The Bank Secrecy Act (BSA) requires that a FinCEN Form 114, Report
of Foreign Bank and Financial Accounts (FBAR) be filed if the aggregate maximum values of the foreign financial accounts of a United States Person [US citizen or resident, or an entity created or organized in the United States or under the laws of the United States] exceed $10,000 at any time during the calendar year. This filing requirement extends to trusts, estates, corporations, partnerships and limited liability companies.
This FinCEN Form 114 replaces Treasury Form TD F 90-22.1, the FBAR form used in the past. It is required to be filed with the Treasury Department by June 30 of the year following the calendar year being reported, must be filed electronically, and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR). Any U.S. taxpayer here or abroad with tax questions can use the online IRS Tax Map and the International Tax Topic Index to get answers.
Reporting jointly held accounts: If two persons jointly maintain a foreign financial account, or if several persons each own a partial interest in an account, then each United States Person has a financial interest in that account and each person must report the entire value of the account on a FBAR.
Limited joint filing by spouses: The spouse of an individual who files a FBAR is not required to file a separate FBAR if the following conditions are met: (i) all the financial accounts that the non-filing spouse is required to report are jointly owned with the filing spouse; (ii) the filing spouse reports the jointly owned accounts on a timely filed FBAR electronically signed (PIN) in item 44; and (iii) the filers have completed and signed Form 114a, Record of Authorization to Electronically File FBARs (maintained with the filers records). Otherwise, both spouses are required to file separate FBARs and each spouse must report the entire value of the jointly owned accounts.
Filing exceptions: In addition to the limited spousal exception stated above, IRA owners, IRA beneficiaries, participants in and beneficiaries of tax-qualified retirement plans, and certain trust beneficiaries are also excepted from the FBAR filing requirement. In addition, individuals who have signature authority over, but no financial interest in, a foreign financial account are not required to report the account in certain specified situations. See the IRS FBAR Reference Guide for more details.
Record keeping: Generally, records of accounts required to be reported on the FBAR should be kept for five years from the due date for filing the FBAR. The records should contain the following:
- Name maintained on each account.
- Number or other designation of the account.
- Name and address of the foreign bank or other person with whom the account is maintained.
- Type of account.
- Maximum value of each account during the reporting period.
Retaining a copy of the filed FBAR can help to satisfy the record keeping requirements. An officer or employee, however, who files a FBAR to report signature authority over an employer’s foreign financial account is not required to personally retain records regarding these foreign financial accounts.
Penalties: Failure to file a FBAR when required to do so may result in multiple civil penalties, criminal penalties, or both. Various civil penalties that could apply could be assessed at up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. Various criminal penalties that could apply could be assessed at up to $500,000 or 10 years or both.
Delinquent Filing: When a United States person learns that a FBAR should have been filed for a previous year, the filer should electronically file the delinquent FBAR report using the BSA E-Filing System website and follow the procedures to request IRS abatement of penalties.
DISCLAIMER: This information is extracted with permission from IRS regulations and publications as of the date of this post. These regulation interpretations are subject to change from year to year depending upon new tax legislation, reform and litigation, as well as IRS changes in interpretation of new and existing laws and court rulings. We are not responsible for updating this information for future changes in such requirements. If assistance is needed requiring the filing of FBAR forms, an appointment may be made with one of our Directors of Audit and Tax Services by reference to the CONTACTS page above. Standard rates and terms for service will apply. New clients may be required to pay a retainer.