Do you have any kind of
financial interest, or a financial account, over which you have a
signature authority in a foreign country? If the financial account or
interest is in a bank account, mutual fund, brokerage account,
investment account, life insurance etc, or in a combination of
different accounts, and the combined value of your holdings exceeds $
10,000 at any point in time during a reported year, you are
absolutely required to report those accounts yearly to the Department
of Treasury. This is in accordance with the rules laid by the Bank
Secrecy Act.
To report the foreign
accounts, you have to fill out a Financial Crimes Enforcement Network
Form i.e. FCEN Form 114, which was formerly known as Treasury
Department Form 90-22.1. The Financial
Crimes Enforcement Network requires individuals to file the details
of their foreign accounts electronically through its website.
US citizens, US Expats,
US residents, and all US entities that are created under the laws of
the US, are classified as US persons and are required to report their
foreign bank accounts, if their combined threshold bypasses $10,000
at any time throughout the year. Even if you are not the direct owner
of such accounts, but just have signatory authority, or the right to
conduct transactions, you have an obligation to fill the FCEN Form
114. Moreover, US persons possessing foreign accounts with even
non-monetary assets, such as a life insurance policy worth more than
$10,000, are also required to file a Foreign Bank Account Report.
Due Date
The due date for
electronically filing a FBAR Form i.e. FCEN Form 114 is June 30th
each year. There is no extension to the due date. Hence, all returns
must be completely filed to the FBAR.
The IRS currently has an
offshore voluntary disclosure initiative in action, which allows all
those persons who absolutely need to file late foreign bank accounts,
and have to make amends to the previously reported foreign income.
However, the program has stern requirements, thus, it is important to
consider it carefully and consult professionals in the field before
applying for this program.
Penalties
If a person fails to file
a foreign bank account report by the due date, the penalty can amount
up to $10,000. In case the IRS finds that a person willfully didn’t
disclose the foreign accounts, or didn’t file the FCEN Form 114,
then the penalty can go up to a maximum limit of $100,000, or can
make up to 50% of the amount that you hold in a foreign account.
Hence, it is wise to start preparing to file the form on time and
report all the foreign accounts if their balance amasses over
$10,000.
Reporting Information
All those persons who
jointly file the foreign bank account report with their spouses, or
through the help of professional agencies, must consider filling out
the FCEN Form 114(a). However, this submission isn’t usually
necessary to the FCEN or the IRS.
In addition, you must
remember that you definitely have to report your foreign financial
accounts worth more than a sum value of $10,000, even if those
accounts do not produce any taxable income.
Did you find the
information in this article helpful ? Kindly let us know in your
comments below.
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