Electronic Filing Requirements for Report of Foreign Bank and Financial Accounts (January 2017)”.