Have you filed your FBAR yet?
If after reading this question the first thing that comes to your mind is "what's an FBAR?" you would want to familiarize yourself with the term as quickly as possible. For those of you who know what an FBAR is, make sure to give yourself enough time before the deadline, as gathering the necessary information requires some work. Even for the average person with one or two bank accounts, going through 12 month of statements can be a time consuming task. The form needs to be filed by June 30th and unlike your tax return, this form does not provide you with the comforting option for extension. As a brief overview, FinCEN 114 (commonly known as FBAR) is an informational form that U.S. citizens or residents must file if the aggregate value of their foreign financial accounts exceeded $10,000 at any given time during the calendar year. This puts most expats with reasonable savings under a filing requirement. The “aggregate value” measurement is the trickiest part of determining your filing obligation. This basically means that if you had three bank accounts, the maximum value of which reached $4,000 at some point during the year, although no single account exceeded the $10,000 threshold, combined together they did and all three have to be reported on an FBAR. It also means that if you had one account in a bank located outside of the U.S., with a balance exceeding $10,000 on a single day during the year and you had nothing left in it on December 31st, you still have to file. The truth is that, the FBAR rules put most expats with reasonable savings under an obligation to file.
The requirements apply to “foreign financial accounts”, which extends far beyond your regular checking and saving bank accounts; it also includes securities and brokerage accounts, certain insurance policies, retirement saving accounts, and other. Additionally, it could cover accounts not directly owned by you, but over which you happen to have signature authority as an employee or an officer. In this case, however, the rules are far more detailed and case specific. On the other hand, the requirements are slightly relaxed for spouses with joint bank accounts, in a sense that the joint accounts can be reported by only one of the spouses, given that the non-filing spouse has no other accounts, and that they both sign Form 114a.
Knowing that disclosing personal bank account information can be sensitive for a lot of people, the IRS has gone above and beyond to ensure that no one is tempted to withhold any of it by imposing rather frightening civil and criminal penalties. The penalty for a willful violation can reach $100,000 or 50% of your account balance. Filing the form itself does not protect you from being penalized; you also have to make sure to report the correct information. This is why it’s critical to file the form accurately and on time! In a rare act of kindness, the IRS has adopted procedures allowing taxpayers who meet certain requirements, to file their delinquent FBARs without being penalized.
The takeaway here is that the FBAR is to be taken just as seriously as your income tax return. The form has no paper version and must be filed electronically. Make sure you file yours on time!
