Are You Required to File FBAR? Cross Border Individuals Basic Information

Navigating the complexities of FBAR requirements can be daunting for cross-border individuals like you. Please find out if you must file, understand the process, and avoid potential penalties.

Understanding FBAR: The Key to Compliance

The Foreign Bank Account Report (FBAR) is a tool used by the US Treasury Department to keep track of US tax residents who have financial interests in or authority over banks and other financial accounts outside of the United States. If the aggregate value of these accounts exceeds $10,000 at any point during the calendar year, US residents, citizens, and entities must file an FBAR. The US persons include expatriates, residents with dual citizenship, and US individuals living near borders who may have foreign financial accounts for convenience.

It is essential to determine your status and understand whether you fall into the category of filers. The criteria are broad and can encompass a variety of financial arrangements, including joint accounts, trust beneficiaries, or simply having signature authority over a business's foreign account.

One thing is clear. If you are a US citizen, green card holder, or someone who meets the substantial presence test (the 183-day rule), you are a US tax resident and must file an FBAR if the balance meets the requirement. If you are also a dual-status resident of the US, you must file FBAR for the period when you are a US resident.  

Financial accounts include bank, investment, pension, insurance, and others. Please include all of them. 

Critical Requirements for Filing an FBAR

Filing an FBAR requires the disclosure of all foreign financial accounts exceeding the $10,000 threshold. Information needed includes the name on the account, account number, name and address of the foreign financial institutions, the type of account, and the maximum value during the year. It’s important to note that the $10,000 threshold applies to the total value of all foreign accounts combined, not individually. Please note that each account must determine the maximum balance figure. 

The FBAR must be filed electronically through the Financial Crimes Enforcement Network's (FinCEN) BSA E-Filing System. It is not filed with a federal tax return; record-keeping is crucial. Filers must keep records of the accounts for five years from the due date of the FBAR.

FBAR Due Dates: Mark Your Calendar

The FBAR has a different due date compared to federal income tax returns. The annual due date is April 15, with an automatic extension to October 15 if you fail to meet the original deadline. You don't need to request this extension; it is applied automatically. Staying aware of this deadline is critical because it differs from, and is not contingent upon, filing your tax return.

I think it's best to avoid last-minute rushes and potential delays that might result in late filings.

Penalties for Non-Compliance: The Serious Consequences of Not Filing

Failing to file an FBAR can lead to significant penalties. If the failure is deemed non-willful, the penalty can be up to $16,117 per violation (not per account). However, if non-compliance is considered willful, the penalty can be more significant than $161,116 per year, or 50% of the account balance at the time of the violation. In extreme cases, criminal penalties may also apply.

The IRS may offer options for those who have simply failed to file without intent to deceive, such as the Delinquent FBAR Submission Procedures. However, these options come with specific requirements and should be navigated with the help of a tax professional.

Steps to File Your FBAR: A Simplified Guide

To file your FBAR, you must first gather all necessary financial information for each foreign account you report. This includes bank statements and other relevant financial documents. You then access FinCEN's BSA E-Filing System and complete Form 114, Report of Foreign Bank and Financial Accounts.

Please enter all required details for each account, review your information for accuracy, and submit the form. Once you've filed it, you will receive confirmation, which you should keep for your records, copies of your filed FBAR, and the documents used to complete it.

If you'd like to discuss your plan for cross-border living, please fill out and submit the form to take advantage of our 30-minute complimentary consulting session.