FBAR Filing Basics

FBAR Filing Basics

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If you are US citizen, Resident or Expat and you hold accounts in a foreign bank or foreign financial institution with a balance that exceeds $10,000 at any time of the year, you are obligated to file Foreign Bank and Financial Accounts Report (FBAR).

Five Elements of FBAR Filing:

1. You must file if you are a citizen or US Person
2.  You have a financial interest in or signature authority over an account
3. That account is a Foreign Financial Account(s)
4. The aggregate value of the account(s) exceeds $10,000 at any time during the calendar year
5. FBAR deadline to file is April 15. There is an automatic extension for October 15.

1. You must file if you are a citizen or US Person

U.S. Persons means:

  • U.S. Citizen
  • U.S. Residents
  • U.S. entities and any entity created or organized In U.S. or under U.S. law tax status disregarded

2.  You have a financial interest in or signature authority over an account

Financial Interest means:

  • If You are U.S. person and you hold title directly
  • If You hold title for the benefit of a U.S. person
  • If you hold title indirectly

Signature Authority  means:

  • You can control disposition of account assets
  • It can be in conjunction with another
  • By direct communication; Oral or written

Signature authority does not mean:

  • Supervisory approvals

 

 

3. That account is a Foreign Financial Account(s)

Foreign Account means: Outside the United States, which is:

  • States or foreign countries
  • D.C. Territories and Possessions
  • Indian lands
  • Physical location of account governs

Financial  means:

  • Both monetary and non-monetary assets
  • Bank, brokerage, and investment accounts; insurance and annuity policy cash values; and mutual funds are specifically named
  • Generally not real and personal property

4. The aggregate value of the account(s) exceeds $10,000 at any time during the calendar year

Aggregate Value Exceeds $10,000 means:

  • Aggregate accounts with financial interest and those with signature authority.
  • Aggregate accounts owned directly and those owned indirectly.

Reportable Accounts

  • Bank accounts checking, savings, CDs
  • Securities or brokerage accounts (buying, selling, holding or trading stocks, bonds, etc.)
  • Other financial accounts
  • Other deposit accounts
  • Cash value of insurance or annuities
  • Commodity futures or options accounts
  • Mutual funds, or similar pooled funds

Mutual Fund is defined as:

  • Issues shares to the general public and shares have a regular net asset value determination and regular redemption.

Reportable Account Exceptions

  • U.S. military banking facility
  • Accounts of U.S. governmental entities
  • International financial institutions
  • Correspondent or Nostro accounts
  • Held in a U.S. IRA (if owner or beneficiary)
  • Held in a tax-qualified retirement plan if participant or beneficiary
  • Consolidated filing

Custodial Accounts

  • Omnibus foreign accounts held by U.S. Banks or other financial institutions to hold investments of multiple persons
  • If U.S. Person can only access account through U.S. entity and cannot directly access the foreign account, no FBAR reporting isrequired

Valuing Accounts for FBAR

  • Each account valued separately at its highest value
  • Periodic statements may be relied upon
  • Value in local currency is converted to U.S. dollars at 12/31 rate
  • Aggregate all accounts
  • Do not double count for determining threshold

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Exceptions  to FBAR filings

Signature Authority Exceptions:

Officer or employee, no financial interest of:

  • Bank examined by U.S. federal regulators
  • SEC or CFTC registered institution
  • Authorized Service Provider (SEC registered)
  • U.S. listed entity (foreign or domestic)
  • A U.S. subsidiary of a U.S. listed entity
  • Entity registered under 12(g) of SEC

Trust Beneficiary Exceptions

  • Trust beneficiary does not need to file if trust, trustee, or agent is a U.S. person and files an FBAR disclosing the trust’s foreign financial accounts
  • Reportable beneficial interest does not include remainder interest
  • Discretionary beneficiary filing not required based on discretionary status

Special Filing Rules

  • If 25 or more accounts: Check box 14a  as yes and provide number of accounts
  • No account detail required in Parts II or III
  • Signature authority filers Check box 14b as yes and provide number of accounts
  • Provide account owner’s information in Part IV

Special Filing Rules For Consolidated Filing Part V of FBAR form for financial institutions

Allowed for all types of entities:

  • Parent information in Part I
  • If you have foreign accounts: all foreign accounts, owned directly or indirectly by parent or any subsidiary, must be shown in Part V except for 25 or more
  • If you have a domestic account: all domestic account owners, direct and indirect, must be shown in Part V.

Special Filing Rules For Consolidated Filing Part V of FBAR form for spouses combining FBAR reporting

Spouses allowed to file one combined FBAR if:

  • Non-filing spouse has only joint accounts  with the filing spouse
  • All joint accounts reported on single FBAR
  • Spouses use FinCEN Form 114a, Authorization to Electronically File FBARs, to authorize one spouse to file for both spouses

 

Tax Planning for U.S. Expats

 

FBAR Record-Keeping Requirements

  • Account records must be maintained for five years. Exception: officers or employees who file an FBAR because of signature authority over the foreign financial account of their employers are not expected to personally maintain the records of these foreign financial accounts.
  • FinCEN 114a -Record of Authorization to Electronically File FBARs

 

 

File an amended FBAR

  • Check the Amended  box in the upper right-hand corner of the FBAR on page 2
  • Complete the entire Form 114 with the corrected information
  • Explain the reason for amending on page 1 of the form

When You Should File FBAR

  • An FBAR should be filed on behalf for example  of your son if he has reportable foreign financial accounts
  • Remember  tax filing status is not a consideration for FBAR
  • There are no age limitations on FBAR filing
  • In general foreign defined contribution retirement accounts are reportable on the FBAR. This goes for FOREIGN IRA TYPE ACCOUNTS such as Canadian RRSP and TFSA accounts
  • An account with a financial institution, located in a foreign country, is a reportable account, whether the account holds cash or non-monetary assets

Further Extension of Time for FBAR Reporting

Further extension of time for FinCEN Form 114-FBAR, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) released December 20. Because the proposed amendments issued in 2016 have not yet been finalized, FinCEN is further extending the filing due date to April 15, 2021, for individuals whose filing due date for reporting signature authority was previously extended by FinCEN Notice 2018-1. For all other individuals with an FBAR filing obligation, the filing due date remains April 15, 2020.

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services.  This article cannot serve as a substitute for such professional services or advice.  Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation.  This article is subject to change at any time and for any reason.

Please contact us for more information, in FAS CPA & Consultants are ready to assist you with all of your offshore tax matters. You can call us or email at support@fascpaconsultants.com and request a free consultation that will answer your most pressing tax questions.

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Fulton Abraham Sánchez, CPA I am Certified Public Accountant, specialized in Tax Planning & Offshore Strategies for Real Estate, Hedge/Equity Funds, Fintech, Crypto, Expats, IRS Debt Resolution. You can email me fa@fascpaconsultants.com and follow us on Facebook : FAS CPA & Consultants.

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