U.S. citizens with funds in foreign accounts should get familiarized with the FBAR (Foreign Bank Account Report). According to the Banking Secrecy Act, U.S. citizens who have financial interests in or signature authority over accounts located outside of the United States need to file an FBAR if the account balance exceeds certain thresholds. In this blog, we will be providing what you need to know on the FBAR so you can comply with federal regulations and ensure you are not subject to civil penalties for failure to report these accounts. Don’t delay any longer – get informed now on the details of when and how to submit reports with our team!
What is FBAR?
The acronym FBAR stands for “Foreign Bank Account Report,” which refers to FinCEN Form 114 (Report of Foreign Bank and Financial Accounts), the official document used to record information on overseas accounts and inform the US government.
What Is The FBAR Used For?
The FBAR (Foreign Bank and Financial Accounts Report) is an informational report used by the United States government to collect information about foreign financial accounts held by US persons. The government utilizes the report to determine whether or not those overseas accounts are used for illegal purposes and to spot any unreported foreign income.
Who Needs To File The FBAR?
US persons who have a financial interest in or signature authority over any foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year are required to file an FBAR.
FBAR requirements apply to below US individuals and US entities that have a financial interest in or signature authority over one or more foreign financial accounts.:
- Citizens
- Permanent residents
- Certain non-resident aliens
- Corporations
- LLCs
- Partnerships
- Trusts
- Estates
Even if the balance surpasses $10,000 for only a day or even just one minute, this requirement is still triggered. All required information should be reported on the FBAR regardless of whether or not taxes are owed.
What Are the FBAR Filing Requirements?
For US individuals and entities that have a financial interest in or signature authority over foreign accounts whose cumulative value surpasses $10,000 at any time of the year, it is mandatory to file an FBAR with the Department of Treasury.
What Is The 2024 FBAR Application Deadline?
The FBAR filing deadline for those that are meeting the requirements is April 15, 2025.
When Is The FBAR 2024 Extension Deadline?
FinCEN provides all FBAR filers who can’t meet the original FBAR filing deadline with an automatic 6-month extension. Because of this, filers do not need to send a specific request for additional time to file.
What Are Filing Exceptions?
Certain persons may be exempt from the FBAR filing requirement.
These exceptions include:
- Entities listed in a consolidated FBAR filing by a greater than 50% owner
- IRA owners and beneficiaries
- Tax-qualified retirement plan participants and beneficiaries
- Trust beneficiaries
- Certain officers and employees with signature or any similar authority in specific situations.
Publication 5569 by the IRS includes a comprehensive guide on the details of these filing exceptions to take into account.
What Are FBAR Instructions?
Required US individuals and entities need to file the FinCEN Form 114 through the BSA E-Filing System. FBAR filing should be separate from the U.S. Federal income tax return filing. You can contact our team for further assistance regarding your FBAR filing.
What are FBAR Penalties?
Failure to timely file the Foreign Bank Account Report can lead to monetary and/or criminal penalties in varying inflation-adjusted upper limits. The standard FBAR penalty for non-willful failure to file is $10,000 for each year that a required FBAR wasn’t filed. The standard penalty for willful failure to file is $100,000 or 50% of the balance of the account at the time of the violation, whichever is higher, for each year that a required FBAR wasn’t filed. It is crucial to file a late FBAR when finding out about the requirement later on and explain the reason for late filing. The IRS may not impose a penalty if a U.S. person properly reports any past-due FBAR under a reasonable cause.
How is FBAR Reporting Made?
US persons need to timely and properly report their foreign accounts on the FBAR through the electronic system and answer any related FBAR questions on their tax or information returns. You must file the FBAR electronically through FinCEN’s BSA E-Filing System.
What is FBAR Meaning?
FBAR is the acronym that stands for Foreign Bank Account Report.
Which Accounts Are Reportable On The FBAR Filing?
Upon meeting the $10,000 threshold, the account types below need to be reported on the Foreign Bank Account Report (FBAR) based on the IRS’s Publication 5569:
- Checking Accounts
- Savings Accounts
- Time Deposits
- Securities Accounts
- Commodity Futures
- Options Accounts
- Insurance or Annuity Policies
- Mutual Funds
- Any other pooled funds or accounts held in a foreign financial institution
We recommend that you consult a professional to determine your specific reporting requirements.
When is the FBAR Due Date?
The FBAR is an annual report and needs to be filed with the Department of the Treasury by April 15th for the preceding calendar year.
When Should I File FBAR?
U.S. persons should file the Foreign Bank Account Report on or before April 15 to avoid penalties.
Do I Need To File FBAR Every Year?
U.S. persons need to assess if they meet the FBAR requirements each year and complete filing accordingly. If the requirements are met for any point in a certain calendar year, filing is required.
What is the Difference Between FBAR and Form 8938?
The main difference is that Form 8938 is filed with the IRS; while the FBAR is filed with the office of Financial Crimes Enforcement Network (FinCEN). The Form 8938 needs to be filed by specified individuals and domestic entities who meet the threshold for foreign financial assets which differs from the FBAR reporting threshold. Moreover, Form 8938 needs to be attached to the federal income tax return while the FBAR is filed through a separate e-filing system.
Where Do I Download The Forms For Filing My Taxes and My Fbars On My Own?
The FinCEN Form 114 can be filed through the BSA E-Filing System for the reportable year. If you would like to paper file the report, you should contact the FinCEN Resource Center.
Need Help Filing FBAR?
US persons should take care to ensure that they are aware of their FBAR filing requirements and deadlines. Consulting with an experienced tax professional is the best way to ensure compliance and avoid costly penalties. At Manay CPA, we assist our clients with FBAR filings to avoid any incorrect filings or missing information on a report which can lead to severe penalties.
