Get Your Accounts in Compliance With IRS Regulations
Avoid Legal Consequences
Must meet qualifying criteria for possible reduction of debt
Foreign Bank Account Report (FBAR) Filings
If you are a resident alien working in the U.S., it is likely that you have at least one bank account in another country. Unfortunately, your foreign bank account could result in disastrous legal consequences for you, including criminal charges, if you fail to fulfill the reporting requirements for your foreign assets.
If your foreign bank account has a balance that exceeds $10,000, you are required to report your account to the IRS. Failure to report your worldwide income can have a devastating effect on your life and your finances: You could face both criminal prosecution and a penalty of 27.5% of the balances in the accounts.
A foreign bank account report filing, or FBAR, is a filing separate from your federal tax return. It requires you to disclose all information regarding your foreign bank account, including balances, adjusted reported interest, and U.S. conversion metrics. FBAR filings are not only extremely time-sensitive, as criminal prosecutions happen quickly, but also extremely complicated. If done incorrectly, or not at all, you could lose much more than money: Your freedom and your ability to continue working in the U.S. could be seriously compromised.
Protect Your Assets at Home and Abroad
At Key Tax Group, we understand the urgency and importance of correctly filing your FBAR with the IRS. We specialize in FBAR cases and have the knowledge you need to protect your assets at home and abroad, we will get your FBAR filed fast to protect you and your assets. Our dedicated team of tax attorneys, enrolled agents, and support staff have the experience and expertise to quickly get your accounts in compliance with IRS regulations before your financial future is jeopardized.
With your freedom, finances, and ability to work in the U.S. on the line, don’t let unreported assets ruin your chance of pursuing the American Dream.
Do you have questions about filing a Report of Foreign Bank and Financial Accounts (FBAR)? Below are some commonly asked questions about this type of report.
According to the Bank Secrecy Act, the Department of Treasury can collect information from U.S. persons who have banking relationships with foreign financial institutions. An FBAR, also known as FinCEN Form 114, must be filled out if the aggregate total of funds exceeds $10,000 at any time during a calendar year.
During a calendar year, a U.S. person who has a financial interest in or a signature authority over at least one foreign financial account with an aggregate total amount of at least $10,000 must file a foreign bank account report.
For filing an FBAR, a “U.S. person” means one of the following:
A foreign country is any and all geographical areas outside of the U.S., the District of Columbia, the commonwealths of Puerto Rico and Northern Mariana Islands, and the territories and possessions of the U.S. which include American Samoa, Guam, and the U.S. Virgin Islands.
When you have a financial interest in a financial account, it means that you’re the owner of record or holder of legal title of the account. This is true whether or not you’re maintaining the financial account for your benefit or for the benefit of someone else.
You’re considered to have a financial interest when the financial account is owned directly or indirectly by an entity in which you have more than 50 percent interest in the entity’s profits or where you are a trust grantor or the beneficiary of more than 50 percent of the trust.
When someone has a signature authority over an account, it means that a person can control the disposition of money, property, or other assets within the account via their signature or by direct communication (e.g., orally) to the financial institution or person who maintains the account.
For the purpose of an FBAR filing, a financial account can include the following:
- Bank accounts - e.g., savings, checking, and time deposits.
- Securities accounts - e.g., securities derivatives and brokerage accounts
- Commodities futures or options accounts
- Insurance policies with cash values - e.g., whole life insurance policy
- Annuity policies with cash values
- Mutual funds or similarly pooled funds
- Any other accounts which are maintained in a foreign financial institution or a person who performs the services of a financial institution
A financial account maintained at a financial institution located outside of the U.S. is considered to be a foreign financial account. Whether it’s a bank account, securities account, insurance policy, mutual fund, or any other account — if it is not located in the U.S., its commonwealths, territories, or possessions, that makes it a foreign financial account.
