EVERYTHING YOU NEED TO KNOW ABOUT FBARS
What is an FBAR (Foreign Bank Accounts Report)?
An FBAR is a report of all foreign financial accounts held by a US person, which (if required) should be electronically filed with the BSA annually. The US government introduced the FBAR in 1970 in an effort to tackle tax avoidance. In recent years, the FBAR has received more attention following the Foreign Accounts Tax Compliance Act (FATCA) of 2010 and the introduction of more severe penalties for failure to file.
Do I need to file an FBAR?
You are required to file an FBAR each calendar year if:
· You are a US person, and
· You own or have signature authority over one or more foreign financial account, and
· The total of all your foreign financial accounts exceeded $10,000 at any time during the year being reported.
What is a US person?
A US person refers to:
· A US citizen
· A US resident
· A US created/organized entity
· A US trust/estate that was formed under the laws of the US.
What types of accounts need to be included in an FBAR?
A foreign financial account refers to:
· All bank/ securities/ financial instruments accounts
· Commodity futures/ options accounts
· Insurance policies with a cash value
· Mutual funds/ pooled funds
· Certain pension funds
· Joint accounts located outside of the US and its territories and possessions.
Regardless of whether an individual account held more than $10,000 during the year or not, if the total value of all accounts exceeded $10,000 at anytime during the year, then all foreign financial accounts need to be reported in the FBAR.
What is the deadline for filing an FBAR?
The current deadline for filing an FBAR is April 15th (or the first business day following this date), which coincides with the annual federal income tax return deadline.
A six-month automatic extension is granted to individuals who fail to file their FBAR by the deadline. There is no need to file a request for the deadline to be extended to October 15th (this is done automatically).
There are significant penalties in place for individuals who fail to file an FBAR when they are obliged to.
What if I have failed to file previous FBARs?
If you have failed to file an FBAR previously you may be able to avoid the penalties. In 2012 the IRS introduced the Streamlined Procedure to help those individuals, who have fallen behind in filing both their federal tax returns and FBARs (due to non-willful conduct), to catch up. The Streamlined Procedure requires a US person to file their last 3 overdue tax returns and last 6 overdue FBARs. No penalties for late filing will be issued if you are eligible to use the Streamlined Procedure.
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