By Bethany Bouw
If you already know you have a Foreign Bank Account Report (FBAR) filing due, you may be aware that the due date has moved. That due date is coming up fast. In order to make sure you are prepared, we have prepared a five W (Who, What, When, Where, and Why) list for your benefit. Read on to make sure you are better informed about your filing needs.
Not everyone who has a foreign bank account has the requirement to file. The FBAR is to be filed by those who have foreign bank accounts that at any point of the year total an excess of $10,000 US Dollars (USD). For example, if on March 20th the filer has one account in USD abroad that is $6,000 and a Euro account abroad that converts to $4,100 USD, the filer has an FBAR requirement. As you can see, when converted to USD and totaled together, the sum will exceed the $10,000 USD requirement.
The location of the accounts must also be taken into consideration. If it is an account that you can access abroad but was opened in a US branch, it is not a foreign bank account. If it is an account you opened abroad in a foreign branch of a bank that has locations in the US, it is a foreign bank account. It is all about location, location, location.
There are some special rules for jointly held accounts regarding disclosure, number of filings, and electronic filing authorization. If accounts are jointly held, this should be brought to the attention of your qualified tax preparer.
The FBAR documents foreign bank accounts for the Financial Crimes Enforcement Network (FinCEN) under the Bank Secrecy Act. The filing of the form is administered by the IRS on behalf of FinCEN. The form declares the foreign bank accounts owned by the taxpayer separately and/or jointly. It also documents accounts that the filer has signature authority only over. The form is also referenced on Form 1040, Schedule B along with other locations for entity filings. If there is a FBAR, there may be other forms also required, such as Form 8938.
The FBAR aids in tax compliance and serves as a part of the fight against financial crimes and other illicit activities. The goal was to be able to have a better tracking on the funds offshore for movement of funds for terror networks. People who are trying to shirk their tax responsibilities or fund illicit activities aren’t likely to store their cash in the local bank down the street. Instead, they may stash their cash abroad. Nowadays, foreign financial institutions and foreign nations are feeling the crunch of information reporting on US account owners. It has become harder and harder for people who have had a delinquent filing requirement to stay hidden.
There are severe penalties for failure to properly file the FBAR. The penalties can be $10,000 per violation. If there is willful failure, the penalties can be quite substantial – up to 50% of the balance in the account at the time of the violation. If you have a filing requirement, it is crucial that you file appropriately and fix delinquent filings. There are options for ways to fix non-compliance and we strongly recommend reaching out to a tax attorney and a qualified tax professional.
The FBAR due date was moved to April 15th (same rules as the individual tax due date with regards to weekends and holidays). The due date was then extended 6 months automatically. You do not need to submit an extension request to receive the extension. The extended due date also takes into account weekends and holidays. The taxpayer should provide the signed Form 114A Record of Authorization to Electronically File FBARs to their preparer with enough time for the preparer to process the e-file of the FBAR.
The FBAR must be e-filed and can no longer be paper filed. You should inquire if the tax preparation software packages used by your qualified tax professional allows for e-filing of the FBAR. Additionally, FinCEN has provided a special PDF to be used to prepare the FBAR for self-filing. The FBAR may look easy, but you should still talk to your tax professional if you self-file. They may need the information for purposes of the Form 8938 or foreign income.
Ryan & Wetmore has assisted clients with their FBARs and related filings over the years. We would be happy to assist you if you have concerns about your foreign bank accounts and reporting.
The International Tax Team at Ryan & Wetmore is well-versed in foreign informational filings. For questions or concerns regarding your international accounts and assets, click here to email our foreign tax team. Please be aware that tax issues are complicated and may vary based on the details of your situation. For this reason, an initial phone call is generally required to obtain the facts and address the questions.
Bethany Bouw CPA, is a manager at Ryan & Wetmore and has been with the firm for over eight years. She has experience with offshore voluntary compliance and assisting taxpayers with foreign asset and entity reporting requirements.
Traci Getz CPA, is a partner with Ryan & Wetmore, P.C. Traci has over fifteen years of experience providing accounting, tax, and consulting services to small and medium-sized business owners. She works with clients to understand their accounting and tax issues while specializing in international tax, healthcare, and construction.
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
© Copyright 2018. All rights reserved.
Brought to you by: Ryan + Wetmore