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Should You Be Filing an FBAR?

If you hold a foreign bank account, you may need to file a foreign bank account report (FBAR) by the June 30th deadline. Additionally, if you owe taxes on income held in a non-U.S. account, payment must be made by the FBAR due date. There is currently no extension in place for FBAR reporting.

Who Has to Report

You are required to submit a foreign bank account report if you hold signatory authority over or have a financial interest in any of the following foreign entities or accounts:

  • Trusts
  • Mutual Funds
  • Bank Accounts
  • Brokerage Accounts

An FBAR must be submitted if, at any time during the previous tax year, you held a combined balance that exceeded $10,000 in any of the above foreign vehicles. Reporting requirements apply if the aggregate total of your foreign holdings were in excess of this threshold. For example, $12,000 spread over three foreign financial accounts will necessitate an FBAR.

People and Companies

Both U.S. residents and citizens are subject to foreign back account reporting. Additionally, foreign funds held by any of the following entities must adhere to FBAR requirements:

  • Limited Liability Companies
  • Partnerships
  • Corporations

The IRS provides comprehensive information for any additional persons or parties who may be required to report foreign holdings.

How to Report

Individuals and organizations subject to FBAR reporting must do so online, using the Bank Secrecy Act E-Filing System; access and instructions can be found at IRS.gov. Questions regarding FBAR filing relevance may be found on Form 1040 and comparable tax documents, under the foreign accounts section. Please note that the IRS has advised that FBAR’s should be filed separately from federal tax returns.

Violations and Fines

The IRS provides severe penalties for FBAR non-compliance. Non-willful reporting violations can result in fines of up to $10,000. Conversely, individuals and organizations who willfully neglect their FBAR duties may be subject to penalties of $100,000 or 50% of the account balance (whichever is greater). Some exceptions to this penalty liability from non-reporting may be considered in instances of reasonable cause, including times of natural disaster.

Reporting and Compliance Assistance

You may refer to the IRS website, IRS.gov, for specific questions or concerns regarding any FBAR requirements. A licensed tax professional may also be consulted to ensure compliance, or in the event that IRS collections follow any form of non-compliance. Any necessary action regarding FBAR filing should be handled prior to the June 30th deadline to ensure timely reporting.