IRS recently reminded all taxpayers about the June 30 deadline for Foreign Bank and Financial Accounts (FBAR) reporting. FBAR filings have risen dramatically in recent years as FATCA phases in and other international compliance efforts have raised awareness among taxpayers with offshore assets. According to data from FINCEN, FBAR filings exceeded 1 Million in calendar year 2014.
What is FBAR and who should file? FBAR (Form114) should be filed by every U.S. person which includes U.S. citizens, residents, domestic corporations and partnerships – that has a financial interest in or signature authority over, any financial account, if the aggregate value of such foreign financial account exceeds $10,000 at any time during the calendar year. The form 114 should be filed electronically.
Financial Interest– A United States person has a financial interest in each account for which such person is the owner of record or has legal title, whether the account is maintained for his own benefit or for the benefit of others including non-United States persons.
A U.S. person has a financial interest in a corporation, partnership or trust if he owns more than 50% of stock profits or interest respectively. This is very often overlooked. Therefore if you have a controlled foreign corporation or controlled foreign partnership, FBAR filing may be required.
Signature or Other Authority Over an Account
A person having signature or other authority over a foreign financial account must file the FBAR even if the person has no financial interest in the account.
A person has signature authority over an account if that person can control the disposition of money or other property in it by delivery of a document containing his signature (or his signature and that of one or more other persons) to the financial institution where the account is maintained.
Due Date – The FBAR is due by June 30 following the calendar year for which it applies. Thus, FBARs for the 2014 calendar year must be filed on or before June 30, 2015. There is no extension to file this form.
Delinquent FBAR – If all income is reported on the income tax return and the IRS have not yet contacted the taxpayer regarding the missed FBAR, or if the taxpayer is not under IRS examination, then delinquent FBARS can be filed. See link below for delinquent FBAR submission procedures.
According to the National Law Review, since 2009 over 50,000 taxpayers have filed delinquent FBARS. IRS is continuing to ramp up its efforts to ensure compliance with the law.
Navigating the complex rules of FBAR can get tricky and the penalty for non-filing is steep. Therefore, it is important to understand the filing requirements and file the FBAR reports timely.