There are some exceptions to the filing requirements for an FBAR. For example, if you have an account in a U.S. military banking institution which is operated by a U.S. financial institution and created to serve the U.S. in another country, then this is not considered a foreign financial account, and thus there is no FBAR filing requirement for such an account.
Other accounts that require no FBAR filing include certain joint accounts owned by spouses, correspondent or nostro accounts, accounts owned by government entities, and accounts owned by international financial institutions such as the World Bank and the International Monetary Fund (IMF).
Other exceptions include the following:
- A consolidated FBAR of which a U.S. person is a part but is not a greater than 50 percent owner.
- An IRA owner or beneficiary
- 401(k), 403(a) or 403(b) participants or beneficiaries
- A U.S. person who solely has a signature authority but no financial interest in a foreign financial account, such as a bank officer or employee.
- Trust beneficiaries who have greater than a 50 percent financial interest in the trust’s assets of income if the trust, trustee, or agent of the trust is a U.S. person and files and FBAR
No. The FBAR has its own electronic filing system for individuals. You can either use the Adobe PDF form or the online form. But there are certain tax filing software packages which allow you to file the FBAR along with your tax return.
Your FBAR is due on or before your tax return due date. For U.S. residents, this is on or before April 15th. For expatriates or “expats,” the date is on or before June 15th. You may request a filing extension to make your return and FBAR due on or before October 15th.
Failing to file an FBAR while having foreign financial accounts can result in some significant penalties. These penalties can either be civil penalties, criminal penalties, or both. The statute of limitations for imposing civil penalties for FBAR filing violations is up to six years after the violation date.
If you find that you have a delinquent FBAR, you must file it with the BSA E-Filing system as soon as possible. When you file, you’ll be given a change to explain your late filing. The IRS will then determine if your reason was justifiable (e.g., a natural disaster). After reviewing your reasons for a late filing, the IRS will then choose whether to impose a penalty or not.
For failing to file an FBAR, the IRS has a list of violations, which range from whether the non-filing was negligently to willfully done. There are also penalties for filing a false FBAR. Penalties increase in severity based on the type of violation. Note that civil penalties can be assessed for an amount which is larger than the account balance.
- For negligent violations, civil penalties can be up to $1,078.
- For non-willful violations, the civil penalties can be up to $12,459 for each negligent violation.
- For willfully failing to file and FBAR, the civil penalties can be up to either $124,588 or 50 percent of the amount — whichever is greater. Criminal penalties can be up to $250,000, five years in federal prison, or both.
- For willfully failing to file an FBAR along with other law violations, civil penalties can be either up to $100,000 or 50 percent of the amount — whichever is greater. Criminal penalties can be up to $500,000, 10 years in federal prison, or both.
- For knowingly and willfully filing a false FBAR, the civil penalties are the greater of $100,000 or 50 percent of the financial account — whichever is greater. Criminal penalties can be up to $10,000, five years in federal prison, or both.
Account records for FBAR filings should be kept for five years from the due date, which is typically April 15th after the calendar year being reported.
Records should include account name, account number, account type, name and address of the foreign bank or person maintaining the account, and the maximum value of every account being reported on during the reported year. Also, keeping a copy of your FBAR filing should be enough for recordkeeping. Failure to keep proper FBAR records may result in civil penalties, criminal penalties, or both.
Key Tax Group Can Help With FBAR Filings
We specialize in helping our clients to protect their assets abroad. Whether you live here in the U.S. or live abroad as an expat, the U.S. tax code can be quite complex and a bit overwhelming to tackle on your own. We have extensive tax law knowledge and experience which we can use to help you avoid some nasty pitfalls and penalties. That way, you can focus more on what matters to you.
If you’ve fallen behind on your FBAR filings, you need to file your first one, or you have some other questions about how to file an FBAR that weren’t covered here, Key Tax Group can help! We have FBAR attorneys who know how to help you handle your tax obligations.
Schedule a free, no-obligation consultation today to learn more about our firm and how we can help. We look forward to hearing from you.