Do you have a financial interest in, signature, or other authority over any foreign financial account? If you do, don’t forget that you’ll need to report that relationship by filing FinCEN Form 114. While the due date for 2018’s report was April 15, 2019, there was an automatic six-month extension to October 15, 2019. If you fail to file you may face harsh penalties.
Here’s what you need to know about filing the Foreign Account Reporting Requirements (FBAR):
- You only need to file the FBAR if the aggregate value of your foreign accounts exceeds $10,000 at any time during the year.
- Form 114 is filed electronically with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) BSA E-Filing System and not as part of your individual income tax filing with the IRS.
- Keep in mind that “financial account” includes securities, brokerage, savings, checking, deposit, time deposit, or other accounts at a financial institution. Commodity futures and options accounts, mutual funds, and even non-monetary assets such as gold are also included.
- It becomes a “foreign financial account” if the financial institution is located in a foreign country.
- If you own shares of a foreign stock or a mutual fund that invests in foreign stocks, and the stock or fund is held in an account at a financial institution or brokerage located in the US, it is not considered a foreign financial account, and the FBAR rules don’t apply to it.
- An account maintained with the branch of a foreign bank physically located in the US also is not a foreign financial account thus the FBAR rules don’t apply to it.
- You may have an FBAR requirement and not even realize it! Here are a few examples:
- If you have relatives residing in a foreign county and they have put you as a signer on their bank accounts in case something happens to them, and if the account exceeds the $10,000 limit at any time during the year, you will need to file the FBAR.
- If you are gambling online, the online casino may be located in a foreign country, and if your account exceeds the $10,000 limit at any time during the year, you will need to file the FBAR.
You may also have an additional requirement to file IRS Form 8938. This form is similar to the FBAR requirement but it applies to a wider range of foreign assets with a higher dollar threshold. If you are married and you and your spouse file a joint return, you must file Form 8938 if the value of certain financial assets exceeds $100,000 at the end of the year or $150,000 at any time during the year. If you live abroad, the thresholds are $400,000 and $600,000, respectively. For other filing statuses, the thresholds are half of those amounts. The penalty for failing to file the 8938 is $10,000 per year, and if the failure continues for more than 90 days after you receive an IRS notice of failure to file, the penalty can be as high as $50,000.
Not complying with the foreign account reporting requirements can have serious repercussions. But Cray Kaiser is here to help. Please contact us with questions or if you need assistance in meeting your foreign account reporting obligations.
Please note that this blog is based on tax laws effective in September 2019, and may not contain later amendments. Please contact Cray Kaiser for most recent information.