What Is the FBAR?
The FBAR, or Foreign Bank Account Report, is a form that the United States Department of Treasury requires for information about financial accounts located outside of the United States. They have other ways to get this information too, such as demanding that any bank in the world who provides an account to a US citizen report to them.
The FBAR comes from the Bank Secrecy Act (BSA), 1970, which the IRA uses to help prevent money laundering and other financial crimes. It also ensures that taxpayers are reporting all of their income and paying the correct amount of taxes. Failing to file the FBAR can result in severe penalties, including fines and even criminal charges. Officially it is known as “FinCEN Form 114”, but we usually refer to it as the FBAR as do most people outside of the US government.
Who needs to file it?
If you are an American citizen or green card holder, if you have any financial accounts outside of the USA, including bank accounts, brokerage accounts, mutual funds, or trusts, you need to file the FBAR if the aggregate value of all your foreign financial accounts exceeds $10,000 at any time during the calendar year. Also if you are a non-American citizen or green card holder but you are residing in the USA, you may have to complete the FBAR too. Remember it might have been an aggregate over $10,000 for a day, and $2000 the rest of the year, but an FBAR would still most likely need to be filed.
The accounts also include shared accounts, where the other person is or is not an American. As long as you have rights to access this account it would be counted as part of the value to be aggregated.
At EDA Professional Services, we understand that tax forms can be confusing and the FBAR certainly can be daunting, but completing the FBAR is essential to comply with U.S. tax laws. We can help make it easier with our expertise and understanding. We help ensure that you stay in compliance with the law and avoid any unnecessary penalties.
How to Complete the FBAR
If you want to go ahead with completing your FBAR we’ve provided the steps to follow.
Step 1: Determine if you do actually need to file the FBAR: As mentioned before, you need to file the FBAR if you have foreign financial accounts with an aggregate value of $10,000 or more at any point during the calendar year.
Step 2: Gather the required information: You will need to gather information about each of your foreign financial accounts, including the name and address of the foreign financial institution, the account number, and the maximum value of the account during the year.
Step 3: Determine your filing deadline: The FBAR must be filed by April 15th of the following year. However, if you are unable to meet this deadline, an automatic extension is available until October 15th. The FBAR filing deadline is separate from the tax filing deadline. We can usually help with arranging further extensions when needed.
Step 4: File the FBAR electronically: The FBAR must be filed electronically through the Financial Crimes Enforcement Network (FinCEN) website. You will need to create an account on the website and complete the required information. Here is a check list of the specific steps.
Go to the Financial Crimes Enforcement Network (FinCEN) website. Create an account on the FinCEN website by providing your name, email address, and a password.
Select "File a Report" from the main menu
> Select "File FBAR" from the drop-down menu.
Enter the required information about each of your foreign financial accounts, including the name and address of the foreign financial institution, the account number, and the maximum value of the account during the year.
Review your information to make sure it is accurate and complete.
Submit your FBAR electronically through the FinCEN website.
Receive a confirmation number.
Step 5: Keep a copy of the FBAR for your records: Once you have completed and submitted the FBAR you will get a confirmation number, keep this for your records, it helps provide proof that you have submitted your FBAR. Also keep a copy of the FBAR itself for your records, you may need to refer to it in the future if you have questions about your foreign financial accounts.
If you need to make any changes to your FBAR after it has been submitted, you can do so by filing an amended FBAR.
Assistance and Penalties
We are able to make the FBAR much easier for our clients by helping them navigate the process. The FBAR requirement is an important part of the Bank Secrecy Act, and failure to comply can result in significant penalties. Failure to file the FBAR can result in significant civil and criminal penalties.
The civil penalty for non-willful violations is $10,000 per violation, while the penalty for willful violations is the greater of $100,000 or 50% of the account balance at the time of the violation. In addition to civil penalties, willful violations can also result in criminal penalties, including fines and imprisonment
If you have foreign financial accounts that meet the criteria, it is important to understand the FBAR requirement and take the necessary steps to comply. By following the steps outlined in this blog, you can complete the FBAR and avoid the penalties for non-compliance.
If you have any questions about the FBAR or need help filing it, we are here to help.