What Is FBAR Filing?
U.S. citizens and residents who have a financial interest in or signature authority over financial accounts in foreign countries or in foreign branches of banks headquartered in the U.S. may be required to file FinCEN Form 114: Report of Foreign Bank and Financial Accounts. How do you know if you must file? If the value of all foreign accounts exceeds $10,000 at any time during the year, then you are subject to IRS FBAR filing.
The foreign accounts that are reportable include:
- Savings and checking accounts
- Mutual funds
- Securities and brokerage accounts
Penalties for not filing can go up to $10,000 if the lack of filing was due to a reasonable cause, such as negligence, which must be explained. Not filing due to a “willful” cause, such as tax fraud, can result in a penalty as high as $100,000 or 50 percent of the total account balances, whichever is greater. Criminal penalties may also be applied for willful non-compliance.
Form 8938 Does Not Relieve Filers of FBAR Filing Requirements
If you are required to report the value of offshore accounts on an FBAR Form 114 (formerly TD F 90-22.1), you must do so even if you are obligated to file Form 8938 (for FATCA reporting). Certain foreign financial accounts are reported on both Form 8938 and the FBAR FinCEN form 114.
However, the information required by the forms is not identical in all cases. Different rules, key definitions (for example, “financial account”) and reporting requirements apply to Form 8938 and FBAR reporting. Because of these differences, certain foreign financial accounts may be reported on one but not both forms.
When & How to File FBAR
The FBAR is due by April 15th and corresponds with the 1040 Tax Return filing due date. While the FBAR is filed electronically through the Financial Crimes Enforcement Network’s BSA E-filing System, Form 8938 is due with your annual income tax return and filed with the applicable IRS service center.
Specified foreign financial assets held outside of an account with a financial institution are reported on Form 8938, but not reported on the FBAR.
For more information about FATCA reporting, please click here.
FATCA (8938) vs. FBAR (FinCEN 114) Requirements
Reporting Threshold for Expats
Form FinCEN 114: $10,000 total in all accounts at any time during the calendar year
Form 8938: The total exceeds $200,000 on the last day of the tax year or more than $300,000 at any time during the year, or double that if filing a joint return
Definition of Interest in an Account or Asset
Form FINCEN 114: Financial interest: You, your agent or representative is the owner of record or holder of legal title, or you have a sufficient interest in the entity that is the owner of record or holder of legal title. Signature authority: You are entitled to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account
Form 8938: Your income, gains or losses, deductions or credits, process or distributions are required to be reported on your income tax return
What Must Be Reported
Form FinCENn 114: The maximum value of your accounts that are held and maintained in a financial institution that is physically located in a foreign country
Form 8938: The maximum value of specified foreign assets and other specified foreign non-account investment assets held by foreign financial institutions
Reportable Assets
Form FinCEN 114: Financial accounts at foreign institutions, financial accounts at a foreign branch of a U.S. institution, foreign accounts for which you have signature authority (with exceptions), foreign stock or securities in a foreign institution (the account but not the assets), indirect interests in foreign financial assets through an entity if more than 50 percent interest in the entity, foreign accounts held by a foreign or domestic grantor trust for which you are the grantor, foreign-issued life insurance or annuity contract with a cash value
Form 8938: Financial accounts at foreign institutions, foreign stock or securities in a foreign institution (the account but not the assets), foreign stock or securities not held in a financial account, foreign mutual funds, foreign accounts and foreign non-account investment assets held by a foreign or domestic grantor trust for which you are the grantor, foreign-issued life insurance or annuity contract with a cash value, foreign hedge funds and foreign private equity funds, and foreign real estate held through a foreign entity (the entity itself is a specified foreign financial asset and its maximum value includes the value of the real estate)
IRS FBAR Form Due Dates
Form FinCEN 114: June 30
Form 8938: The due date of your annual income tax return, including any extensions
Penalties for Non-Compliance
Form FinCEN 114: If non-willful, up to $10,000; if willful, up to the greater of $100,000 or 50 percent of account balances; criminal penalties may also apply
Form 8938: Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply
Contact Expat CPA for FBAR Reporting and Filing Help
Our expert CPAs offer professional FBAR filing services to help American expatriates navigate the difficult road through the foreign reporting aspect of federal income tax. While the above information helps you get a feel for FBAR requirements, the regulatory complexity means that most expats would be better served by a knowledgeable CPA than attempting to go it alone. Let us help you by making sure your FinCEN Form 114 filing requirements are handled correctly and on time.
- FBAR Filing (Form FinCEN 114): $150